Today looked like a big churn day to me. The DJIA stalled
out at its 200-day moving average. The breadth was
essentially flat. And folks rediscovered their love for
the haves, but not all of them, just a select few.
I still think we're oversold enough, or at least not yet
overbought, that we are likely to stay lifted for about
another week. That doesn't mean we have to go up every
day -- I'd be shocked if we did -- but dips will likely
get bought in this time frame. We saw how quickly this
morning's dip got bought. That's what happens in oversold
On a positive note, the American Association of
Individual Investors' bears joined the Investors
Intelligence bears by climbing to 40%, a reading not seen
since the "taper tantrum" of 2013. The chart is shown
below. On a shorter-term basis, the Equity put/call ratio
was 50% today. Typically a reading under 50% and it
screams to get cautious. Yet the 10-day moving average of
the put/call ratio has turned down (which is bullish).
The bottom line to me is that I still think we could pull
back, but we are not yet overbought, so for now I think
we see pullbacks get bought. Once we get overbought, if
the problems are still with us, I'd look for us to go
back down again.
I do want to point out a few items with regard to Nasdaq.
First of all, the Nasdaq Summation Index has barely
turned up. That is very unimpressive. Nasdaq is mere
points from a new high and its Summation Index has barely
turned up. Remember, this indicator tells us what the
majority of stocks are doing, so you can see the majority
of stocks on Nasdaq are still going down, or at least not
playing well on the upside.
Another way to show this is that today Nasdaq tacked on
17 points and net volume (up volume minus declining
volume) was a rather poor +100 million shares. That's the
poor breadth I speak of.
Finally, several have asked about oil stocks. I was so
wrong for liking them in late June and they got crushed
for a month. The last few days have lifted them, but in
my view that's all I see right now: a lift. Unless the
Energy Select Sector SPDR Fund (XLE) can recapture
this $72 to $73 area, then this is going to be just
another oversold rally. Even getting over the line
doesn't turn them positive, it just removes some of the
I was asked if I could look at Esperion
Therapeutics (ESPR) because it's a biotech stock that
has gotten creamed of late. That looks like a top to me,
but I would point out that it bounced from support today,
so as long as it doesn't violate today's low, it has a
good chance of getting back into that $70-ish area.
The AAII bears are discussed above.
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We've looked at United Parcel Service (UPS) before
with an eye toward an eventual/potential breakout over
this $102 area. It has gapped up so much and is now
stalled there, so it might need some time to digest, but
I continue to think that if it can get over that, the
first target is near $106 to $109.
Union Pacific (UNP) would be a better chart if it
could spend some time backing and filling between here
and $95 so that it can flesh out the other side of the
chart. That would set it up for a better move up and over
$100. But until then, this is still a stock in a
Alcoa (AA) is a chart we've looked at before with
a target in the $10.50 to $11 area, but you can see how
weak it has been in that it couldn't even bounce from
there. The stock ought to start a bottoming process now,
but until it gets up and over $10.50 it remains stuck in
a downtrend. Over $10.50 would cross that downtrend line
and would be the first time it is able to get up and over
a previous low. That's what it needs for me to believe
it, even though I think it should start that process.
Make no mistake, market is still oversold.
And yes, I'd still like a W.
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