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Whose Churn Is It Now?

It has been my contention that the banks are trying to bottom, but they've not made any progress in a month. There are others like this, too.

The Market

Let’s talk not about the market, but what happened underneath.

Most stocks have spent the last several weeks churning around. We have discussed this. They go up for a day and then spend a few days giving it back slowly. Then they have a nice rally and give it back slowly.

As you know, I like the banks. My three favorites have been JPMorgan (JPM) - Get Free Report, Citigroup (C) - Get Free Report and Bank of America (BAC) - Get Free Report. Last week, I showed you the exchange-traded fund SPDR KBW Regional Banking (KRE) - Get Free Report. I still like the chart, but take a look at the day to day for the last few weeks.

July 15, there is a nice day where it rallies to $38. The next three days it gives it back and dribbles to $36. Then we get a nice up day, back to $38. We mill around for three days making no progress and then we had back down, this time to $37. Then along comes Wednesday, where we go back to where we were late last week.

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It has been my contention that the banks are trying to bottom. But they've not made any progress in a month. There are other stocks that look like this, as well. Some industrials, some retailers, some airlines, even some railroads. But as much as they have these one day pops there seems to be no follow-through. So it just becomes a big churn. If that churning can develop into follow-through that would change where we are in the market. But until that changes, we will continue to see the number of stocks making new highs lag, especially on the Nasdaq (the NYSE is in better shape as I noted the other evening). Until that changes we will see breadth with days like today and then a give back.

Would a sell the news reaction to the mega-cap tech earnings Thursday night change that? It’s unclear to me if it would. When they get dumped and there is no dumping in the down- and-out names, breadth is good. But can the down-and-outers get enough love to have follow-through?

That’s what is happening underneath.

I want to end with a chart of the ProShares UltraShort S&P fund (SDS) - Get Free Report. I am not a fan of inverse ETF’s so I am not a fan of this chart. I also don’t think shorting has been profitable, which is why I have avoided it for the most part. Oh, sure, we had some minor success with a stock like Facebook FB last week, but that is not commonplace. I was asked about SDS and all I can say is that a move up and through $18 would be a game changer. That is the equivalent of the S&P breaking under 3200.

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New Ideas

I have yet another financial stock that has potential: American Express (AXP) - Get Free Report. Again, it looks like a small base has developed and with some follow through it should shape up.

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I would also remind you that I think United Health (UNH) - Get Free Report has the potential to break out. Here’s another stock that keeps teasing and giving it back. Maybe one day it will go.

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Today’s Indicator

The Volume Indicator is at 52%, which is still leaning toward the overbought side.

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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.

Citrix Systems (CTXS:Nasdaq) has had a decent break of the uptrend line, but it is coming into support. I would look for a rally off this $135 area, but if the stock can get up near $150 I’d sell it there.

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Tesla (TSLA:Nasdaq) has a measured target in the $1,450-$1,500 area and it got there a few weeks ago and has stalled out. It’s not my cup of tea up here, so I would need to wait for the pattern to set up again or for it to tag that uptrend line around $1,200, before I was interested. Would I short it? I don’t short fad stocks since you have to be perfect in your execution.

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Wheaton Precious Metals (WPM) - Get Free Report has a measured target in this $57-$59 area, but it hasn’t done anything wrong yet. On a trading basis, maybe some profit taking is in order but a trip back down to that $47-$48 area would be a place to have another look at it.

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