It's such a tough call as to whether that was a good test
of the low today and whether it gave us the W pattern I
The positives include the fact that there were far fewer
stocks making new lows today on the NYSE than there were
last week. Last Monday, there were 343 new lows and today
there were just over 200. Sure, we didn't break to a
lower low intraday today, so it's very questionable as to
whether this is a real positive divergence. In fact,
outside of some of the oils, there was very little
selling at all in the market.
What I can't get a handle on is the sentiment. Sentiment
indicators such as Fear and Greed show a reading of 13,
which is surely on the fear side. The bloggers show only
16.6% bulls. Yet everyone I see interviewed on television
seems to have a "this too shall pass" attitude. That is
atypical at a good low in the market.
Then there is the put/call ratio. The total was high at
115%. By my estimation, the 10-day moving average of this
indicator ought to roll back over by the end of this
week. When it rolls over, it tends to coordinate with a
In addition, the put/call ratio for ETFs zoomed up to
244%. We have seen sometimes where having this high is
not terribly bullish. For example, on June 25, it was
210% and two days later the market was down 44 handles on
the S&P. But I do think it speaks of the general
sentiment that leans more overall bearish than not. And
as you can see on the 21-day moving average, it is
heading toward the top of the page, which is where we see
the market get intermediate-term oversold, so it’s
heading in the right direction.
Tomorrow we get more Greece news as the Europeans meet
again. We'll see a potential for an Iran deal, which
folks seem to think will crush oil even more. And then
there is China, where the government is buying stocks and
the market is at its 200-day moving average, so everyone
thinks it's time to stick a toe in.
I can't prove it, but my sense is that as long as the
"Favored Few" stocks hold up, we'll see bearish sentiment
rise, but we will not see the kind of panic that ensues
at a good low. My guess is that if we saw Apple
(AAPL) or Facebook (FB), or heaven forbid the
biotechs or Disney (DIS) down a few bucks on the
day, we'd hear more fear in their voices.
No matter how we look at it, I still think by the end of
the week we'll see an oversold rally in the market. I
just think it will be a better rally if we can come down
one more time before the end of the week. If we don't,
then I would consider whatever oversold rally we get to
be part of the ongoing chop in the indexes and not much
I was asked if I still like the chart of Idera
Pharmaceuticals (IDRA), and the answer is yes. But I
am extremely disappointed that it hasn't yet broken out
over 4. If it fails to do so this time up here, I might
have to give up on it. So now I'd use a stop under $3.50.
The 30-day moving average of the advance/decline line is
a tiny bit oversold, but it will be right back to
overbought later this week. So we've got a short-term
oversold reading and an intermediate-term "not oversold"
reading. Thus the difficulty in getting a rally worth
Helene welcomes your questions about Top Stocks and
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I cannot recall the last time we looked at Netflix
(NFLX), but I do recall we had a target of $650. It
managed to tag $700 but could not stay up there and now
it hovers in the $650 area. I hesitate to be too negative
on such a darling, but if it fails under $675 it will
have a small head-and-shoulders top with a measured
target -- if the neckline at $640 gets broken -- of $590,
which would fill the gap. So I surely would not buy it
here; if I owned it, I'd be taking profits. And I would
not have a look at it again until either time passes or
it trades near $590. I might even be willing to short it
with a tight leash.
DuPont (DD) completed its head-and-shoulders top
when it broke $65 in June. That top measures to
approximately $55, so while the chart has support at $58
from last August's low and therefore ought to bounce from
there, I'd be inclined to hold off on the buy side until
it either built a base or tagged the target area. I
realize it is often a target for activists, so I don't
think shorting it is a great idea.
iShares MSCI Italy Capped ETF (EWI), an ETF to be
long the Italian stock market, broke and broke badly
today as it gapped down under support. It measures to the
$13.25 area, so I would sell rallies back to $14.50 for
Falling early in the week can give a good short-term oversold condition.
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