Skip to main content

The Market Backtracks

We traveled right back to where we were a month or so ago: Mega-cap tech rallied and everything else fell apart. Here's where we could go from here.

The Market

The most impressive thing we saw in the market Monday was the contraction in the number of stocks making new lows for Nasdaq. The most unimpressive thing we saw was the increase in new lows for the New York Stock Exchange. Also, breadth was back to awful.

Image placeholder title

Basically the market went right back to where it was a month or so ago. Mega-cap tech rallied and everything else fell apart.

OK, there is some good news in that everything else fell apart, since at one point 92% of the volume was on the downside. We didn’t close there, but you might recall a few weeks ago when this started I noted that we couldn’t get 90% downside volume and I view that as a form of short-term capitulation.

I know I sound like a broken record, but this means nothing has changed in the indicators. The McClellan Summation Index is still heading down. High yield and junk bonds also went down, something that they haven’t tended to do when tech is rallying.

I would view Monday as part of the short-term oversold condition that I have discussed these last few days and a minor positive divergence in Nasdaq – with fewer new lows. I wouldn’t be surprised to see some upside follow-through — we have had four-straight red days, which is rare. In fact, the last time we saw that was late February and prior to that was early August 2019.

Despite the S&P bouncing off some support, I do not think we’re going to head straight back up. Resistance now resides around 3320 to 3340.

Image placeholder title

New Ideas

The move in the bank stocks was dreadful. There is some support here on the Bank Index and all the way down to 70; the chart looks remarkably similar to the chart of JP Morgan (JPM) - Get Free Report, which is shown below.

Image placeholder title

I would say keep your eyes on Apple (AAPL:Nasdaq), because it rallied well, but it hasn’t gotten back over that resistance it broke down from in the $110-$115 area.

Image placeholder title

Here’s a follow-up to the person who asked about Square (SQ) - Get Free Report recently. It has held $140, so that is your line in the sand. If it trades under that area, be cautious.

Image placeholder title

I would also point out that Freeport McMoRan (FCX) - Get Free Report became a beloved name and Monday’s action is not good. I think even if it rallies again, this chart is one to be cautious on.

Image placeholder title

Today’s Indicator

The 30-day moving average of the advance/decline line is not yet oversold. But it is finally getting much closer. Very much closer.

Image placeholder title

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.

Oh, sure, I can draw this line in on JPMorgan (JPM) - Get Free Report, but the better line (blue) broke. There is some support in this low $90 area, so I’d like to see it hold down here. But I admit this is not a good chart anymore. If it rallied back over $97,, I’d have to give up.

Image placeholder title

I liked Workhorse (WKHS:Nasdaq) a few weeks ago but up here it has tagged its measured target. It has done nothing wrong but I’d be inclined to take some profits anyway.

Image placeholder title

Amazon (AMZN:Nasdaq) has some support in this $2,800-$2,900 area. I know that is absurd that it is so wide, but if you lob off two zeros and think of it as $28-$29, it makes more sense. If it did get smacked to $2,800 I might buy it for a trade.

Image placeholder title

Illumina (ILMN:Nasdaq) had a downside measured target around 280 but it snapped right through it today. If it rallies to $29-ish I’d sell it. The thing that would turn it bullish is if it gapped up over $290 and left today down here as an island.

Image placeholder title
Dow is the Most Vulnerable to Profit Taking

Dow is the Most Vulnerable to Profit Taking

Despite the newfound focus on the Dow Jones Industrial Average last week, it turns out we may be seeing the last gasp of outperformance here.

How Hungry Is This Market?

How Hungry Is This Market?

Here's what I'd like to see happen with this rally -- I'd like it to show some FAANGs. Here's why -- and a look at Microsoft's chart, news highs and more.

Sloppy With a Chance of Rallying

Sloppy With a Chance of Rallying

Here's why I see another rally before the weekend, even amid the messiness, and a bump for Amazon.

Sloppy With a Chance of Rallying

We Can Rally Just a Bit More

Energy stocks have a lot of complacency in them.