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Sifting Through the Mix

Let's see which indicators are bullish, bearish and in the middle of nowhere.

The Market

Last week’s statistics and indicators “said” the week should be mixed, and that’s pretty much what it was. I’d love to report to you that Friday’s pullback changed the indicators, but it did not. They remain mixed. So let’s just break down the bullish, the bearish, and the middle of nowhere.

The bullish side of the ledger would be breadth: It made a higher high. Common stocks- only have not, though. But overall, breadth on Friday was flat as a pancake with the S&P 500 down nearly 12. That goes on the positive side of the ledger.

The McClellan Summation Index is still rising, but it only requires a net differential of negative 700 advancers minus decliners to send it right back down. That is very unusual after a hundred point rally in the S&P. Yet, that’s where we are. I’ll put this on the positive side of the ledger with an asterisk.

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Then there is sentiment. Friday’s decline saw the equity put/call ratio zoom up to 99%. That seems wild, doesn’t it? Typically we see put/call ratios that high for equities, when we’ve seen the market down a lot, not just one day off the highs. The last such high reading was Aug. 15,, but by mid-August the S&P had declined nearly 200 points from the high two weeks prior.

I can offer one thought, although I really prefer not to rationalize an indicator, and that is the Brexit vote was set for Saturday, and it could be folks were interested in hedging ‘just in case’. (and no, I’m not even sure in case of what!). On its own, this should be considered bullish, at least for a day or two. Yet, to keep with the theme of mixed indicators, look at what this high reading did to the 10-day moving average of the equity put/call ratio: It turned it back up, which is usually not bullish. Although typically it is not bullish when it turns up from under 60%.

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I’ve already noted that my own Oscillator will be overbought midweek this coming week. And Nasdaq’s Momentum Indicator gets the nod for an overbought reading after Monday’s trading. That would make me think we can rally one more time early this week, but it seems we remain mixed and in the range.

I want to comment on the chart of iShares 20-Plus Year Treasury Bond (TLT:Nasdaq), because it has not been able to rally all week, and at the same time it did not collapse. If -- by some remote chance – we see it fall to that line around $138 early in the week, I would call for a bounce off that line in the very short term.

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There is something strange going on regarding the dollar and gold. First, the dollar has collapsed in October and aside from the fact that no one even discussed the decline, gold has hardly reacted to such a steep decline.

It all seemed perfectly normal in June when the dollar went down and gold went up. Then the dollar rallied and gold went sideways. But look at August: The buck went up and so did gold. September was more mixed for both, but October is just plain odd.

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The dollar looks like it is getting oversold and there is some support in this $96-$50-$97 area, so a bounce can be expected. I would still love to see GLD have one more swoon to get sentiment too bearish, but the relationship with the dollar needs to be watched.

New Ideas

I need to address the chart of the iShares North American Tech-Software exchange-traded fun (IGV) - Get Free Report for software stocks, because I thought it could lift itself up and over $220 and therefore change the chart from a head-and-shoulders top to the last few months being a correction. I was wrong. There is clearly support at $200-$205, so it that breaks, it will complete the head and shoulders top.

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Today’s Indicator

The new highs increased a bit last week and new lows have contracted. While the 10-day moving average of new lows is still heading down, that could change again later this week. Again, we’ve got mixed signals.

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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.

When we last looked at NVDIA (NVDA:Nasdaq) it was near $170, bouncing off that line, and I thought it could bounce to the $190 area. It went further, as you can see. It has some support in this $185-$190 area. If it can hold it, as it did near $170, I’d happily think it was a buy again, so that’s what I’d watch for: That last week’s pop wasn’t a fake out, but rather a real breakout.

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Front Yard Residential (RESI) - Get Free Report is a stock that hardly trades and has quite a high yield. I suppose if it can get up and over $12.25, it would have a target in the $13.50 area. It would be great if it could break out and retest the breakout the say it did in May/June.

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We had a great trade in Match Group (MTCH:Nasdaq) earlier this year, but I got off the ride too soon, when I thought it was done around $75. What we have now is a stock that broke its uptrend line and has some support down around $65. Unless it cracks $65 on a gap, I suspect it would see a short-term bounce from there, but overall, this does look like it’s developing a top, so it ought to eventually break $65. I’d be wrong if it goes back up over that $80-ish area.

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