I would have preferred a down day Monday, because it would have gotten us to a better oversold and a better sentiment situation. Perhaps Tuesday will see some downside.
That having been said there was a minor change in the indicators. I know, you’re shocked. Shall I wait for you to catch your breath?
The change was that 85% of the volume on Nasdaq was to the upside. We have not seen that since April 6, and prior to that it was March 24. Here is the chart of the Russell 2000 small-cap fund (IWM) - Get Free Report, so you can see how things transpired thereafter.
Now, I know this is quite a different situation than what we saw in the spring, but as you can see, we don’t tend to see this sort of statistic very often, and despite the rally the last several months we haven’t seen it since back then, so, yes, I think it is a positive. I would, however, note that two days after March 24 we saw IWM give back almost the entire rally before lifting again on April 6. That rally lasted a few more days before giving back half.
But what I think this is part of is the discussion we’ve had several times in recent months -- that the statistics on the New York Stock Exchange are in better shape than Nasdaq. Said differently, the down-and-outers are starting to work.
I don’t quite know, because it’s only been one day, how this all fits into a market correction scenario, but I don’t think the correction is over yet. And as we can see on the chart of IWM there was a lot of give back within the week after this big volume reading.
Long-time readers know I have been a fan of United Airlines (UAL:Nasdaq) for the last few months. My view has been that as long as it trades over that $30 area, it’s OK, and it has worked its way up by 20%. I am still a fan of the stock, but I want to lift my stop level. I do not want to see it trade under $34, because that breaks the uptrend line that has been in place since July.
The 30-day moving average of the advance/decline line is not yet oversold. This is an intermediate-term Oscillator.
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Cabot Oil and Gas COG is a decent chart that is trying to bottom. As long as it stays over that uptrend line, I think I would put this in the “worth a try” category.
When we looked at Under Armour (UAA) - Get Free Report back in August, I didn’t trust it to do more than enjoy an oversold rally, but it came back down and I missed this last nearly 20% run up. There is a small gap around $12.50, so that is short-term problematic. But this is a stock developing a nice base and over $12 is a breakout, perhaps it maps out in blue the way I have drawn it in.
I was asked to do a follow up on Alcoa (AA) - Get Free Report, which I recommended quite a few months ago. It has had a quiet correction over the last six weeks. I think as long as the stock can stay over this $13 area, this would be an area to get involved again since the risk/reward is pretty good.