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Rally and a Pullback?

So should the S&P rally again Tuesday and the DSI tags 90, we might set ourselves up for a pullback.

The Market

Monday’s action was more of the same with breadth good, which as you know keeps the indicators buoyant. What changed was sentiment.

Let’s begin with the Daily Sentiment Indicator (DSI), which has been a good-short term tell for us. It is now at 85 for the S&P 500 and 83 for Nasdaq.

Now let’s talk about the upcoming overbought condition. As of now, breadth has been positive for nine straight days. Good breadth is good for the market. But since my Overbought/Oversold Oscillator is based on the 10-day moving average of breadth, it will get overbought midweek this week. The exact date is after the close Tuesday, but it would be extraordinary if it was such perfect timing.

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So should the S&P rally again Tuesday, isn’t it possible the DSI could tag 90? And once it has tagged 90, we have set ourselves up for a pullback. It has happened twice in the last two months.

The DSI for the Volatility Index is now 19. We had an extraordinarily low reading of 8, just prior to the two day whack two weeks ago, so a low reading for the VIX would also be showing up just as we’re getting short-term overbought.

This area of 11-12 has been “support” for the VIX in 2019.

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Anecdotally there were several calls for a market melt up Monday. We haven’t seen those since mid-to-late April. The only big difference is that back then the indicators were rolling over and they are not doing so now – not yet at least. A pullback would give us better charts, just as we had a decent list of down-and-out stocks last week. But many of them have moved already and as you know, I stink at chasing.

New Ideas

I don’t know why 3M (MMM) - Get Free Report has yet to enjoy the rally. I had thought it would do well several times in the last few weeks and I’ve been wrong. But that isn’t going to stop me from thinking this chart should rally at some point.

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To the person who asked about Simon Property Group (SPG) - Get Free Report recently, it tried to break and couldn’t do it. There is still a ton of resistance all the way up, but now the key is that it doesn’t head south from below $150. If it does that, I think the next time down it would break. Otherwise, you know where you’re wrong.

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Today’s Indicator

The 30-day moving average of the advance/decline line is not yet overbought. But it has been a poor indicator for the last three months.

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Q&A/Reader’s Feedback

Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.

The only good news for Boeing (BA) - Get Free Report is that it hasn’t broken support, despite all the bad news that gets thrown at it almost daily now. If it can mill around here for a few days it can probably rally, but a gap-fill at $340 probably stops the first rally. Now If it rallies to 340 and turns back down abruptly, there is a chance it breaks $320 on that next trip down. Then we’d be able to measure lower targets, but for now it has been in a trading range most of this year.

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BeiGene (BGNE:Nasdaq) looks like it wants to close that gap that it left in early November. I’d look for a bounce should it get down into that $140-$150 area.

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There is very little for me to say about the chart of Deciphera Pharmaceuticals (DCPH:Nasdaq), because it has rallied too much for my liking and has exceeded all measured targets. I’d either have to wait for a new pattern to set up or use a trailing stop if already long it.

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