I want to begin with an ounce of good news since I think we could all use some these days.
The good news is that the S&P 500 made a lower low –- by a whopping 43 cents! —and there were fewer stocks than yesterday making new lows. Nasdaq made a lower low by 13 points and there were fewer stocks making new lows. At least for the day, the selling dried up, exactly what it is supposed to do when we are as oversold as we were.
I also want to report that Monday’s equity put/call ratio was 112%, which is the highest since we saw 113% two days before the December 2018 low. That tells me that along with the selling on Monday we had folks getting a bit panicky.
The total put/call ratio was also high on Monday at 184% and Tuesday was still high at 121%. The 10-day moving average of this metric is now over 120%, an area it does not get to often. It got up there in 2007 and 2008. It returned to that level in the summer and fall of 2011 and then not until the August 2015 collapse. Finally, it got there in December 2018, as well. The key is whether this is going to be more like 2007 or one of the subsequent readings. We don’t or won’t know, but what we do know is that with the exception of 2018, they all “double tapped” in that it took months to work its way through the system. But in the short term, we rallied.
Breadth was not terribly impressive today; it was actually less than last Monday’s rally of 136 points. But we are more oversold now than we were then.
There is a little gap on the S&P at 2910 (cash) from Monday’s gap down. I expect that will be problematic unless we gap up over it. There is another gap at 3000 after that. For now I think we’re just looking at an oversold rally that will come back down when it exhausts itself.
As a last reminder, I do not think the volatility is done yet.
If Universal Display (OLED:Nasdaq) can get over last week’s high around $160, I think it can make a run toward the next resistance around $170-$175. Since it’s a quick trade, if it can’t work quickly, I’d give up on it.
The McClellan Summation Index is still heading down and requires a net differential of positive 4,000 advancers minus decliners to halt the decline.
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Apple (AAPL:Nasdaq) did not make a lower low on Monday’s market decline. So if you want to be long on it, then that’s your line in the sand: that uptrend line. Resistance starts around $290-$295.
I am not thrilled with the chart of Nike (NKE) - Get Free Report, but it is impressive that it held that uptrend line dating back to June. Perhaps Monday will turn out to be the head of a head-and-shoulders bottom. All we know now is that the uptrend line is your stop and if the stock cannot get up and over $88-$89, it’s in trouble.
I was asked to revisit Verizon (VZ) - Get Free Report from a week ago. It filled the gap so the island pattern is gone, but it didn’t make a lower low. Also it is doing an admirable job of eating through all that resistance overhead. I continue to think the stock hit its downside target, but it will take a long time to eat through that resistance left overhead.