That's twice this week that I thought we would rally and we
did not. To my mind, this speaks again of the change we have
been seeing in the market of late. It began with the
Nasdaq a few weeks ago, when we started seeing more
selling than buying. It moved to the NYSE this week.
I can make the case for a rally in the next one to three
days based on the indicators. But my logical brain wonders
if we can rally with the weekend looming and the Crimean
secession referendum on Sunday. If it was not a Friday with
potential ramifications, I would be betting on a one- to
three-day rally and then another push down.
Why the rally? Well, the Arms Index (TRIN) on the NYSE got
to 2.5 today. The last time it was this high was when it
tagged 2.9 on February 3, the day before the early February
low. Then there is the put/call ratio. You had better sit
down for this one: It finally went to triple digits, with a
reading of 104%. The last time it went over 100% was October
9, which was a low in the market.
Even more curious, there was no pickup in new lows on the
NYSE vs. yesterday. And we filled the gap on the S&P
500 from last Tuesday's move up.
So why a push down? I have been targeting this time frame
for weeks now as the time to get the market back to
overbought -- the time for the retest. And heck, it still
plays out that July-into-August scenario. But here are the
statistics that say so. The McClellan Summation Indices have
now turned down. The sentiment readings are still too
bullish. For example, the Investors Intelligence readings
show 55% bulls; they were in the low 40% area in early
Also on the sentiment front, the 10-day moving average of
the put/call ratio that we discussed last evening is most
definitely turning up. (See the chart below.) The 30-day
moving average of the advance/decline line is just about
overbought, as is the volume indicator.
There was not that much selling on the Nasdaq today vs.
Tuesday in terms of volume. But the number of stocks making
new lows on that index doubled from yesterday.
In terms of levels on the S&P, even I find it amazing that
the market got to just shy of 1875 but could not quite get
over it. So we know that was a good resistance level. The
downside will have everyone watching 1840-ish, since that
was last week's low. The 50-day moving average is near 1830.
In the very near term, resistance is now 1860. If we rally
there and fail, we will have a small head-and-shoulders top
Read Helene's latest column
Last week we looked at the PowerShares DB US Dollar Index
Bullish Fund (UUP:NYSE), an ETF to be long the U.S.
dollar. We have also looked at the CurrencyShares Euro
Trust (FXE:NYSE) several times as well. I have been
bearish on the dollar and bullish on the euro for quite some
time; last week was no exception. But the action, courtesy
of comments from European Central Bank President Mario
Draghi today, reversed the dollar in a heartbeat, and now it
is hard for me to be bearish on UUP anymore. I would note
that the target price was only $20.80. But still, with
action like this, I have to move my old opinion to the
The move in the bonds also took me by surprise, since I
figured for sure we would see one more rally in the
ProShares UltraShort 20+ Year Treasury ETF (TBT:NYSE),
as per last night's
Q&A section. The problem with turning bearish on this
now is that when a chart plunges like that and does not
break to a lower low, any break further on tends to be
exhaustive rather than fresh unless it occurs on a gap.
Therefore, I will adopt a wait-and-see attitude that maybe
TBT holds at $68.
Visa (V:NYSE) is another chart like Yahoo!
(YHOO:Nasdaq), which we looked at the other night; it has
made a lower high and is turning down. The difference is
that V is just now breaking the uptrend line. If it can
rally back to $223-ish, you should sell it. The stop would
be over $225; the target around $210. I would expect the
target to come in a few weeks, not a few days.
The 10-day moving average of the put/call ratio is discussed
in full above.
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.
When 3D Systems (DDD:NYSE) broke down on the gap, it
completed a head-and-shoulders top. The top measures to
$50-ish, but for now, the February spike low and that
uptrend line dating back to October are support. Perhaps
there is a "save" in store. But I think DDD is likely to
test $50 in the coming weeks/month.
Once again the question is about Potash (POT:NYSE)
and where it is going. I continue to think this stock is a
slow mover, with a target near $37 that fills the gap. If it
continues to hold the uptrend line (currently at $32), then
I can make a case for a target in the $40-ish area.
I can actually come up with a target around $200 on EOG
Resources (EOG:NYSE) in the longer term. But right now I
think the stock is in correction mode. I would need to see
the pattern develop first, and then would probably start
looking at the chart somewhere around $170-$175 to see if it
could hold and form another base.
If the market can stay up here for another week or so, you will have a decent selling/shorting opportunity in the latter part of March.
If the S&P can recapture 1875, it will get saved once again -- and we will have to wait until later in March for the market to retest.
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