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Sentiment Shifts

Let’s look at the Citi Panic/Euphoria Model, the Insider Transaction Ratio, the 30-day moving average of the equity put/call ratio and other signs of changes in sentiment – and remember, when it gets this stretched, buying at this pace becomes difficult.

Markets

When the market does the same thing every single day, it’s difficult to see the indicators change much. The one thing that has changed is sentiment.

There are a few things to point out now, as we head into the last week of trading for the year. Let’s begin with the Citi Panic/Euphoria Model which has flatlined for the last few weeks. I do not know what goes into this proprietary indicator, nor do I know why it ticked down from November to December and has not moved up again. What I do know is that it is not close to Euphoria.

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But I did go back and look at how it acted in late 2017 and into the early 2018 market peak. Look at how it flatlined for all of November and most of December. It wasn’t until the very end of December it began to rise, and did not step into Euphoria until the calendar turned to January.

Therefore I would say it is not out of the ordinary in how it is acting at this time of the year or in this type of environment.

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There was a slight uptick in the Insider Transaction Ratio, which for the first time in months has moved up. Notice how often we saw the insider selling ratio over 30 in the first half of the year, but it has barely breached 20 in the second half after the big move in July. I’ll call this a minor change from what we’ve seen.

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Then there is the 30-day moving average of the equity put/call ratio, which is now at 58%. It has not been this low since the summer of 2018. Prior to that we’re looking at that very extreme reading in January 2018. So yes, things are getting a bit complacent you might say.

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And finally there is the Daily Sentiment Index (DSI) for the Volatility Index, which is now 11. You might recall the day prior to Thanksgiving it went to single digits, when it got to 8. It is a rare event for any instrument to get to single digits, and when it does it is difficult to ignore it. Especially when the VIX hasn’t made a lower low in a week and the DSI began the week at 19. You can see the move in the VIX off that 8 reading right there just after Thanksgiving.

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Once again I would remind you that breadth is good and as long as breadth is good the market is not bearish. But when sentiment gets this stretched, it is very difficult to keep buying.

New Ideas

3M (MMM) - Get Free Report finally strung together a few good days late last week. I still like it, but I thought I would note that it is up against some resistance here. Longer-term that base measures to the $195 area with a possibility of filling the gap.

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I am watching iShares Barclays 20-plus Year Treasury Bond (TLT:Nasdaq) very closely here because I think from this $135-$136 area it ought to bounce.

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Today’s Indicator

The new highs have finally increased. The 10-day moving average of stocks making new lows is still precarious for Nasdaq as new lows regularly number more than 50.

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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 oil service stock exchange-traded fund VanEck Vectors/Oil Services ETF (OIH) - Get Free Report is a chart I recommended as a year-end pick in October. It has had a good run, but you can see it is a bit overbought and at resistance. Similar to the Schlumberger (SLB) - Get Free Report chart we looked at recently, it would be beneficial if it backed off to give it a better chance of having some oomph when it crosses that line, rather than limping over it.

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HollyFrontier HFC is a chart I have liked over time and had thought that a pullback to around $52 would be beneficial. But it came down to $50, so I was asked if I still think it is OK. I do. I would like to see it stay over that blue uptrend line, but it looks to me like if it can do that then the base it has been building should complete in the coming months.

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I have not been a fan of the home builders for quite some time, right around the time everyone got so excited over them in October. But notice no one mentions them anymore and Lennar (LEN) - Get Free Report has corrected more than 10% already. I think this channel stays in place for a while, so for the time being I would sell a rally back to the upper line.

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