If you take away the banks and some other names here and there, today was a tired day in the market. But that’s not a bad thing, after all, the S&P 500 has been green for five- straight days and it tagged 4500. In most respects not much changed in any of the indicators today. Breadth was good, not great. Upside volume tailed off to a mere 52% of total volume and the major indexes tagged their trendlines. I am more interested to see if my premise that we can rally after a pullback will be correct. There were two fairly interesting things to discuss, though. Bonds really backed off. Maybe that’s why stocks stalled out and the banks charged ahead. However, mega-cap tech stocks simply stalled out; they did not retreat. It is possible that this relationship has changed. I am dubious that it has, but I am willing to keep an open mind.
The other change was the Investors Intelligence bulls dipped to 50%. That is the lowest reading since May 2020, and, although it’s a bit stale in that it likely reflects last week’s action and not this week’s, it is still an intermediate-term indicator and therefore goes on the bullish side of the ledger for now.
We will have to start to watch the Volatility Index again in the days ahead. The daily sentiment index for the VIX is now 20, so any further downside will push the DSI lower. At this point, my notes say we should get back to an overbought condition around Labor Day, so if we get overbought and sentiment is too giddy at the same time, then we’ll have to look for another retreat in stocks. Recall at the beginning of the week I said we’d have to fret if folks became bullish too quickly, so that’s what we’ll watch.
The chart of eBay (EBAY:Nasdaq) is not a typical one that I like, because it is not down- and-out, but I find myself drawn to it with the current pullback looking like a cup and handle.
The Volume Indicator is at 48%, which makes it lean oversold.
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If Bumble (BMBL:Nasdaq) can map out something like I have drawn in blue, then I think it has a chance at a fourth-quarter rally, but it is going to take some work to eat through that resistance that was left from the spring.
The resistance on Diamondback Energy (FANG:Nasdaq) is pretty solid in this $75-$80 area. What would improve the chart would be a small move into the zone followed by a pullback to say $72-$74 to form the right shoulder of a head-and-shoulders bottom, as I have drawn in blue.
I have no measured target for Cisco (CSCO:Nasdaq), because going all the way back so many years to me is not realistic. I think the chart is a bit over extended up here, but as long as that uptrend line holds, I do not see that the stock has done anything wrong so a pullback to the line ought to be buyable.