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When Choppy Turns to Sloppy

Let's check the indicators, but I will repeat my views of a rally.

The Market

You see? I always find it difficult when the sentiment gets too giddy before the overbought reading arrives. Instead, we end up with this grinding chop. And that grinding chop becomes sloppy. Just look at the Russell 2000, which is now down on the week, despite the huge up day on Monday.

I will sound like a broken record when I say I think we can rally one more time this week. My own Oscillator gets overbought Friday. Nasdaq’s gets overbought sometime between Friday and Tuesday. The 30-day moving average of the advance/decline line doesn’t get overbought for another week or so. Maybe that’s why we end up here in this chop zone.

If I use the Nasdaq Momentum Indicator and plug in higher closes for Nasdaq for the next week, we find it peaks on Tuesday of next week. So you can see in the next several trading days, the short-term indicators are going to be overbought.

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Sentiment is interesting, though. The put/call ratio zipped right back up to .80 on Wednesday, after putting in two of the lowest readings since February during the first two days of the week. So the sideways chop and the sloppy action in the small caps is getting folks nervous (as it ought to).

Then there is the Investors Intelligence bulls, which jumped six points this week to nearly 61%. I have always plotted it on the chart with the S&P, but perhaps it should be plotted with the Russell 2000, since you can’t even see the three pullbacks we had this year on this chart of the S&P. Just so there is no confusion, the survey is released on Wednesday, so the S&P plot is for Tuesday’s close. I suppose that means if we only owned stocks on Tuesdays, we would have had no corrections this year....

Seriously, the bulls are now the highest since Jan. 20, which was just before the first hit the market took this year with the GameStop (GME) - Get Free Report nonsense.

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I still think we should pull back in the latter part of the month, but it’s pretty clear the Either/Or market is still with us as the FANG stocks, or index movers, are back in vogue, while everything else takes a back seat.

New Ideas

I have liked Disney (DIS) - Get Free Report for quite some time, but I am getting concerned that the stock has done nothing for months. It hasn’t broken, it hasn’t even threatened to break. I’m not even sure that breaking $180 would kill the stock, because there is so much support all the way down but I am getting concerned that it can easily trade down to that area.

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Today’s Indicator

The Volume Indicator is back at 52%, which means it is neutral now.

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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.

My target on Southern (SO) - Get Free Report is that old spike high around $64. I do, however, think it has had quite a run and needs a rest or a pullback/correction. So, If you have been in it for the last month or so, I wouldn’t tackle you if you wanted to take some profits here. If it did fall back to around $61.50, I’d look to buy it back.

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If Ericsson Telephone (ERIC:Nasdaq) did not have that spike high from late January, I would like the chart a lot more, but that spike high gives me some hesitation. If it can clear this $13.75 area, it should make its way toward the spike high, though. Let’s call it a decent chart, but if it trades back under $13, I would toss it quickly.

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Kinross Gold (KGC) - Get Free Report has managed to cross the downtrend line that has been in place for the last six months. It has a lot of resistance all the way up, so there is no spot where we might say, "if it clears this, it’s ready to go." If it pulled back toward $6.75, I would take a look at it on the long side. Right here I lean positive but feel like it could be a tough slog.

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