Skip to main content

Upset Stomach?

Let's try to make some sense of what's going on in the market during this roller coaster ride.

The Market

Are you feeling nauseated yet? It’s been that kind of week, hasn’t it? But, yes, I still think we’re going to have another oversold rally next week.

As of Friday we will finally be maximum oversold using my own Overbought/Oversold Oscillator. For this, I look back 10 days ago to see what sort of numbers we are dropping. The sell-off began in earnest two weeks ago. That means starting Friday and through next Friday, we drop the following numbers (this is the net of the advance/decline line):

-1,165 (Friday)

-2,405 (Monday)

-2,429 (Tuesday)

-934 (Wednesday)

-2,387 (Thursday)

-1,592 (Friday)

There are no positive numbers to drop. So even if we replace Monday’s reading (that’s negative 2,405) with negative 2,000 the Oscillator still rises. It does not mean we must go up every day, but it means the market should finally lose some of the downside momentum, using this particular metric.

Image placeholder title

We might not get off the roller coaster that we’ve been on, but let me report that the Daily Sentiment Indicator (DSI) for the S&P 500 is at 17. Nasdaq’s is at 15. If the market sells off on Friday, I expect those DSI’s to come into the weekend in single digits. But remember, we’ve only been green once on a Friday in 2020.

Single digit readings on the DSI are no guarantee we rally, but when I combine it with an oversold market, I think it makes the likelihood high.

We are not oversold on an intermediate-term basis, just a short-term basis, although the Hi-Lo Indicator for the New York Stock Exchange did fall to 12% Thursday. Nasdaq’s is still over 20%, though. It will take quite some time for many of the other intermediate- term indicators to get to an oversold condition.

Image placeholder title

For those who keep asking if we need a retest, my answer would be, yes. That was why I showed you that chart from 2010 to show you how long it took to work this sort of action through the system. But we’ll talk about that after we get – If we get! — an oversold rally next week.

In the meantime wash your hands and keep your family safe and healthy.

New Ideas

I was asked about Gold, or more specifically the SPDR Gold Trust (GLD) - Get Free Report. That base still measures to this general area, but so far it hasn’t done anything wrong. The Daily Sentiment Indicator is at 81, so it’s not extreme the same way it was last time it was up here (when it was 96). So I expect that spike high to be a problem in terms of resistance, so I wouldn’t buy it. If I were long I would use a stop under $154.

Image placeholder title

Today’s Indicator

The 10-day moving average of the put/call ratio is likely to turn down in the next few days, which typically means we see a rally in stocks.

Image placeholder title

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 will consider that Utilities SPDR (XLU) - Get Free Report, an exchange-traded fund for the Utes, pretty much held the long-term line, but who cares? Now it looks like it got back to resistance and is coming back down again. Should it come down toward $64-$65 and you use a stop back under that line it might be worth looking at.

Image placeholder title

The iShares Dow Jones U.S. Home Construction (ITB) - Get Free Report an ETF to be long home construction names bounced off its long-term line, rallied to resistance and is now stuck nowhere. I’ll call it a trading range between $42 and $48 for now, but the only pattern I see at the moment is that if $42 doesn’t hold it will get ugly.

Image placeholder title

Logitech (LOGI:Nasdaq) has broken and while it has support in the mid to upper $30s, I’d sell it if it rallied to around $42, because that would close the gap and tag the broken uptrend line.

Image placeholder title

The banks have simply died as if this was 2008 all over again. The SPDR KBW Regional Banking (KRE) - Get Free Report is no different, even though it is for regional banks. I can calculate a short-term target around $45 for KRE, so it ought to attempt to hold and bounce from there, but a rally back to the $48-$49 area that can’t go further needs to be sold.

Image placeholder title
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

Suddenly everyone noticed the banks are not so hot. Also, let's look at new lows, energy and Exxon, and ... vomiting camels ...

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.