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We're in a Mixed Market

Last year, all the growth names were hotter than can be and all the value names were in the doghouse. This year is the exact opposite.

The Market

What a mixed market we are in! Last year all the growth names were hotter than can be and all the value names were in the doghouse. This year, the little we have seen of it, is the exact opposite. Thus the Either/Or Market remains with us for now.

The question is if Friday’s action in the growthy names was enough to change the tide back to them and away from such value-oriented names as the banks. I would say things are split now.

Neither the S&P 500 nor Nasdaq took out Monday’s low on Friday. So, it’s hard to say there was a positive divergence in terms of stocks making new lows, since there were fewer for both exchanges. Yet, if we use closing prices for the exchanges then there were lower lows in the Nasdaq and S&P 500 and fewer stocks making new lows. Clear as mud. The chart of new lows is down below.

What I do know is that sentiment in some areas leans too bearish, such as the Investors Intelligence bulls at 43% or the American Association of Individual Investors bulls at 24%. In prior times, these two showed such aversion to stocks, we saw other indicators at extremes as well. Such as the National Association of Active Investment Managers exposure, which is now in the mid 70s and in prior instances was in the 50s. The put/call ratio on Friday was 1.09, which definitely leans on the high side. The equity put/call ratio was 0.64, which is now the highest since early December when it was well over 0.7. That means the 10-day moving average of the equity put/call ratio is getting to lofty levels again. This is good news because if it stretches much higher, it will confirm the Investors Intelligence and AAII surveys discussed above.

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My weekly Twitter poll shows sentiment skewed, ever so slightly to the negative side with more looking for downside than upside in the S&P 500 for the second week in a row. And three weeks prior, the poll was at 50-50. The same thing occurred in September 2020. The difference between now and 2020 is that the S&P 500 actually corrected more than 10% as did Nasdaq. Now it’s just Nasdaq.

Overall, I do think sentiment leans to the bearish side without being panicky. The biggest difference in the market between now and December is that in December breadth had been terrible for six weeks running, which means all the short-term and intermediate- term indicators were oversold. That is not the case now. Now the intermediate-term indicators are leaning toward overbought, although some won’t get there until later in the month. Let me finish by noting that the McClellan Summation Index needs just one day of negative breadth to halt the rise and that is a change. We’ve watched this indicator heading upward for nearly four weeks now. I also think the move in volatility is not quite done. We had a big down day on Thursday but on Friday we rallied back to flat and up so the Daily Sentiment Index for the CBOE Volatility Index is back at 21 which means we are still on VIX watch. In sum, the market is still mixed, and it remains a trading environment where we should not get too comfortable in any trade.

New Ideas

I remain hopeful that Deere (DE) - Get Free Report will find its way to breakout over $390. But now I have decided that if it trades under $370, then I am probably looking at more sideways action rather than a breakout.

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Today’s Indicator

The new lows are discussed above.

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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.

Air Products (APD) - Get Free Report has begun to trade erratically. I am excusing the move down to $285 because it looks more like a false break than a real one. But if Air Products breaks this $290 area this time, I won’t excuse it because it will look like a top.

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Linde (LIN) - Get Free Report might have a tiny head and shoulders top, akin to how small the Apple one was when we looked Thursday evening. So if it breaks this $325 area, it has some support at $318 but leaves behind resistance around $330. That likely means over the coming months it would make its way down toward that blue line.

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I have some good news regarding CrowdStrike (CRWD:Nasdaq). There is a measured target around $170, so it should try and bounce from that area if not before. The bad news is that if it bounces with very little energy (i.e. cannot manage a bounce over $200) then the next trip down, it might break $170 and that would be a fresh break.

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I think ultimately Docusign (DOCU:Nasddaq) should go lower than here, it is getting a little bit oversold and should bounce. If such a bounce cannot get up and over $145, then I think the next trip down measures near $120 first.

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The breakdown from that top on Universal Display (OLED:Nasdaq) measured to $140, and the stock has had a decent rally off of it. As long as it stays over that lower line (for now use Monday’s low), it should try and rally some more.

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I was asked to follow up on ConAgra (CAG) - Get Free Report, which I liked at $32 in late October. Then it collapsed, stopped me out and rallied hard. It still looks like it is trying to base, and a move over this $35-$36 area would be a small breakout. There is still resistance overhead so it’s not a clean breakout. It ought to measure back near the highs.

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