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We're Still Within Range

We've been stuck in a range these past couple weeks, and here's what I see ahead.

The Market

They are down, but not out.

All we’ve done for the last two weeks is trade in a range. Sure, it’s a large range, but we haven’t gotten to the point where we’ve seen panic, because we’ve broken some important level, have we?

Look at the S&P. It has had a 100-point trading range for two straight weeks. Also, please notice the lows come in around this 3300 area (OK, it’s really 3320, but I’m rounding it out).

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Now, let’s look at the Invesco QQQs (QQQ:Nasdaq), which is where most of the selling has come from –- technology. This $265 area has been support, while $280 has been resistance.

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In that time, the breadth of the market has improved. We discussed Wednesday how the McClellan Summation Index had stopped going down. It went down more since, but not a great deal. And a few up days would take care of that now. That is a big change from the last six weeks.

We have also seen the 10-day moving average of stocks making new lows begin to roll over and new lows contract instead of expanding the way they did throughout the summer. We have seen sentiment shift, as well. I have discussed the Investor's Intelligence bulls, which came down from 61.5% to 55%. I am hopeful we can see them even lower in the next few weeks. But that is a change.

We have seen the National Association of Active Investment Managers (NAAIM) take their exposure down from over 100 to the current reading just over 60. And we have seen the put/call ratios begin to rise. Thursday it didn’t quite get to 1.0, but it came close. That means the 10-day moving average has worked its way upward to where it was in June (chart is shown below).

If you look at the chart of the QQQs, you can also see there was a rise in volume Thursday. That tends to lead to a bounce. I think we can get a short-term oversold bounce from all of this in the next few days. But I would again caution everyone that I do not expect this volatility to go away. I do not think we’re going back to complacency and a market that goes up every day.

This weekend marks the beginning of Rosh Hashona, the Jewish New Year. For those who observe, Happy New Year!

New Ideas

I have liked the chart of Mosaic (MOS) - Get Free Report in the agriculture/fertilizer area for a few months now. In that same area CF Industries (CF) - Get Free Report had quite a turnaround today and it hasn’t moved much in the last few months. I like it as long as it stays over $32. And I would like to see it get up and over $36 although that might take some time.

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Today’s Indicator

The 10-day moving average of the put/call ratio is 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.

Nautilus (NLS) - Get Free Report hasn’t done anything wrong yet and as long as it stays over that uptrend line, it ought to make its way toward its target around $20. But respect a break under that line.

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I liked the chart of Palo Alto Networks (PANW) - Get Free Report a few months ago and it managed to tag its first measured target in August (when it broke out over the blue line). It has since fallen apart, much more than I thought it would. I am inclined to think it is now stuck between $220 and $250 or maybe $260.

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FedEx (FDX) - Get Free Report has had a terrific run, but it has also achieved its upside target around $230-$240, so while the chart hasn’t done anything wrong, I’d be inclined to take some profits after this great run. If you want to hang on, then that uptrend line is your guide. A break of that and it’s time to go.

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How many times have we looked at Anheuser-Busch InBev (BUD) - Get Free Report, thinking it would breakout and it doesn’t? Over $60, and I think it fills the gap at $65. But I also think if it trades back under $55, I would have to give up on it for now.

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Salesforce.com (CRM) - Get Free Report had a terrific run when it broke out over that line, but the measured target was $270 and it was achieved. Now I wonder if it will come down and fill that gap at $220.

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Fluor (FLR) - Get Free Report is trying to hold. But I think a rally to that $11 area would be tough to get through, especially as we get closer to the fourth quarter where tax loss selling starts to take hold. So a trade into that $10-$11 area, but I’m inclined to sell there.

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