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