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This Party Just Stinks

While I hate to be a downer, I’m just reporting what the market’s statistics say – let’s hope the market’s party-goers can get a good night’s rest.

The Market

I have become like that person you take to a party who spends the whole time complaining. You know that person. She doesn’t like the food. The drinks are not right. The music is too loud. Everyone is drunk. And I am sorry, but as a slave to my statistics, all I can do is report to you what they are doing.

Monday’s barely positive close brought us negative breadth for both Nasdaq and the New York Stock Exchange. The NYSE was negative by 400 issues. That does not help the McClellan Summation Index. In fact, the Summation Index turned down nearly two weeks ago — remember this tells us what the majority of stocks are doing — and now it needs positive 900 advancers minus decliners to stop going down.

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Monday’s positive close brought us another rise in the number of stocks making new lows. There were 77 for the NYSE and 133 for Nasdaq. Again, this may be end-of-year stuff, but why aren’t the number of stocks making new highs expanding? When new highs are expanding, it’s easier to find winners on the long side. When they are contracting, it means the market is getting narrower. Narrow markets mean it’s harder to find winners, even though the market indexes are rising.

And sentiment is very complacent. The 10-day moving average of the put/call ratio has turned up, which can often mean we should pull back.

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But then there is also the Daily Sentiment Index (DSI) for the Volatility Index. It fell to 10 Monday. And the S&P 500 is at 89, while Nasdaq is at 90. That’s quite a spread, between the VIX and the indexes.

I suppose I can note that the Transports are oversold – I said the same Sunday -- or that the breadth of the market has been negative for seven of the last 10 trading days, so that makes the small caps a little oversold. But there really are too many signs that the folks at the party need a good night’s rest. If they can do that, perhaps the party does not get out of hand!

New Ideas

I was asked about Twitter (TWTR) - Get Free Report in late October, after its earnings debacle and I was lukewarm, with the view that it would take time to see if the stock can hold – it has a lot of support in the upper 20s -- and for it to build at least a small base. It seems to be on its way. I think it’s getting more interesting now that it has held $29 for a few weeks now.

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The iShares North American Tech-Software exchange-traded fund (IGV) - Get Free Report for software is into its first layer of resistance at $225. It’s had a good run so it might stall out up here. I’d love to buy it back at $220, but I’m not sure it will give us that chance.

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Today’s Indicator

The 30-day moving average of the advance/decline line is back to overbought, or it will be by Wednesday.

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Q&A/Reader’s Feedback

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That little base on Facebook (FB:Nasdaq) measures to the old high around $205, maybe a bit higher than that. It’s hard to imagine it will get through there handily, but stranger things have happened.

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VanEck Vectors Gold Miner fund (GDX) - Get Free Report an exchange-traded fund to be long the gold stocks refuses to break under $26, so as long as it stays over $26 it gets the benefit of the doubt. Crossing over $28.50 would accomplish two things: breaking the downtrend line and making a higher high than the two October highs.

I really wanted GLD to smash down to $134 and see sentiment get so negative, but it has not accommodated me. But I would like to point out that the DSI for Gold was over $90 in early August. Notice there was a pullback and a higher high, but it didn’t really pay to chase once that DSI got so high. That’s the lesson for DSI.

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Momo (MOMO:Nasdaq) should eventually measure to the mid-$40 area; that high around $40-$41 should keep the first rally up there in check. That means I would expect more of a stair-step and not a runaway. If it trades back under $36 I’d give up on it.

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