Skip to main content

What the Russell 2000 Is Saying

If everyone favors small-caps, why are they lagging?

The Market

If you don't think today was a total chopfest, then we did not watch the same market. Sometimes it is dull and there is movement underneath in a lot of names. There was some movement in some names, but it was nothing noteworthy.

For example, the Russell 2000 gave back half of the previous day's gain, which is never what you want to see in an index that was lagging to start with (it has yet to make a higher high). I watch this index like a hawk for several reasons. First, because I believe when it leads, the market tends to be in better shape. When it lags, it is often an early warning the market is about to falter.

But lately I am paying close attention since it seems everyone favors small-caps. If they all favor small-caps, why are they lagging? Relative to the S&P, the small-caps have lagged for nearly six weeks. I would need to see a marked change in that relationship before I thought the market can go significantly higher.

So in general, days like today take some of the giddiness out of the market that developed the last two days, but it is not enough to remove the complacency. On Monday, we saw complacency removed when the put/call ratio for the VIX sunk under 20%. We do not have that yet. We still have the index put/call ratio under 100%, for the fourth day in a row.

I've looked back to see if it is always or ever bearish. In the last two years, we've had four such strings of at least four readings under 100%. Three times we chopped or went down and once the market yawned and kept going higher.

For my part, I will continue to pay attention to breadth. If breadth seriously falters, I will find plenty of reasons to be bearish since so many of the other indicators have rolled over. But as long as breadth holds its own, then I see chop with some down movement in order to ease the giddiness.

New Ideas

I have a stock chart that has caught my eye but I feel I need to report to you that it probably has terrible fundamentals, so you really need to do your homework on it. The stock is Lending Club (LC) - Get Free Report, which has a lot of resistance at $6.50 but it has been eating away at it for months, so if it can clear it then I think it can fill that little gap near $8.

Image placeholder title

I was asked to update my view on EOG Resources (EOG) - Get Free Report, which I had liked months ago. It has an unfulfilled target of $114 to $116. It's got resistance overhead around $107 and then again at that spike high near $108, but if it can clear $107- ish, I think folks might like it. Either way we're still waiting for that measured target from months ago.

Image placeholder title

Today's Indicator

The 10-day moving average of the equity put/call ratio just mills around. If it spikes higher, I'll find it bullish; otherwise, there is not much to like in it.

Image placeholder title

Q&A

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.

Longtime readers know I have liked Whole Foods (WFM) over the last year off and on, so of course with the Sprouts (SFM) - Get Free Report discussion yesterday, WFM is on the table for today. That resistance at $32.50 seems difficult to me. I think it gets there, but I would have preferred it if the stock had not come off so hard from the December high.

Image placeholder title

I was asked to measure a long-term target on IBM (IBM) - Get Free Report. It is $210. I find it hard to believe it gets there in a straight line, but that's what it measures to. However, I'll be the first to admit when I liked Boeing (BA) - Get Free Report last summer with a target near $180, I never thought it would get there in a straight line and it is nearly there with barely a breather.

Image placeholder title

Markel (MKL) - Get Free Report has crossed a downtrend line, which I like. It also tagged its downside target when it plunged in November. Here's my issue: all that resistance overhead starting right here and all the way up. It seems to me that unless there is a reason for the stock to gap up and over it, this will take some time to eat through. I might be inclined to nibble on dips toward the broken downtrend line, but I would have to understand this may be a very long and frustrating process of eating through resistance.

Image placeholder title
Dow is the Most Vulnerable to Profit Taking

Dow is the Most Vulnerable to Profit Taking

Despite the newfound focus on the Dow Jones Industrial Average last week, it turns out we may be seeing the last gasp of outperformance here.

How Hungry Is This Market?

How Hungry Is This Market?

Here's what I'd like to see happen with this rally -- I'd like it to show some FAANGs. Here's why -- and a look at Microsoft's chart, news highs and more.

Sloppy With a Chance of Rallying

Sloppy With a Chance of Rallying

Here's why I see another rally before the weekend, even amid the messiness, and a bump for Amazon.

Sloppy With a Chance of Rallying

We Can Rally Just a Bit More

Energy stocks have a lot of complacency in them.