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The Indicators Just Won't Budge

Breadth improved, but not enough to change any of the indicators, but here's what could move them. Also, let's check on GLD and even a SPAC.

The Market

Breadth improved, but not enough to change any of the indicators.

For now the McClellan Summation Index, even after a 100-point rally in the S&P over four days, is still heading down. A net differential of positive 400 advancers minus decliners will finally halt the decline; more would turn it upward.

The Cumulative advance/decline line has not made a higher high, while the S&P has. And the number of stocks making new highs remains pathetic, as neither the New York Stock Exchange nor has Nasdaq managed to get more than 200 new highs this week, although the NYSE came, oh so close today with 199.

I still think even if the market backs off tomorrow, we have an open window until early July for rallying, since that’s when the market gets overbought. But we’re back to talking sentiment, because that’s where the extreme is coming from.

The put/call ratio fell under .70 today for the first time since June 9. The equity put/call ratio was under .40 on Wednesday. The final tally for Thursday is not out yet, but back-to-back readings under .40 have been warning signs in the past.

Then there is the Daily Sentiment Index (DSI), which has Nasdaq at 88 now. A reading over 90 can see the market keep on going, but it’s generally a good idea to be cautious once it hits those levels. And the DSI for the Volatility Index is at 14. It probably didn’t go down more, since the VIX closed near the high of the day. Again, a down day tomorrow can reset these for another run up next week. But at this rate, that overbought reading is going to be accompanied by too much market enthusiasm as best as I can tell.

The most bullish sentiment indicator I have is that the NAAIM Exposure Index came back down to 70 (from 98.5 a week ago). If this is back in the 90s in early July, it too will show too much complacency.

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New Ideas

I do want to talk about the gold exchange-traded fund (GLD) - Get Free Report today. You might recall that I liked it near the spring lows, but when it got to $176 I thought it was time to take some profits. It has since come back to $166. There is nothing good to say about that chart. Oh, maybe I can say that $164 is support. However, the daily sentiment index is now 14, so for the first time in months, I begin to focus on when might be a good time to buy GLD again. If it pushes down to $164 and the DSI goes to single digits I will look for an oversold bounce, but that would be it for now.

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I also want to revisit TripAdvisor (TRIP:Nasdaq). We looked at it prior to my vacation, because I thought it was early, but had potential to start basing. It has. There are layers of resistance all the way up so there is no clear breakout. However, if it can cross that line the process begins in earnest. I like it as long as it stays over $40.

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Finally, I want to follow up on Qualcomm (QCOM:Nasdaq), which I was asked about a few months ago. At the time, I said I saw a sideways stock and that’s what it’s been but this week’s action tells me it might make a stab up there at that mid-$140s area again.

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Today’s Indicator

With these now-low readings on the 10-day moving average of the equity put/call ratio, I think it is possible we see it come back down next week and make another low in early July. Lows in this indicator are usually not good for the stock market.

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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.

Palantir Technologies (PLTR) - Get Free Report is the sort of chart that I struggle with. I see the resistance right overhead. I see that the stock hasn’t had a breather in six weeks. Yet I see the potential base. So what I would love to see is something akin to what I have drawn in blue. Without a breather, correction or pullback the stock will just get overextended and if it manages to breakout over $28 it will be exhausted when it does so.

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I don’t like SPACs. I think out of the hundreds of these special purpose acquisition companies there aren’t that many that are worth it. And if they are not trading near 10 bucks, then is it worth it? As a pure chart, Churchill Capital IV (CCIV) - Get Free Report looks like it is trying to base, so I’ll say it is fine as long as it stays over those twin lows from last week. I’d rather buy a real stock.

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Occidental Petroleum (OXY) - Get Free Report has spent quite a few months correcting and going sideways, which is something I tend to like. A move up and over this resistance around $32 should eventually measures to somewhere near $40, although I doubt it would be in a straight line.

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