Now that was quite a rally. Oh sure, I thought we'd be up, but I never expected this type of surge. I suppose the market had set itself up more bearishly than I realized.
In any event, breadth was terrific, the best since the first days of the New Year. Volume on the NYSE was the best since mid-December. Up/down volume (net volume) was the best since the first days of 2017 as well. Even the number of stocks making new highs on the NYSE increased.
But the new highs on the NYSE are still at only 200 issues, which is far below the nearly 500 stocks we saw making new highs in December -- this with a higher high in the S&P. So while that's an improvement, it's still a negative divergence.
And none of the indicators has changed from what I wrote here two days ago. Not much at least. The McClellan Summation Index did turn back up -- barely.
But the same way the put/call ratio for the VIX was eye-catching yesterday, today the fact that the various put/call ratios sunk like a stone was equally eye-catching. Let's begin with the total put/call ratio, which was 76% today, the lowest since Dec. 8 when it was 75%. You can see on the chart (red arrow) we had a bit more upside before we went into that extended chopfest.
Then there is the index put/call ratio. I do not discuss this one very often because it rarely steps out of the range. Today it sunk to 68%. Wow. It was last this low (at 64%) on Dec. 13. That's the green arrow on the chart.
In sum, the low put/call ratio on the VIX gave way to a rally. That rally took all that "going nowhere/negative" chatter right off the table today. So it did exactly what it was supposed to do. Now I think we're back to the best we can do being chop and maybe have some downside.
Chinese New Year is coming up next week. But I read an article on Bloomberg this morning about how much traveling will be done during the upcoming holiday, according to C-Trip (CTRP:Nasdaq), which may be the only Chinese stock that hasn't rallied (I am friendly toward the chart). It made me think of Wynn Resorts (WYNN:Nasdaq), which has gone nowhere for quite some time. Now it has developed a potential head-and- shoulders bottom. If it can get up and over that neckline ($95-ish), I think it can run back to the early December highs.
I think I have posted the chart of EFA, an ETF to be long world markets with an emphasis on Europe, several times in the last month or so but I will show it again. If it can get over $60, I suspect the chatter will be nonstop. I continue to like this longer term.
The 30-day moving average of the advance/decline line has come down but is not oversold. A few days on the upside and then it gets right back to an overbought reading again.
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Before I begin a discussion on the chart of Celgene (CELG:Nasdaq), I feel I should reiterate my view on the health care, biotech and drug stocks since it has been about a month since I last said this. I believe these stocks will be trading vehicles for the foreseeable future, but not investments, much the way the financials were for the last several years.
As for CELG, there is a gap fill near $110; anywhere between here and there and the chart will look like a small W has formed. The upside is what I am unclear on. I'm not sure it is oversold enough to get through $115 and all the way up beyond that. But for an oversold rally to at least $115, I'd be keen to take a stab. Earnings are out in early February.
Freeport McMoRan (FCX) - Get Free Report has been a chart with a $16 target for quite some time, but I was asked, now that everyone loves it, if I can calculate a higher target. I can measure a target in the $19 to $23 area. I'm sorry it's so wide but that's how it measures up. One word of caution: Earnings are out tomorrow.
For another follow-up on Twilio (TWLO:Nasdaq), I would point out that it did hold that $27.50 to $28 area nicely, so that would now be the stop, and the downtrend line near $32 to $32.50 would be an appropriate target. I do feel better about its ability to get through $30 this time around.