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Return to the Rags and Riches

If you look at the banks, transports, back-to-work names and others against the index movers, you’ll see a trend toward the haves and have-nots.

The Market

If you are the type of person who owns some banks, maybe some “back to work” stocks, maybe some drug stocks, and, heaven forbid, some retailers, you might be wondering about this market.

I say that because for the last two weeks, we have had a split market once again. Yet no one seems to be chatting this up.

The banks are down — 10% — in two weeks.

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The Transports are down, also 10% in two weeks.

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I could go on, but I think you get the picture. Yet, the flip side is the stocks that move the indexes are up and up nicely. It is more widespread than just a handful of stocks, but there is definitely a feeling of the haves and have-nots now.

That is why the next few days are critical. Look at those charts above. Technically, they are enjoying a correction and nothing more. They have support, not terribly far away and haven’t broken anything. But can they rally again?

That is what I mean when I discuss the deterioration underneath. You can see it with all these stocks that are down double-digit percentages. They are what makes the McClellan Summation Index flat right now, but trying to head down. Monday’s breadth was pathetic with the S&P up 20 and net breadth not even positive 200, so it didn’t help the Summation Index’s cause.

Basically it’s been that big down day and then, well, nothing. Since then, the majority of stocks haven’t gone up or down, but rather they have been forgotten.

Meanwhile Nasdaq has made it six straight on the upside. More so, Nasdaq has had exactly two red days in June. Mind you, one of those days was about 7%, but still, that is incredible. One would think that by now there might be more than 150 stocks making new highs, but that hasn’t happened yet. That is tells us the haves aren’t sharing the wealth very much.

What I am keeping my eye on is that the new lows haven’t expanded much yet. Monday saw an uptick in new lows. Remember, if there is enough of an uptick in new lows to get the 10- day moving average up, it will matter.

The Daily Sentiment Index (DSI) for Nasdaq is at 85. So one more up day and it could get over 90 again. As you know, readings over 90 make Nasdaq dangerous in the short term.

New Ideas

Micron (MU) - Get Free Report would be one of those charts that has corrected about 10% in the last two weeks. You can see it needs to hold over $50 to keep the uptrend alive and a break of the uptrend line would turn it from just a correction to negative.

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I was asked for a target on Square (SQ) - Get Free Report, which we looked at with a positive eye about a month ago. There is a first target around $115.

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Today’s Indicator

The 30-day moving average of the advance/decline line is in a funky spot. The math says it should go up for the next few days (into month end) and then it is back to being very overbought again.

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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.

I liked Berkshire Hathaway (BRKB) back in mid-May around $175 as it appeared to be bottoming. It had a nice run and has come most of the way back. My guess is as long as it stays over $175 it gets another chance at rallying again, but I am not as positive as I was back then. Back then sentiment was not nearly as complacent as it is now.

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OGE Energy (OGE) - Get Free Report has been a big fat nothing for about four months now. I suppose it is worth a shot on the long side with a tight stop (under $29) since that lower line has held so often.

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The good news on the chart of Bristol-Myers Squibb (BMY) - Get Free Report is that the head-and- shoulders top gave way and met its downside target. To me, that means the stock can try and start to improve now. The bad news is that a rally to around $60 will probably get sold the first time up. The head-and-shoulders top is only two months in duration, so perhaps by mid summer, BMY will have done enough work to eat through it. For now I’d sell rallies near $60.

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