The question I always ask myself after market action such as we saw today, is, if the reversal was a result of the short-term overbought-ness or something more?
The S&P has been sitting at this 4,200 area for nearly seven weeks now. I have called it sideways, sometimes I call it chop, but whatever it is, the S&P 500 is currently stuck. Nasdaq, despite its 10% declines and rallies, is where it was nearly six months ago. Even the Russell is where it was six months ago.
Yet breadth made a new high. It is now outperforming all the indexes.
The number of stocks making new highs finally increased today.
Yet, the Volatility Index reversed and did so with some oomph.
I think it leaves us with one more chance to rally this week and then we’ll be too overbought to make much more headway. You see, the put/call ratio was .66 today and that is the lowest reading since April 26th and if we have learned anything from this year’s sideways trading it is that once everyone is in the pool and the market is overbought we are due for a pullback.
I think we need to talk about Apple (AAPL:Nasdaq) because no one even fusses over it anymore and it is sitting at an important uptrend line. Apple has support all the way down to the $116 area, so I’m not concerned that if it breaks it will go into free fall. I am concerned that if it breaks, it won’t be able to get back up and over that line when it does rally. If AAPL breaks it’s a heavy weight in the indexes and that’s why we should care.
Our old friend Air Products (APD) - Get Free Report has not moved terribly quickly, it is more plodding than anything else, but I do want to remind you that the target is that gap fill near $310 should it manage to get there.
The McClellan Summation Index is heading up. It now needs a net differential of negative 2,100 advancers minus decliners to halt the rise. That means this indicator has stepped a toe into overbought territory now.
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I don’t know what to do with InMode (INMD:Nasdaq) here, because I think it looks like it got to resistance (and therefore profits should be taken), but despite that it has a series of higher lows since February, so a pullback is likely to stop at a higher low. I think I’ll just note that it seems right now to be caught between old highs near $90 and lows near $73-$75. Should it map out in a manner I have drawn in blue, then the 90/100 rule would come into effect (90% of the stocks that make it to $90 will make it to $100). Right here, it’s a coin toss.
DraftKings (DKNG:Nasdaq) met its downside measured target when it hit $40, but now all that resistance overhead at $55 would be the spot I’d look to sell.
KraneShares CSI China Internet ETF (KWEB) - Get Free Report an exchange-traded fund for Chinese Internet stocks, is interesting, because it did not stop at $72, which was resistance. A move up and over into the $78-$80 area would tell me the chart is on its way to forming a base. But it has to get over that black line first.
Recall, I have been a fan of ASHR ASHIR, another ETF for Chinese stocks. As a side note, that has hit its first target so I’d lean toward taking some profits there, just some.