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Which Will It Be? Oh, Yeah, Either/Or

The market is back at it, and this time it's tech that's going hot; here's what that means for the indicators.

Helene Meisler will be off for the following week. The next installment of 'Top Stocks' will be a shortened version on Sunday, June 20.

The Market

And just like that, the either/or market has returned, and it is currently favoring big- cap tech. That means instead of seeing deterioration in tech and growth stocks, we now see it in industrials, financials and transports.

It also means breadth was downright pathetic today. The S&P gained 20 points and net breadth was positive 200. Worse is that only 45% of the volume was on the upside. But we know this and we have seen it before: When big-cap tech is favored it does so at the expense of everything else.

Breadth was not weak enough to turn any of the indicators. Not yet. The New York Stock Exchange would still need a net differential of negative 800 advancers minus decliners to halt the rise in the McClellan Summation Index. Over on Nasdaq, I did find it interesting that after net volume was positive for 11 straight days we’ve now had two days of net negative volume, although neither has been terribly weak.

Nasdaq’s McClellan Summation Index, where I use volume, would still need a net negative of 2.8 billion shares (that’s up minus down volume) to halt the rise, but it is something to keep an eye on since two days ago that number was negative 5.6 billion shares.

On the sentiment front, there was very little change in the National Association of Active Investment Managers number (now 79 from 82) and the American Association of Individual Investors bulls were down four where the bears were up one. It’s that the neutral camp has gotten quite crowded; in fact the neutrals are the highest since February 2020. The equity put/call ratio was under .40 for two straight days. The last time it did that was early February, which is a curious time, because recall the "meme" stocks peaked in late January and big-cap tech ran a few more weeks and then down we went. The final piece of the pie is interest rates. Everyone seems so surprised that rates are lower, to which I say, it almost feels like the exact opposite of how they felt in late February and early March. Not quite. But the DSI for bonds is now at 79, so the runway for the bond move is getting short now. Another few days of lower interest rates and that DSI is going to scream "sell bonds" if it rises anywhere near 90.

In general, I continue to see a sideways market. The big-cap tech stocks move the indexes as you know, but then we get weakness elsewhere and vice-versa.

New Ideas

I want to cycle back to the chart of Disney (DIS) - Get Free Report that I was asked about earlier this week. I had said I thought it had one more rally left in it, and thus far it hasn’t budged. But as long as it holds this $175 area, it really ought to rally back to resistance in that $180-$182 zone.

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Shopify (SHOP) - Get Free Report also hasn’t budged but has held around $1,200, so I’m still waiting for that next rally.

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Today’s Indicator

The 10-day moving average of the equity put/call ratio is getting near the "danger zone" (under .40). I expect it turns upward in the coming days.

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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.

I would guess Capital One (COF) - Get Free Report needs a pullback near that line, so let’s call it $150-$155 and keep in mind that it rises as time goes on. There is no top to speak of, just a stock in need of a pullback.

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Logitech (LOGI:Nasdaq) has an unfulfilled upside target in the $145-$150 area. I do not like the sharp break today, but when a stock runs 40% in a straight line it is vulnerable to a harsh pullback. There is no support until $115, so for me it’s a tough call on how far it goes, but I would think $120-$125 is doable.

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I would have liked Palo Alto Networks (PANW) - Get Free Report to fill that gap at $345 before it rallied again. So for now I’d be a buyer at $345, because it ought to get up and over $370 but it would have had more spring in its step had it filled the gap. Be careful if it fails at/under $370 this time.

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