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Sentiment on Oil Has Shifted

It's not bearish yet, but it has gotten too giddy.

The Market

I take a few days off and tech falls apart while oil rallies. So, of course, sentiment has shifted on the oil stocks. Big time.

The Daily Sentiment Index (DSI) for crude oil is now at 89%. This is the bullish percentage. That means a mere 11% are bearish. Yes, this can go higher and surely so can oil, but once we get up to these lofty levels, it's time to have a rest.

I don't see oil as bearish yet, but I do think the sentiment has gotten too giddy. I think the stocks look OK, but chasing is not something I like to do. For example, just over a week ago I highlighted Devon Energy (DVN) - Get Free Report as a positive stock. It's had a great run after that breakout, but now it's pushing near resistance ($37) and has a measured target $1 higher ($38). Now is not the time to jump on board. It's time to take some profits on a portion.

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Then there is technology. I believe it was also about a week or so ago we looked at a few of these big names. Please note down below (in the Q&A section) there is a follow-up on Apple (AAPL:Nasdaq) where I note I think it is due a bounce. Facebook (FB:Nasdaq) broke the support level I noted and will likely get sold into rallies up there at resistance (about $168). Google (GOOGL:Nasdaq) has still not broken under $920.

The volume for the PowerShares QQQ (QQQ:Nasdaq) today was high, and typically high- volume declines lead to short-term rallies.

Breadth remains strong, which is bullish. The transports and the Russell 2000 also remain strong. The overall market is not as overbought as it was thanks to two weeks of milling around, but it is far from oversold. And today's sentiment has me somewhat concerned since the put/call ratio was 70%. Readings under 70% are bearish.

Finally, the 30-day moving average of the advance/decline line (chart shown below) is finally overbought.

The bottom line is that I would not be surprised if the market rallies tomorrow, but I still think the best we can do is chop and maybe even correct some more.

New Ideas

I have been bullish on the chart of Deckers (DECK) - Get Free Report for months and it has not done a thing. Yet I can't help thinking the stock is curling under. There is resistance all the way up, but over $66 and perhaps it can have a bigger move.

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I also want to highlight the iShares Emerging Markets ETF (EEM) - Get Free Report. I stopped being bullish on it at $43 and it kept on running to $46. But now it is back at $44.50. It has not broken the uptrend line yet and I suspect it will bounce off it, but if it breaks the line I think folks will get quite upset since EEM has been a fan favorite this year.

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Today's Indicator

The 30-day moving average of the advance/decline line finally got overbought late last week.

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Q&A

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 was asked to follow up on Apple (AAPL:Nasdaq), which we looked at just over a week ago with a negative bias. It did gap under that $154 area, leaving an island behind (red box). That is bearish. However, it has tagged that $150 area (green line), which fills the gap. Apple has had exactly three up days in September so far. My guess is the stock is getting pretty oversold and should have a bounce from this $148-$150 area.

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Longer term, I still have a measured target of around $360 on the iShares Nasdaq Biotechnology ETF (IBB:Nasdaq). In the near term, I think it's a coin toss whether it holds here or corrects more. The one thing I have noticed is that it has a strong history of plopping before it rallies (that's a technical term!). See the two arrows on the chart.

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Nordstrom (JWN) - Get Free Report has a giant base. It has also put itself up for sale. I suspect it is only a matter of time before the news hits. So if you have a long enough timeframe and are willing to wait, then JWN is probably a good bet because it doesn't seem like anyone expects the deal -- whenever it might arrive -- to come under this mid-$40s area.

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