I thought it was possible for the market to rally
some, but instead it showed us why the big-cap stocks
keep moving the indexes around as the indexes surged.
This is not to say breadth wasn't good. It was OK, as it
has been of late. The number of stocks making new highs
was quite disappointing as Nasdaq saw fewer than it had
on Monday and the NYSE saw about six more than on Monday.
The number to watch now is 130 on the NYSE as that has
been the peak reading so far. Today saw 105 new highs.
So breadth has the McClellan Summation Index still
heading up. But we are into overbought territory now, so
unless folks decide to push the market up on a hope or
belief that the ECB will give them another massive round
of QE on Thursday, the upside should stall out shortly.
What I found quite interesting today was how quickly
sentiment turned. Oh, you can't see it in the options
ratios, but anecdotally it was as if all those who were
cautious a few weeks ago came out stomping on anyone who
wasn't cautious. We practically saw a party as we had the
S&P back at 2100 along with lots of chatter about how it
was going to be smooth sailing going forward.
What changed between a week ago and today? Nothing.
The most fascinating chart to me is that of iShares
20+ Year Treasury Bond ETF (TLT). When it was at
$118, I thought it could rally, but I thought $120 was
all it could do, so I was quite wrong on that as it is
now kissing $123. You can see a lot of resistance here
from the downtrend line as well as some previous highs
from October. But despite the move in bonds, everyone
seems convinced the Fed will hike in December.
Either someone was short and had to run for cover today
or there is real concern in the bond market that the weak
ISM numbers today mean something more. The curious thing
was that no one seemed terribly concerned over the move.
The good news, though, is that better-acting bonds mean
that Barclays High-Yield Bond ETF (JNK) continues
to act better.
I still think we're in for a bout of volatility, but thus
far I am wrong on that.
I have had a lot of questions about oil and U.S.
Oil Fund (USO) since it hasn't rallied and the OPEC
meeting is on Friday. Last week, I thought the best it
could do was a rally to $14; it barely made it to $13.50
before it headed down again. Thus far, it continues to
hold here. The weekly oil inventory numbers will be out
tomorrow, so there is a wild card. I would love to see
USO break this low, run some, stop and then reverse. That
to me would make it look like a decent low had been put
I was also asked to follow up on Market Vectors Gold
Miners ETF (GDX). We looked at this with a positive
eye two weeks ago when it was at $13, and today, with
very little fanfare, it peeked itself up over $14. I'd
look for $15 to $15.50 as the next target.
The McClellan Summation Index is still rising.
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I am intrigued by the chart of American Water Works
(AWK) because it has hung in there so well. If it
breaks $57, it won't be dire, but it won't be nearly as
good as if it can hold over that level. A breakout over
$59 would give a target near $61 to $62.
Berkshire Hathaway (BRK.B) is a stock trapped in a
triangle. We have so many charts that look like this. But
as long as it stays over $132, it seems to me it gets the
benefit of the doubt. Over $138 and the next target would
be in the $142 to $144 area.
This doesn't tend to be a great time of the year to get
long retailers, but if Wal-Mart (WMT) can fill
that gap and bounce off the line near $58, it should at
least be OK in the near term. It will take a long time to
build a base that gives us confidence that the stock can
offer more than a trade.
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