Skip to main content

We Will Rally Again

As we head toward oversold, another rally should come before the week is over, but, wait, where's the panic?

The Market

Has there been panic in the market? I think we had some last Monday. But I don’t think we had any this Monday.

What we did have was a high TRIN. It clocked in at 2.41, which is the highest reading since early December. Yes, please note that it was early December, it was not at the low. We also had a high reading in early May and early March. We can make the case that there was a minor low in early March, but it did come back for a “W” in late March.

So, what exactly does the high TRIN tell us? There was a good deal of selling Monday. It takes selling to get us back to oversold. It takes selling to get the indicators back to oversold. You don’t get there with buying.

Image placeholder title

And we are heading back to another oversold condition. My own Oscillator will be there midweek this week. The exact date is Wednesday, but that’s an approximation.

Image placeholder title

Nasdaq’s Momentum Indicator also turns back to an oversold condition this week, having reached one last Thursday. In this case, I have walked Nasdaq down an additional 250 points in the coming week. Take a look at what the Momentum Indicator does: It rises and makes higher lows.

Image placeholder title
Image placeholder title

So, yes I think we rally again before the week is out.

But what of the intermediate-term indicators? The 30-day moving average of the advance/decline line, which I use as an intermediate-term indicator, is simply not oversold. I’d love to tell you when I see it reaching an oversold condition, but as of now I simply don’t have a time frame. The chart is shown below.

The Hi-Lo Indicator for Nasdaq is currently 34%. Under 20%, and it is an excellent intermediate-term oversold condition. The May low took it to 30%, so I would say this is on its way, but not quite there yet. It would be helpful if the 10-day moving average of the new lows would stop rising (it hasn’t).

Image placeholder title

On the sentiment front, let me point out that the put/call ratio was high Monday at 116%. But look at the 10-day moving average of the equity put/call ratio. It is higher than in May. It appears it may peak and turn lower later this week. That remains to be seen, but it’s come a long way from mid-July, hasn’t it?

Image placeholder title

New Ideas

The Daily Sentiment Index (DSI) on Gold is back at 94, on this little move back up. So I ask you to notice that GDX, the exchange-traded fund for gold, stocks was down Monday. So I will reiterate: I think taking some profits in gold is not a terrible idea.

Image placeholder title

The shocker of the day is that Netflix (NFLX:Nasdaq) was green Monday, after it came down and filled last week’s gap. I would love to see it rally toward $320-$330, but what I do know is I don’t want it breaking last week’s low.

Image placeholder title

Today’s Indicator

Following is the chart of the 30-day moving average of the advance/decline line:

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 was hopeful that American Airlines (AAL) - Get Free Report might stop around $30 and form a head- and-shoulders bottom, but that gave way and now it is approaching the prior low near $27. It ought to bounce from there – prior lows often provide a bounce on the first revisit – but that’s the best I can say.

Image placeholder title

I am not a fan of the chart of Facebook FB because the times I have been successful buying it have been the times there has been hysteria surrounding its decline. I see no hysteria now. What I do see is a chart that had better hold over $180, or we may get hysteria.

Image placeholder title

I don’t know what Fidelity National Information Services (FIS) - Get Free Report is, but it may have just formed a double-top. Right now I’d say resistance at $137 and support is at $125, but I would be very careful if it breaks that uptrend line. The chart looks like shorts got forced to cover last week and that’s what the rally was.

Image placeholder title

There are a lot of lines on the chart of Square (SQ) - Get Free Report, which tells you that from a support basis, this $60-$65 area is important. I don’t like charts where they gap down and barely have a rally attempt. We are heading to another short-term oversold condition later this week, so a bounce from around $60 should be in the cards. A crappy bounce (i.e. fails at $65 or under) would set up a break of $60 the next time down.

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.