Skip to main content

The Market’s Score? Three for Three

That’s three red days for the S&P 500, so let’s take a look at the charts.

The Market

Just when you thought the market couldn’t go down, we get our first three red days in a row for the S&P 500. It has not gone to more than three in a row since early August. I guess that means the odds are stacked against it going down again on Friday.

Yet, a down day on Friday would be a decent set up for a rally next week.

You see, another down day would make the market a little bit oversold. It would – if breadth were negative — get the McClellan Summation Index to the point where it needs more than positive 2,000 advancers minus decliners to halt the current decline, and that typically means it is oversold.

But let’s talk about the charts. It’s rare that I look at just charts instead of indicators, but some charts are now at critical levels.

Let’s look at the transports. I am not using the iShares Dow Jones Transport Average exchange-traded fund (IYT) - Get Free Report, because there is a weird print that does not show on the chart of the actual Transportation Index. This 10,500 zone is some support, and it is critical that it hold. It has support at 10,400 as well, so that’s not the issue. The issue is that if it breaks this line, it has come down too far.

Image placeholder title

Now let’s move to the Philadelphia Semiconductor Index (SOX:Nasdaq). We looked at it relative to the Nasdaq Composite the other day and we saw that it had weakened with the ratio peaking on or about November 1st. The SOX has since come down 3%. It has filled the early November gap and is coming into trendline support around 1675. It’s not critical that this level hold but it tells us a lot about the market if it doesn’t.

Image placeholder title

The Dow Jones industrial average has support as it heads into the 27600 area from this uptrend line.

Image placeholder title

Think of uptrend lines like earnings growth. If earnings are growing at 30% and all of a sudden they are now growing at 15%, then we have to say 15% is not bad but it’s not 30%. It means the growth rate has slowed. So if an uptrend line breaks, it is not the end of the world, but it means the growth rate of the stock price has slowed. And slowing and breaking change the picture.

I will end by noting that folks are clearly getting a bit more nervous. The put/call ratio was 120% today. That’s the highest reading since it was 137% on Oct. 3. The 10-day moving average is shown below. I think it gets higher before the correction is over. New Ideas

I was asked about the chart of Comcast (CMCSA:Nasdaq) and as long as it holds $43, I guess it gets the chance, but the stock has made two lower highs since September, so I’m not sure I trust it. And if these lows break, then I think $40 is the next stop.

Image placeholder title

In the oil area, keep your eyes on EOG Resources (EOG) - Get Free Report, because if it cannot get over this little downtrend line, I fear the rally in energy will be short lived.

Image placeholder title

Today’s Indicator

The chart of the put/call ratio’s 10-day moving average is discussed above.

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.

Of course if I am going to say something nice about the VanEck Vectors Oil fund (OIH) - Get Free Report, like I did Wednesday night, then I get asked about Apache (APA) - Get Free Report, which still looks like it’s trying to turn upward. Obviously under $22 and it gives it up, but over $24 and it gets interesting. One thing to note: It is a triangle with a pattern of indecision and the best moves – those least likely to be a false breakout – come somewhere between half way and two thirds into the apex. So, the longer it takes to break out, the less likely the triangle actually matters, because it is more apt to just keep grinding back and forth.

Image placeholder title

I was asked to follow up on JB Hunt (JBHT:Nasdaq), which I highlighted the other day as a stock that ought to bounce from this support line. The first test is $117.50. If it cannot get over that, it’s in trouble. And since it has now spent a few days milling around at support you don’t want to see it break that line with any oomph.

Image placeholder title

The question is whether there’s a head-and-shoulders top in Micron (MU) - Get Free Report. There is, but the right shoulder is higher than the left, so it makes it a bit suspect. For now, I’ll call that $42-$43 area support. It would need to rally up and over that short-term downtrend line for me to think it’s out of trouble.

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.