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Time for a Sentiment Check

We needed a pullback all week and all we got was sideways, but at some point it’s hard to keep buying with the sentiment where it is.

The Market

I guess the big change of the day is sentiment.

First, we got the American Association of Individual Investors’ weekly tally. The bulls are now at 44.1%, which is up just over six points from last week. It is also the highest reading since early October 2018. The bears are down to 20.5%, the lowest since late April.

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When we look at the spread between the bulls and the bears in this particular survey, we can see they are the highest since that big cluster over 20 points as we headed into the January 2018 highs.

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Then there is the CNN Fear and Greed Index, which closed the day at 90. It did get to the mid-90s in mid-November, but it had reset itself back to 60 in a hurry when we got that post-Thanksgiving sell off.

We also have the National Association of Active Investment Managers (NAAIM), who tally up their members each week on how exposed they are to the market. This week they moved up to 98. Yes, it can go over 100 – see the spring of 2018 on the chart below — that would mean they have gone long on margin. In any event, you can see this is pushing up at the high end now, having been just below 60 in October.

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The Daily Sentiment Index (DSI) for Nasdaq and the S&P is only at 82. The Volatility Index, however, is now at 14.

The only sentiment indicator that is not into “giddy” land is the Investor’s Intelligence bulls, who were at 57% this week. The last time they were over 60% was early October 2018.

Yet, let me report that breadth remains strong, so the indicators have not rolled over. Does the market need a pullback? Yes. It needed one early this week and all we got was sideways. But at some point it’s hard to keep buying with the sentiment where it is.

New Ideas

Gold has not given up much in weeks. I wrote it up positively for the first time in months three weeks ago and it popped, dropped, popped and sat. I think it should rally and I also think over $140 on SPDR Gold Shares (GLD) - Get Free Report and folks might actually get excited over it.

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Today’s Indicator

The 10-day moving average of the equity put/call ratio is low. That’s another sign of sentiment being complacent.

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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.

I was asked for an upside measured target on Best Buy (BBY) - Get Free Report and my math says the high of the pattern was around $77 and the low was around $63, which gives us $14. Add that onto the breakout at $77 or $78 and you get around $92. It is over extended, so a pullback would be welcome. But keep in mind if it does make it to, or over, $90 then the 90/100 rule kicks in. That rule states that 90% of the stocks that make it to $90 make it to $100. My guess is there is a dip/pullback before it tags $92, just because it is so over extended.

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United States Natural Gas Fund (UNG) - Get Free Report, an exchange-traded fund for natural gas, has made a higher low. It ought to rally and cross that steep downtrend line, just because the line is so steep. I do wish the DSI for natty – natural gas – was lower than the current $42 reading, because we have had some great trades in UNG this year when the DSI is extreme. I would be shocked if it can get over $19 though. Just remember that when the natty traders in New York City need to wear a coat when they go out for a smoke, natty tends to rally.

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I struggle with charts like Centene (CNC) - Get Free Report, because it gapped up on good news and looks like it will close on its lows, which is generally not a good sign. I suppose a pullback to fill the gap ought to lead to another rally, but there are better charts out there for my taste. Also the upside measured target is around $64-$66 and that high from early in the year is just overhead.

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Molina Healthcare (MOH) - Get Free Report ran right into resistance — twice. The good news is it is trying to eat through it. The bad news is that Thursday’s rally could not exceed the high from late November. If I was long, I would use a stop under the uptrend line and hope it gets up and over $140 soon.

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