Well, this is clearly not much of a breakout over 1985. It’s
almost as if we dribbled across the line and then decided we
wanted a do-over. In fact, the Dow has been red for
four of the last six trading sessions. So much for the big-
So many stocks are gapping up and down on earnings that I
truly cannot recall another earnings season with so many
gaps. If it were all gaps up, then I’d say, well, that’s
because we have so many shorts in the market, but my oh my,
we have just as many gaps down. It looks as though
tomorrow’s big name in that category will be
I want to reiterate that the market feels as though it is
running on empty in some ways. If I showed you the charts of
five or six Dow stocks that have gapped down this week and
didn’t tell you what the Dow had done this week, you would
have thought for sure there would have been several triple-
The inverse is that Apple (AAPL:Nasdaq) did not
exactly blow the doors off, and folks are more than willing
to give it a pass until next quarter. Facebook
(FB:Nasdaq), on the other hand, did blow the doors off and
yet managed to close on the lows, albeit up nicely on the
And how about the reversal in some of those airlines today?
You would have thought for sure the Dow Transportation Index
was down hard. But nope, it lost a whole two bucks!
The Russell 2000 lagged again today, and in turn so did
breadth, and that means here we are one week into the
oversold rally, and the McClellan Summation Index is still
pointing down. We are swiftly working off that oversold
reading from last Thursday evening.
In good news today, the Hi-Lo Indicator is curling back up,
although the raw number of stocks at new highs continues to
lag significantly. The other good news is that the folks on
TV have started to notice the divergences and point them
out. That’s good news, because when they ignore them, it
shows giddiness; when they don’t, it shows concern.
Let me make a few comments on the put/call ratios. The 30-
day moving average of the equity put/call ratio has
decidedly turned up. In the past four years, that has been
bearish on an intermediate-term basis when it occurs from
these levels (chart shown below). The 10-day moving average
is heading down, and that implies a short-term oversold
condition in the market. The raw data for the put/call ratio
today was 91%, which leans somewhat high (bullish). However,
on the basis of the numbers, we are dropping off this moving
average, and if the readings stay in the 90s for a few more
days, the shorter-term moving-average line will turn back up
(bearish). The chart is shown below.
It’s hard to say exactly when we will be back to an
overbought reading, just because the market has been so
choppy in the last two weeks, but at least we know it is no
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We may as well look at the chart of Amazon
(AMZN:Nasdaq), since everyone will discuss it on Friday. You
can see the clear support at $320-$330. I am not a fan of
catching falling knives, but should the stock manage to hold
this area for three days, I’d be inclined to trade it from
the long side with a stop under $320.
The put/call ratio charts are discussed above.
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and her charting strategy and techniques. Please send an
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I have been a long-term fan of First Solar
(FSLR:Nasdaq) since the beginning of the year, but I must
say that the break under the line in early July -- and the
inability to recapture it -- is not something I am fond of
on the chart. However, in the near term it is trying to make
a small bottom. I would like to see a push over $65, and
while it would only measure to the underside of that uptrend
line, it would put some distance between the recent low and
the current price to make me feel better about owning it. If
I liked the market more, I’d think it has a teensy weensy
head-and-shoulders bottom forming here. Very teensy weensy!
Ulta Salon (ULTA:Nasdaq) really looks as though it is
trying to form a base. It clearly needs a breakout over that
resistance at $95 to improve it, but right now this action
in the past few days looks more like a small flag to me, so
I’m inclined to give this the benefit of the doubt. I would
not want to see it slip back under today’s low, though.
Also in retail land, J.C. Penney (JCP:NYSE) finds
itself in a triangle that would be a breakout over $9.50. I
must admit, I cannot possibly imagine how, with most of
retail in such a bad way, J.C. Penney can shine so much, but
the chart says that over $9.50, we’d have a target near $11.
The obvious stop is under $8.50.
The market has become quite narrow as a handful of stocks take the indices to higher highs.
Why a breakout should look like a breakout.
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