We finally got a pullback, if we can call a six-point loss
on the S&P 500 a pullback. It is interesting that the
market was actually down on the week. What is even more
interesting is that the S&P has been down not only three
days in a row but six out of the last eight trading days. So
far, that is how it is working off the overbought reading.
Very few of the indicators changed on Friday, so there isn't
much to review on the indicator front. While I believe this
coming week will see folks concentrate on the employment
number Friday, the market is more apt to react to oil and
oil stocks as well as interest rates, and subsequently
financials and interest-rate-sensitive stocks. For example,
oil rallied Friday and the oil stocks did not join the fun.
The support line for Energy Select Sector SPDR ETF
(XLE) keeps moving lower, as you can see. When I first drew
this line in early February, it was at 80, then it moved to
79, and now it is at 77.50.
Last week I wrote that it's not just about holding over the
line, but there had to be buying to go along with it; that
remains the case. If the XLE can hold over that line, that's
good. But it is only bullish if it can rally well off the
line. Last week it held but couldn't rally. I suspect it
holds the line again but I am unconvinced it can rally.
To go along with oil, the transports are on the watch list.
They have not made a new high since November. That means
there is a Dow Theory non-confirmation in place -- that is a
long-term negative divergence. There is short-term support
around 161 on the iShares Transportation Average (IYT) chart
(thin line), so I suspect unless oil surges this week, the
IYT will find short-term support there. The question is if
it can get up and over that downtrend line, and my initial
thought is it will fail to do so in the next month or so.
When it comes to interest rates, the 2% area has become a
magnet for the 10-year note. My view has been that rates
should rise again after this pullback to the 2% area, but
thus far, all we've seen is a lot of thrashing around back
and forth at this level. It isn't even helping to watch the
utilities because they are sitting right at major support.
It's always difficult for me when we visit support for the
second time as we are doing now on the Utes. My inclination
is to think they will break, yet in this environment of such
low rates, stocks of all kinds tend to be saved instead of
breaking. Should the Utes break down, I suspect they will
hold at 580. But it would make sense that rallies back to
590 to 600 are sold. The Utes have been a good tell for
interest rates, so I'll keep my eyes to see if 590 breaks.
I continue to believe March is more apt to be volatile, and
not an extension of February's action.
I have been asked about oil stocks, and I reviewed Exxon
Mobil (XOM) Thursday evening, and here are two more that
were requested. I don't see much to like in the oil stocks.
Either they will hold and start to curl under to make the
charts get better, or they will have a nice shakeout by
plunging to support and holding. Those are the only ways I
can see myself warming up to the oil stocks.
EOG Resources (EOG) is trapped between these two
lines and thus hasn't done anything wrong or right since
making a low in October. It is likely to come down and test
the $87 to $87.50 area (spike low), but my question is
whether it breaks it and tries for the lower (thick) line
around $84. If it holds the thin line around $87, it makes
the chart more interesting (long) than if it comes all the
way down to the thick line at $84. For now, expect more
Apache (APA) has actually done better than most oil
stocks because it has a very solid uptrend line. My concern
is that it won't be able to hold $63 on this trip down. It
has already visited that level twice and has not made a
higher high off the bounce either time. Typically, that
means there is not enough buying to push it higher once it
The Hi-Lo Indicator has rolled back over. What is
fascinating is that it has moved with the market
consistently, except in the last month. In the last two
months, as it headed down, the market headed up. Either way,
the number of stocks making new highs is not terribly bullish.
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Chicago Bridge & Iron (CBI) has made a small base
that measures to the $52 to $53 area. That also happens to
be where the downtrend line comes in. It's obvious that if
it comes down to fill in the gap left from its earnings
report last week, the stock is buyable. I would consider it
much stronger, though, if it doesn't come all the way down
and fill in that gap and, say, holds $45 instead.
Intrexon (XON) has a measured target of about $43, so
it is very close to its target. The stock hasn't done a
thing wrong, so if you wanted to use a trailing stop you
could below $39. I would be inclined to take some profits,
though, since the stock has had a great run and is more
likely to consolidate or correct now.
Incyte (INCY) had a target off the base of $75 and
you can see what happened when it hit $75: It meandered back
and forth for several months. This is a great example of
what happens when a stock hits a target; it tends to digest
around that area or correct severely. It rarely just keeps
going. It is now in an up-channel; therefore, I expect the
dips to continue being bought. The upside should be limited
to the top of that channel, although the stock hasn't done a
thing wrong, as it has made higher highs and higher lows.
Should the stock get above $90, the 90/100 rule comes into
play (90% of the stocks that make it to 90 will make it to
100). My guess is there is at least one more push upward in
ANI Pharmaceuticals (ANIP) had a target off that base
of $54 and once again you can see that it reached that
target and then went sideways for three months. The mini
base that occurred during those three months measured to
$70. While the stock hasn't done a thing wrong yet, breaking
that small uptrend line signals that upside momentum is
waning; therefore, I would be inclined to use that as a stop.
Signs of market weakness could spread.
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