Remember all those support lines I drew in here on Mond ay morning? Every one of them held! The only one I did not draw in was the uptrend line on the S&P 500, but here you can see that it too held, just as the Russell 2000 continues to toy with its 200-day moving average line and the Dow Jones Industrial Average rallied off the uptrend line. Saved yet again!
Even the PHLX Semiconductor Index (SOX) finally saw the selling abate, one day later than I thought it would, since I figured it would find support and bounce on the third day and not on the fourth day.
But did any of this change the statistics? In a word, no. The breadth was still negative, and that in turn took the McClellan Summation Index down some more. The number of stocks making new lows expanded yet again on both the Nasdaq and the NYSE.
When we look at the ratio of the S&P 500 relative to the Russell 2000, we find it now hovering at 1.74. Yes, I know I sound like I am being so picky on this, but when you look at the chart of the ratio, I think you can see that the extremes that made fabulous bottoms were all spikes that blew through that 1.75 area.
I can also note that the spikes were accompanied by positive divergences such as fewer new lows, as well as intermediate- term oversold conditions such as the 30-day moving average of the advance/decline line being oversold (chart shown below). Keep in mind that this is a moving average, so we look back to see the numbers we are dropping. I feel compelled to report to you that I cannot find a string of red numbers being dropped on this indicator for several weeks. In the next two and a half weeks there are only two red numbers to be dropped.
The best news I can offer is that Nasdaq is a bit oversold, mostly because of the Russell’s action. I can also offer up that the Blogger Sentiment reached 56% bears this week, the same place it was near the April low in the S&P.
On Wednesday we’ll hear from the Federal Open Market Committee yet again, and on Friday we will get the employment number. For now, I only see a market that got saved when it had the chance not to be.
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I was asked to comment on the recent hot IPO GoPro (GPRO:Nasdaq). Typically when a chart has so little history, it’s hard to make a determination on support and resistance. However, I would note that if this goes through $45, it ought to make another run at the high near $50.
I am sure you have all had the same experience I did today. I intended to type in the ticker GRPO for the above chart, and instead my fingers naturally typed in another chart whose ticker begins with GRP. This time it was Groupon (GRPN:Nasdaq)! And what an interesting chart. There is resistance all the way up, but once over $6.50, you would have to consider a move up to $7 quite doable. And dare I say, maybe even $7.50.
One word of caution on this: Many of these former faves tend to rally for only a day or two before reality sets in, so if you play it and get a pop, don’t overstay your welcome.
The 30-day moving average of the advance/decline line is discussed above.
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I am sorry I missed the big base in Atlas Energy (ATLS) , but it did break out last week. It’s going to have plenty of resistance along the way, starting with that spike high near $50, but that base measures to the mid-$50s now. A pullback to retest the breakout in the $47-ish area would be good, especially if it occurs over the course of a few weeks. I would not want to see it trade back under $45- ish, though, since that would make it look as though it negated the breakout.
Not long ago, we looked at the iShares MSCI Japan (EWJ) - Get Free Report, an exchange-traded fund to be long the Japanese market, and noted that it had a higher target. Now I’ve been asked about WisdomTree Japan Hedged Equity Fund (DXJ) - Get Free Report, another ETF to be long the Japanese market. This has a target in the $53 area, and I suppose if you wanted to be really bullish you’d come up with a target near $56, but I’ll stick with $53 for now.
When we looked at Starbucks (SBUX:Nasdaq) in the low $70s, I liked it but thought it would stop at $75-$76. I was clearly wrong, as the stock zoomed on up to just over $80 before scooting back to $78. I do not like when stocks do what Starbucks did, shoot higher and then reverse, but as long as the stock holds $77, it is OK for the longer term. I am not terribly fond of the chart up here, since it looks tired to me.