Skip to main content

Something’s Amiss With This Rally

Lets look at the statistics behind Tuesday’s rally compared with last week’s action to see how it stacks up.

The Market

If you felt like last week’s rally had a better feel to it than this week’s, then I can’t blame you. The statistics back you up, too.

Remember last week, when the breadth was the best since early January? It was plus 1,950. Tuesday it was plus 1,300. Oh, sure, the S&P 500 rallied 12 points more last week, but 12 points does not account for that disparity in breadth.

We also saw an increase in the stocks making new highs last week, when the S&P tagged this 2940 area. There were 168 new highs; Tuesday there were 156 on the New York Stock Exchange. Nasdaq had 93 new highs last week compared to 72 Tuesday. And, once again, there were more new lows than new highs for Nasdaq on Tuesday.

Last week, the banks rallied, this week they barely lifted their head. Same for the transports. And the small caps. And the 50-day moving average continues to be resistance overhead.

And the bonds? They can’t manage to go down, can they?

Yet, we are not overbought. It’s possible that the 10-day moving average of stocks making new lows could peak in the next few days. That would be a change. Also, if you squint really hard, you will see that the 10-day moving average of the put/call ratio turned down .

Image placeholder title

The McClellan Summation Index, after last week’s rally still needed a net differential of plus 900 advancers minus decliners to halt the decline (and therefore more to get it to rally). After Tuesday’s action it needs plus 1,200, so we’re essentially in the same place with the intermediate-term indicators. The chart is shown below.

This means there is no change in my view. Even if we come down Wednesday, I think we’ll have another rally attempt before the end of the week. After that we’d have to reassess where the indicators are. I still believe we’ll come back down after the oversold reading is worked off.

New Ideas

I want to discuss the chart of Adobe (ADBE:Nasdaq), because I have so many charts in tech-land that look like it. There’s that uptrend line that connects the late December/early January low, the late May low and the recent low. So here’s my question: Is the last few days a small flag, before it pushes higher? Or is it part of a right shoulder of a head-and-shoulders top (albeit with a very funky down slanting neckline)?

I think the action the next few days will tell us as this pattern unfolds.

Image placeholder title

Today’s Indicator

The McClellan Summation Index chart is below:

Image placeholder title

Q&A/Reader’s Feedback

Cyber-Ark Software (CYBR:Nasdaq) broke last week. I’d say it has the potential to form a top now, but it hasn’t even had a failing rally yet. If it rallies to $125-$130 and fails as it ought to then that would make it start looking toppy.

Image placeholder title

I have not liked Salesforce.com (CRM) - Get Free Report for quite some time, because of that big top it has been building most of this year. There is a minor target at $140 and another at $130. So I expect a bounce from here. It should make it to $150. If it can’t make it all the way to $150 that would be quite bearish.

Image placeholder title

When we last looked at Invitation Homes (INVH) - Get Free Report I was on the side of taking profits, and I see the stock has done nothing more than go sideways since then. For two months, it’s been one, big sideways. It still hasn’t broken down either. If it can break out it measures to $30. If it breaks under the trend line, I’d worry quite a bit.

Image placeholder title
Dow is the Most Vulnerable to Profit Taking

Dow is the Most Vulnerable to Profit Taking

Despite the newfound focus on the Dow Jones Industrial Average last week, it turns out we may be seeing the last gasp of outperformance here.

How Hungry Is This Market?

How Hungry Is This Market?

Here's what I'd like to see happen with this rally -- I'd like it to show some FAANGs. Here's why -- and a look at Microsoft's chart, news highs and more.

Sloppy With a Chance of Rallying

Sloppy With a Chance of Rallying

Here's why I see another rally before the weekend, even amid the messiness, and a bump for Amazon.

Sloppy With a Chance of Rallying

We Can Rally Just a Bit More

Energy stocks have a lot of complacency in them.