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Spinning Wheels

Wednesday’s rally pretty much just took back was the swiped on Tuesday, but if we are down Thursday, expect another rally before we reach overbought.

The Market

Well at least we got the rally Wednesday. Of course all it did was regain what it took away on Tuesday, so the end result is we’re spinning our wheels.

But recently I showed you the chart of the cumulative advance/decline line with the S&P 500 and how it was well ahead of where the S&P was. Then Tuesday, I noted that breadth wasn’t bad on the decline. Now take a look at breadth (blue line), especially relative to the S&P (brown line). Breadth is about to touch the July high, while the S&P is about one hundred points under it.

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The other indicators were pretty much as they have been all week, so there is very little more to say on them: The 10-day moving average of the new lows continues to decline, the McClellan Summation Index is still trying to turn up, and the 10-day moving average of the put/call ratio is still heading down.

Speaking of the put/call ratio, Wednesday’s reading was off the charts. The total put/call ratio was 128%, which is super high for an up day. In fact, it is the highest reading we’ve seen since the market turned down nearly a month ago. Where is the love?

Then there is the put/call ratio for exchange-traded funds. It was an amazing 254%, which is the first reading over 200% since Aug. 5. Maybe folks don’t trust what could come out of the Fed’s symposium at Jackson Hole later this week? Or maybe they don’t trust what might be tweeted by the President? Whatever it is, I expected a bit more love for the market by now.

I am waiting for the market to reach an overbought reading again, which I believe will arrive next week (more on that as we get closer). As I said on Monday evening, it gets harder as we move away from the oversold condition. But I really did expect a bit more embracing the market by now. Is it possible the S&P needs to clear this resistance before folks get more bullish?

In any event, if we are down Thursday, I would still expect one more rally before we reach an overbought condition.

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New Ideas

I want to revisit the chart of General Dynamics (GD) - Get Free Report, which I still like, but is nearing some resistance around $190. It’s probably a bit overbought, having run over 10 points in August – when everything else is down -- but on an intermediate term, if it can ever clear this area around $190, I think the old highs are doable.

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I am going to keep showing you the chart of Adobe (ADBE:Nasdaq), because it keeps threatening to break that line but can’t or won’t. It reaffirms $280 as a critical level on the downside.

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Today’s Indicator

The Volume Indicator reached 44% late last week. That means it got oversold. It is currently 46%, so it hasn’t moved up that much yet.

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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 chart of GLD gets more questions than other stocks do these days. So let me be clear on this chart: That base it broke out of in June has an upside measured target around $142. It reached that level. So now, it either needs to correct or go sideways to digest the move and build a new pattern. Can it keep going? Sure. But a few weeks ago I wrote about how I use measured targets. The bottom line is I am a fan of taking profits or using a trailing stop once they get there. I am not a fan of buying more. That won’t change, no matter how many times you ask. And it won’t change even if GLD rallies to $150 from here. So it needs time, or it needs a correction, before I will like it again.

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I look at the chart of PG&E (PCG) - Get Free Report and think a rally back to $15 would be a gift and a place to sell it. Then I look at what it did in January, when it filled the first gap and kept going. But in reality the gap at $22 got filled and that was pretty much it. So I’ll stick with a gap-fill in that $15-$16 area, and that would be a good place to sell this.

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It’s hard for me to like NVDIA (NVDA:Nasdaq) right here, because it’s had a heck of a run already, and there is resistance overhead. It’s hard for me to hate it, because it’s had such a good run. I will watch it and monitor it to see if a pattern develops after this run to offer up a trade. In the meantime, the resistance would have me taking profits or sidelined.

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Axalta Coating Systems (AXTA) - Get Free Report reached its target around $31-$32 when it tagged it in July, but a trip down to fill that gap or tag that line would have me interested in the chart again. So around $26-$27, I’d have another look at the long side.

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