Well, you can't say the market lacks ... energy.
We started with energy for sale on news from OPEC. Then OPEC denied it, and oil came roaring back, only not quite back enough for most to go up on the day. That tells me folks are still quite keen to buy energy, but it is likely still over-owned.
Energy’s midday rebound helped breadth end the day with just a minor negative and, yes, that keeps the McClellan Summation Index heading up. For now. A negative breadth day of negative 1,000 or greater on the New York Stock Exchange would halt the rise.
But the 30-day moving average of the advance/decline line, what I use as an intermediate- term oscillator, is heading into overbought territory now. The chart is below, but you can see how that overbought situation is developing.
In other areas of the market, tech was terrible, especially small-cap tech. I have discussed several times in the last month that as we get closer to year's end, we are likely to see tax-loss selling and perhaps that is what we saw today.
I still think we can have one more rally this week, but the sloppiness is becoming pervasive.
It began with fewer stocks making new highs and now we have new lows on Nasdaq creeping up again. Today’s new lows numbered 278 for Nasdaq, which is the highest since just before the consumer price index's low-than-expected inflation reading that got everyone so excited.
Finally there is the Daily Sentiment Index for the Volatility Index, which fell to 21. The VIX fell, too. I’m not sure I have ever seen the DSI for the VIX on the verge of being a teenager at the same time the DSI for Nasdaq was on the verge of being one, as well. Yes, Nasdaq’s DSI is at 21, too.
I would love to see a rally this week, but I maintain that December is setting up to be a volatile month. Do not get complacent, even if the steel stocks were up so nicely today.
A few weeks ago, I recommended the Utilities Select Sector SPDR Fund (XLU) - Get Free Report for a trade, and it’s done well. In fact, today it eked out a higher high, but I want to lean toward some profit-taking now. It can rally a bit more, but in this market I prefer taking some money off the table when we have it.
I have had several questions on the Dow’s outperformance and how long it might be able to go on. It is my belief that sometime in the next one or two months, the Dow Jones industrial average will correct and give back some of these gains. Sometimes it is easier to see a "Buy" vs. a "Sell," so here is DOG (DOG) - Get Free Report, which is an ETF to be short the Dwo. It doesn’t trade much, but if you look at it this way, I’d be a buyer between here and $32.
The 30-day moving average of the advance/decline line is discussed above.
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I am intrigued with the chart of Constellation Brands (STZ) - Get Free Report, and I believe it should make a try for that $255-$260 area. Will it breakout and hold it? I’m skeptical, but I’m willing to give it a chance. So, if it can’t get over $255-$260, I’d be out. If it can then my stop would be under around $253, because then it would look like a false breakout.
We looked at Peabody Energy (BTU) - Get Free Report recently when the stock was at resistance and my preference was for a pullback and another rally. So I’m still in that camp but now I’d use a stop under around $26, and I’d fret if it can’t get up and over $30.
Merck (MRK) - Get Free Report has completed the 90/100 rule (90% of the stocks that make it to $90 will make it to $100), but it has also hit its target off that sideways pattern from the summer. While the stock has done nothing wrong I’m in favor of taking something off the table in this $105-$107 area.