Statistically sentiment does remain sticky but anecdotally the last two days changed some minds. For the first time since last Tuesday the put/call ratio slipped under 100%. That’s a start, isn’t it?!
The 10-day moving average of the equity put/call ratio continues to slide. It has now given up about half of what it gained during the decline. Today’s reading was a smidge under 60% so it’s not as though folks have thrown caution to the wind.
For the most part today was all about the indexes. There were pockets of strength here and there but generally speaking it was a big cap, index led rally. For that reason I decided to take a look at what happens if I walk Nasdaq up into midweek next week, having it rally another 200-ish points in that time (8 trading days). For this exercise we plug in higher closes for Nasdaq each day to see when the Nasdaq Momentum Indicator stops going up. That day is tomorrow.
What we see is that as the Nasdaq Composite continued to rise in late January the momentum slowed considerably. That would be the same thing that would occur if Nasdaq continues to rise into midweek next week. My guess is Nasdaq pulls back before then due to this overbought-ness.
Nasdaq is now just shy of 100 points from a new high. The number of stocks making new highs is currently about 25% of what it was in mid January (the chart, unfortunately has not been updated for today but today’s reading is near 120). That means if Nasdaq keeps on going without a pullback it will have one giant, massive, negative divergence.
My guess is we see a pullback this week.
I think gold is due for a rally. The SPDR Gold Trust (GLD) - Get Free Report should make an attempt at $128. I hope it can do more but at this point it seems only certain technology stocks can rally that hard!
For those who have asked about United Continental (UAL) - Get Free Report, it did break out and would now measure to $72 with an outside shot at filling that gap near $76. I do not want to see it back under $68.
I know the small caps have lagged but the chart of 3D Systems (DDD) - Get Free Report intrigues me. Sure there are layers of resistance all the way up but it feels like it is forming a little bottom here.
The 30-day moving average of the advance/decline line has barely budged during this rally. It’s not even really that oversold, despite being at the bottom of the page.
Hecla Mining (HL) - Get Free Report intrigues me because it has a W pattern over the last four months. I think it can/ought to rally toward $4.20-$4.40 and the key will be if it can rally over $4.20 because if it can do that it gets over the downtrend line and that change the pattern because it means that the downtrend that has been in place since last year has the chance to be ending. If it can’t get over 4.20 then it is still a work in progress.
Ensco ESV has decent support at $4.75 and resistance resides at the underside of the black line. I’d like to see ESV trade sideways between $5 and $5.25 for a few days because if it can do that I think it can make a try for that black line.
Microsemi (MSCC:Nasdaq) had a measured target around $62-$64 and it got there in January, corrected and has since rebounded back up there. I suspect for now it is going to be trapped between that spike high in the upper $60s and the rising uptrend line in the upper $50s. it would need to set up a pattern for me to believe it was dying to go much higher and I just don’t see that yet.