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Top Stocks With Helene Meisler

 Top Stocks

The Wild Swings Are Breathtaking

BY Helene Meisler | 12/18/14 - 06:54 PM EST
Stocks in Focus: LL, UN, DGX

The Market

Even if I had a gun to my head, and was asked if I thought the market would rise over 2% two days in a row, I would never had said yes. With the intermediate-term indicators not quite oversold, it is even more shocking to me. Sure, I thought we'd see an oversold rally based on several of my shorter-term indicators, but not an explosion.

Yet today was not nearly as impressive as yesterday, statistically speaking. For example, the breadth on the NYSE yesterday was +2,450, and today was +1,960. It might not seem like a lot, but it needs to be monitored. As you known all year long, breadth divergences have preceded market tops.

There are two charts I want to share with you today. The first is that of the Dow Jones Industrial Average. It is headline-grabbing with its 400+ point move. It broke this short-term trendline early last week, and has now scurried right back to it. Even though we are not overbought yet, this could act as resistance in the near term, especially when you consider that only three of the 30 Dow stocks made new highs today.

Then there is the chart of the Russell 2000. There is a potential head- and-shoulders bottom in it. It still needs to clear all those old highs, and I am unconvinced it will do so easily. But if this rally can turn all the indicators back to up-swinging, then this would measure longer-term to 1,280-1,300.

There is something else you should be aware of. You might recall back in September, a fuss was made over the so-called Black or Death Cross in the Russell. The pundits all say that when the 50-day moving average crosses below the 200-day moving average, we get a sell signal. Remember CNBC making fun of it? But the reality is that when both moving averages are going in the same direction, that's the market's trend. Eventually, it did catch up with the market, since you can see the Russell fell 13%.

In that time, the two moving average lines have never recaptured each other to see the 50-day moving average cross back up over the 200-day moving average. No one has mentioned it, but the spread between the two moving averages is now just shy of two points. It's hard to know exactly what will push it to a real crossing, but my point is that if we do get a crossing, it means the trend is up. Folks call it a golden cross.

It is possible we just get a giant chop, and the two moving averages keep kissing each other, so we will watch for that.

The put/call ratios finally fell today. That means the 10-day moving average of the put/call ratio did turn down (bullish). In the extreme short-term, the put/call ratio for ETFs sunk under 100%. If yesterday's total put/call ratio of 124% was bullish because it meant too many puts were being bought relative to calls, then the ETF ratio falling under 100% is not short-term bullish, because it means too many calls relative to puts.

Thus, I would say we are likely to see some chopping and digesting going forward, until we get short-term overbought again. Based on the resistance up here, probably a bit of give-back. If the intermediate-term indicators can swing back upward in that time frame, then I'll give them credit. For now, these wild swings are simply breathtaking.

New Ideas

I am disappointed that ebay (EBAY) did not move up and above this resistance line today, but I still have hope that it will. A true breakout over the line would measure longer-term to the mid $60s. Call it $64- $66.

Today's Indicator

The put/call ratio is discussed above.

Q&A

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 love to be bearish on Quest Diagnostics (DGX), because I dislike stocks that are near their highs after the market has fallen 5%. But the reality is that it hasn't done anything wrong yet, because there are no lower highs or lower lows. I suspect that trend line would keep the upside in check for now, and a move below this week's low would change the pattern of higher lows, which would be a warning.

Unilever (UN) has the potential for this to be the right shoulder of a head-and-shoulders bottom. It's similar to the way the Germany stock market ETF iShares MSCI Germany ETF (EWG) looks. We had reviewed that here within the last week. The fact that the right shoulder is lower than the left, though, keeps me suspicious for now. I think it gets halted at the downtrend line, but if it can get above it, that would be very impressive and bullish.

Lumber Liquidators (LL) had a bad second half of the year, when it disappointed on earnings. It has since built a small base with a target in the $70 area. There is also an obvious gap to be filled there. Here's my question on the chart though: why no follow-through today that would have taken it up and above the early December highs? I think I would rather keep my eyes on this to see if it can start to get up and through, rather than speculate that it will. Near-term is questionable, but ultimately, it ought to tag that target near $70.

Regards, Helene Meisler

Another Wild Day in the Market
Stocks in Focus: LVS, SUNE, CLX

But at least the market is now oversold.

12/17/14 - 06:12 PM EST
Strap in for Tomorrow
Stocks in Focus: MS, KO, MSFT

FOMC meeting days tend to be volatile.

12/16/14 - 06:54 PM EST

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