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Top Stocks With Helene Meisler

Was This a Good Test of the Market Low?

By Helene Meisler | 07/06/15 - 06:26 PM EDT
Stocks in Focus: IDRA, NFLX, DD, EWI

The Market

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 so desired.

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 market rally.

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 more.

New Ideas

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.

Today's Indicator

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 buying for.

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 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 now.

Regards, Helene Meisler

Here Comes Short-Term Oversold
Stocks in Focus: IWM, TLT, PSX, MAR

Falling early in the week can give a good short-term oversold condition.

07/04/15 - 02:42 PM EDT
How Close Are We to Being Oversold?
Stocks in Focus: APA, EOG, XOP, MS, GS, XLI

Intermediate-term indicators aren't taking the usual route.

07/01/15 - 06:16 PM EDT

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