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The Down-and-Outers Are Put Back on a Leash

It seems this group is literally allowed just a day or two to run up, and that is it.

The Market

And just like that, the down-and-outers went right back to underperforming. They are literally allowed a day or two, and that is that. I mean, breadth was poor. Net volume on the New York Stock Exchange was negative with the S&P up 17 points. Not exactly barn burner stuff.

Nasdaq had somewhat better breadth and net volume, but it too was nothing to write home about.

And, because of all of this, none of the indicators have changed. The McClellan Summation Index is still going down. But, now it only requires a net differential of positive 500 advancers minus decliners to halt the slide. That is the closest we have come in a month. The chart is down below.

I know it’s unheard of to think the market could be down on the day the Fed opines, but I want to remind you that if it is down Wednesday, or even Thursday, we are still going to be short-term oversold. That won’t go away. In this case, I would consider down to be more of a short-term positive than a negative.

The banks are problematic, but have not broken. The massive volume traded in Citigroup (C) - Get Free Report is interesting, because it is just about to fill that gap from May. Notice that high volume tends to mark lows more than highs. That sideways action it has had for the last three months measures to $44-$45 as well. In other words, it needs to make a stand here. If it doesn’t the blue line is next.

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I will finish by noting that it looks to me that the Volatility Index is in need of another lift. So let’s not be surprised if we see a short burst of volatility.

New Ideas

I want to do two follow-ups today.

First, I was asked about Schlumberger (SLB) - Get Free Report a few weeks ago, and I was non-plussed. It fell, but didn’t break. The oil numbers are out in the morning, which could affect these stocks, but I am a bit impressed that SLB appeared to break, but couldn’t tag $17. I’ve got my eye on it for a potential rally.

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Raytheon (RTX) - Get Free Report was a name I was asked about recently, too, and I was very lukewarm on it. But now I stare at the chart and wonder if it is trying to form a head-and-shoulders bottom. Over $65 would complete it. Under $69 and I am wrong.

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Today’s Indicator

The McClellan Summation Index is discussed above.

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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.

I can make the case that NovoCure (NVCR:Nasdaq) has a target around $130, but the stock is up 30% in a week and is over-extended, so I don’t think it is getting there without a correction along the way. Gun to my head, I would take something off the table up here.

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I am very disappointed in the banks and the way they act, which has gotten much worse in the last week or so. Bank Of America (BAC) - Get Free Report needs to hold this $24-$25 area. If it doesn’t, my guess is it revisits that $22-$23 zone.

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Prudential Financial (PRU) - Get Free Report has been milling around for weeks. A break of those prior lows around $66 would also break the uptrend line. That would be my stop.

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Dow Holdings (DOW) - Get Free Report has been quite good to us since I recommended it a few weeks ago. It has a lot of resistance in this $52-$53 area, so if you wanted to trade around it up here (i.e. sell some), I wouldn’t argue too loudly. Overall, though, it continues to do just fine and should eventually eat through the resistance. I would love to see a pullback toward that $46-$47 area to buy it again.

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International Paper (IP) - Get Free Report has done well since the recommendation a few weeks ago, although it is heading into the first serious resistance, in the low $40s, from earlier this year. My inclination is to buy a pullback in that $39 area (blue line).

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