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Tracking the Minor Moves

Let’s look at some of the subtle changes in the indicators.

The Market

Nothing has changed with the indicators. Well that’s not entirely true. I should say nothing has changed to make the market feel any different than it has for the last few weeks.

The changes thus far are minor. First, we had a down week last week that worked off the short-term overbought reading that we entered the week with. The intermediate-term had its first push into intermediate-term overbought territory, but it still appears this indicator will not be significantly overbought until the first week of May, so about another week or so.

Overall breadth is still lagging, but the McClellan Summation Index is still rising, which means the majority of stocks are still rising. What has shifted, in a minor fashion, with this indicator is that we entered last week where it would take a net differential of negative 3,600 advancers minus decliners to halt the decline. We enter this week where the number is negative 2,300. You can see how the number has thinned out. But typically this indicator will rollover before the indexes.

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Another minor change is sentiment. Last week we looked at the 10- and 30-day moving averages of the equity put/call ratio. The 10-day was already down, but not at any level of note. At the time I said if we get another week or two of readings that hover around 60%, the moving average ought to fall toward or under 60% and then it would be noteworthy. As of today that reading is down to 62%. It is still falling. The way I would describe this indicator now is that it is no longer bullish for stocks, it is neutral. Should it fall under 60% and turn upward it would go in the negative column.

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We also looked at the very high 30-day moving average and it has backed off quite a bit, now it is just a smidgen under 72%. Should we continue to get readings hovering in the 60% area this week, I would expect this indicator to move into neutral territory in the mid- 60s.

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Even the Citi Panic/Euphoria Model has moved into neutral territory as it now sits just a bit over the halfway mark between Panic and Euphoria. I am not sure it can or will get to Euphoria before the market gets intermediate-term overbought, but if it does, I would consider that a negative.

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This brings me back to the Volatility Index chart that we looked at Thursday. It came down hard on Friday, but I still see it as part of a rounding under that I expect has another week or two before it starts heading back up. I am not looking for the VIX to skyrocket up to the old highs, let’s just say the chart look to me as thought we should get a bout of volatility in mid-May, since it often goes sideways for two to four weeks before having a spurt upward.

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I think we can rally this week, even if we’re down on Monday. If we do rally this week it leaves the door open that we get short and intermediate term overbought in early May, around the same time period. So, as I have said for the last few weeks, we’ll watch to see if there is a change in the indicators.

New Ideas

The Daily Sentiment Indicator (DSI) for the Mexican Peso is at 12. I’d like to see it get to single digits but typically when I want to play a bounce in the Peso my go to stock is American Movil (AMX) - Get Free Report which might just try and hop over that line around 11.

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I am intrigued by the chart of Morgan Stanley (MS) - Get Free Report as long as it can stay over last week’s low I think it can have another rally try.

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Today’s Indicator

The new lows have not expanded, but neither have the new highs. It’s like they are stuck in the mud.

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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 would say Sleep Number (SNBR:Nasdaq) completed a head-and-shoulders bottom that now measures to the $35-$37 area. It would be better if it can hold over $27 though. I would prefer it doesn’t try and fill that gap.

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We looked at Jabil (JBL) - Get Free Report near the lows with an eye toward it filling that gap around $26-$27, which it did. I think it can rally back to the $27-$28 area. If it can get over $28, I’d be impressed, otherwise it’s just a trading range.

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I look at the chart of Disney (DIS) - Get Free Report some days and wonder why it’s not down more. Then I look at it and think maybe folks are betting on a recovery, but it doesn’t go up either. I think we’ll call it a trading range for now, low $90s to that $110 area. If it came down near the intersection of those two lines (between $90-$95) I’d probably get interested in it for a decent bounce.

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If Boeing (BA) - Get Free Report can hold $120, then I’d look for a bounce. If it breaks $120 I would not hang around to see if it can recapture it.

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I was asked for a target on KB Homes (KBH) - Get Free Report, which we looked at with a positive eye a week ago. I’d love to see it get up there into that gap around $25-$26. I do not want to see it break under last week’s low and if it can get over $22.50 I’d move the stop up to at least $21.

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