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They’re Down, Out ... and Roaring Back

They down-and-out stocks rallied and outperformed growth; breadth is great; and sentiment remains elevated.

The Market

The down-and-outers came alive!

And, yes, that makes me happy. What I find more interesting is that so few feel the urge to embrace them. Instead, we hear a lot more chatter about how crummy the economic numbers are, so we shouldn’t trust it.

Statistically, speaking breadth was terrific — finally. It was enough to get the McClellan Summation Index to stop going down. It has been going down for six weeks now, so that’s a change. The bad news? If the market turns south again Thursday, it is entirely possible the Summation Index gives up the help it got Wednesday.

So, why should the market turn south? Well, perhaps not south immediately, but we are back to a sentiment issue. The Daily Sentiment Index (DSI) is now 89 for both Nasdaq and the S&P, so if we get one more up day, these will scoot over 90 and you saw what happened Monday when we get readings over 90.

Then there is the put/call ratio, which chimed in today at 62%. This is the lowest reading since June 8, which turned out to be the peak in June for most stocks. I suppose the good news is that there were two days with such low readings before it mattered, so perhaps we get one or two more.

Finally, the Investor’s Intelligence bulls are now 58.1%. The peak reading so far for this year was 59.4% in January, so we’re getting closer. As a reminder readings over 60% are big red flags for me. Over 55% and it’s a yellow flag.

Anyway, the takeaway is that there was improvement in that the down-and-outers finally rallied and they outperformed growth in a meaningful way. Sentiment, however, remains elevated.

New Ideas

It’s getting harder to find stocks that are down and out now that they have moved. I also don’t like to get in front of earnings, so I’m looking at Citigroup (C) - Get Free Report. If it holds that $50 area it should improve.

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Today’s Indicator

The Volume Indicator remains overbought at 54%.

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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.

SailPoint Technologies (SAIL) - Get Free Report has a measured target in the mid $30s, but it is not my kind of chart. It is up too much and hasn’t had a correction in months, so in my view it is vulnerable to one. If it pulled back to the breakout around $24-$25, I might get interested.

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PagerDuty (PD) - Get Free Report has good support around $22.50, and I would expect it to hold there on this trip down. There is still an unfulfilled target near $35.

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Silver (SLV) - Get Free Report finally broke out, but it has done so rather quietly. I still like it, but we’ll watch the DSI for signs of getting too frothy. It is currently just shy of $90.

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High on Tech

High on Tech

Let's check sentiment, why you shouldn't trust any bounce from the producer price index number, and what the heck is up with those put/call ratios?

Bond Relief

Bond Relief

Here's why bonds could use a little respite as they were the only thing to really move today. Also, let's look at sentiment and McDonald's.

Breaking Bank

Breaking Bank

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A Rally Last Week? What Rally?

A Rally Last Week? What Rally?

It's almost like what happened last week never happened. Also, let's check the indicators, the overbought reading, energy, transports and ... Tesla.