Special Note: Top Stocks will not be published the
morning of Monday, December 16, due to Helene's travel
schedule. The next edition of the newsletter will appear
You know the old expression. Which do you want first, the
good news first or the bad news?
I will start with the bad news: I see no panic in the
market, no fear and no capitulation. As evidence, the
put/call ratio today was 70%. Wow. The whole world, it
seems, was buying calls. The 10-day moving average of this
indicator is poised to move higher (bearish). The chart is
shown below, in the "Today's Indicator" section.
There is more bad news. The Market Volatility Index (VIX)
did not get jumpy. And new lows expanded to nearly 270 vs.
170 yesterday -- the highest number since mid-August. That
is not what we want when it comes to seeing a positive
divergence. Let me remind you that in mid-August, the S&P
500 was trading around 1650. If we fell another 100 points,
would there be a contraction in new lows? My answer would be
no. But a contraction in new lows is what we would need to
get a positive divergence.
I would love to tell you that the Arms Index (TRIN) got nice
and high today. But that too did not happen. In fact, it
would be better if breadth were worse than it was, since
that would get the TRIN higher. But that would also push the
McClellan Summation Index into an oversold condition.
Keep in mind that the Summation Index continues to decline,
which is a bearish sign. At some point, however, there will
be enough selling that when I calculate that +4000 or more
advancers minus decliners on the NYSE are needed to turn the
Summation Index from down to up, we will be extremely
oversold. As of today, the number was +3200. A big down day,
with a breadth reading such as we had yesterday, would do
the trick and set us up for that oversold condition.
In fact, with the S&P down eight out of the last 10 trading
days, we are getting pretty oversold. You can see this on
the oscillator I keep.
The good news is obvious: The Russell stopped going down
today and ended the day in the green. The banks also saw
very little selling.
But without positive divergences or panic, the best we can
do, I think, is to get another lousy oversold rally from
this general support area. Again, you know what I prefer:
capitulation. We are awfully close now; let us see if we can
get that set up.
Please note that I will be traveling this weekend and the
letter will not be published Monday morning. The next
edition will appear the evening of Monday, December 16.
Read Helene's latest column
We looked at Citigroup (C:NYSE) a few weeks ago and noted
the resistance in the $53 area. As a follow-up, the stock
has had quite a pullback, more than I expected. You can see
the support in the $50 area, and it ought to bounce from
there. But even though they held up well today, these banks
act as though the buying is done once it levels off. If C
cannot have a decent bounce off $50, it is likely to go back
into the same trading range it has been in for six months.
The put/call ratio is discussed above.
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Global X Social Media Index (SOCL:NYSE) is the ETF to be
long social media stocks, for which I calculate an upside
measured target in the $22 area, with a chance at $23.50. I
would prefer if it bounced right from this minor support at
$20 rather than coming down to retest that trend line near
$19. Be very wary if SOCL gets up to $21 and cannot get
through those two prior highs. For now, you could give it a
Is it possible that the euro might finally stop going up? It
certainly has a lot of resistance up here. I thought the
CurrencyShares Euro Trust (FXE:NYSE) would stop at $134, so
I was wrong. But this resistance is quite clear. While it
might not be a straight shot lower, a move over $136.50 will
obviously get shorts run in. For now, let us say the fund
should back off and find support at that red line, which is
currently $135. If it comes down to $135, rallies and fails,
I would start to consider this a double top.
Skyworks Solutions (SWKS:Nasdaq) has been a long-term base
and therefore a favorite of mine for quite some time. It
finally started to move a few months ago -- that took long
enough, didn't it?! The measured target is in the $30-ish
area, so there is not a whole lot left on the upside to the
first measured target. But the stock ought to make its way
There are several options at present, including going nowhere as we have done for a month now.
A decline would help to shake out the weak holders, but I doubt we will get one.
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