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Strange Day

Let’s unpack some of the oddities underneath Thursday’s market action.

The Market

Thursday was one of those odd days in the market. The Russell 2000 was down almost 11 points and breadth was a mere negative 250.

It’s odd, because usually when the Russell is soft, breadth is soft, but that’s not what happened.

Then we had Nasdaq lose 76 points, which these days isn’t that much, but it is more than Nasdaq is used to losing lately. In any event, there the net volume (up minus down volume) was positive by a decent margin at 900 million shares. To put that in perspective, last Friday, Nasdaq gained 70 points, so about what it lost today, and net volume was positive 900 million shares, then.

All of these moves, though, had the net effect of no changes to the indicators. The biggest change, or really more of the same, was in the put/call ratio. First, Wednesday’s equity put/call ratio was so low (38%) that it was the lowest we’ve seen since June 8 (the peak in early June), but more than that it has taken the 10- day moving average to the lowest reading so far. The chart is shown below, but I must say it can only be a matter of time before this will matter. Clearly, it hasn’t mattered yet, but at some point all that call buying comes back to bite us.

I would have thought we’d have more of a pullback just from that reading alone, but we didn’t get that. In fact, the whole market felt like there was no selling. The New York Stock Exchange had the lowest volume since the Friday before Memorial Day. If Friday wasn’t options expiration, we might expect Friday’s volume to be even lower.

Adding to the oddities, we saw the Transports up for the third straight day, something that hasn’t happened in a month. Yes, it is odd that all the reopening stocks are doing better than the work-from-home stocks this week, when you consider the news that we have on the virus and economic front.

I’d love to see the market pull back for a few days to wring some of the bullishness out of it but Nasdaq hasn’t had consecutive red days in two months and the Russell, for all of its lagging, hasn’t had back-to-back red days in a month.

New Ideas

I’m going to do some follow-ups here.

Roku (ROKU:Nasdaq) reached its first target of $160 and has been milling around in the area ever since, so it probably is due a consolidation or correction. As long as it can stay over $140, though, it probably gets another push upward at some point.

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Adobe (ADBE:Nasdaq) bounced off that first support at around $420. If that breaks, it will complete a head-and-shoulders top.

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JB Hunt (JBHT:Nasdaq) had earnings after hours and the stock is up some more. I have a higher target for the stock near $160, but I would point out that it is going to be over- extended and due for a pullback next week.

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Today’s Indicator

The put/call ratio’s 10-day moving average is discussed above.

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.

Expedia (EXPE:Nasdaq) is the type of chart I would have liked a week ago, because it was down and out, but now it popped, and I am inclined to want to wait and see if it fills that gap down near $81-$82 to buy. Why? A gap fill is often a good place to buy, but down there you are much closer to the level where you know you are wrong. So in this case, under $80 and you are wrong, because you break the prior lows and the uptrend line, so the risk/reward seems better.

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We have looked at Simon Property (SPG) - Get Free Report several times, and I think I have said the same thing: down in this $55-$60 area I would take a look at it, because if it can hold that uptrend line then it has a good chance of a rally. But in this case I would also add any failure to get up and over $70 is a warning. So a break of the uptrend line, and I’m not interested. Failure to rally over $70 and I’m not interested.

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CIBR is an exchange-traded fund to be long the Cybersecurity stocks. It has broken the uptrend line I’ve drawn in black which is longer term. In the near term the blue one is key. If it can hold the blue one then I would simply hold on the belief that this is just a correction. If that blue line breaks I would get concerned there is a top forming.

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