There was a minor change in the market today. Let me
reiterate that it was minor, but I do want to point it
First, we've discussed the stretched "what if" for the
McClellan Summation Index, which of course got more
stretched today. But keep in mind, each day we go on we
get closer to an overbought reading on my own Oscillator.
Recall that the Oscillator I use is based on the
advance/decline line, but it is also based on a time
factor. So we look for when we stop dropping red numbers
off the 10-day moving average of the advance/decline
line. That comes midweek next week.
The minor change today showed up in volume. For the last
week, volume has exploded upward, which quite frankly has
been a rare occurrence in this bull market -- up volume
on up moves. But today the volume tailed off quite
abruptly. For Nasdaq, it was the lowest volume since
Sept. 23. For the NYSE, it was the lightest volume since
I don't typically spend that much time fussing over
volume, but on the individual stock charts it was quite
noticeable. We know all rallies begin with short
covering, but for them to continue we must see real
buying come in, so I would say the bulk of the short
covering is done and what we saw in volume today was what
buying looks like: not so hot for today.
When it comes to the S&P, you might recall when we first
discussed a trading rally there were two targets. The
first was the zone of 1980 to 2000 and next was 2020. We
are now into the 2020 area. Some might say 2060 is better
because that's where the heavy resistance comes in; I
would not argue with that, but you can see the S&P has a
line right here.
Then there is that ancient index, the DJIA, which is into
its first real resistance zone as well.
Finally, in terms of sentiment, there was a sense of
towel-throwing today. It was the first day with the Index
put/call ratio under 100% since the rally began. We also
have our second reading in the ISE ratio over 100% in a
week. Recall it had a mere three readings over 100% since
All of this points to a short-term breather. Like last
week where I knew my timing would be a bit loose into the
low, my timing might be a bit loose now but it seems to
me we need a breather.
Let me point out that the 10-day moving average of the
put/call ratio is falling (bullish). The Hi-Lo Index is
rising (bullish). The McClellan Summation Index is rising
(bullish). And my own Oscillator says we can get a few
more days of upside. So I am not bearish; I just think
there is a higher chance of a pullback next week.
I had a typo last night when we looked at the chart
of Salesforce.com (CRM). I had $75 for a breakout
but it should have been $76. My apologies.
The 10-day moving average of the put/call ratio is
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Layne Christensen (LAYN) acts terrific and has
come off the bottom rather well because it barely missed
a beat when it got to $7.50. But this one will be hard
for me to get excited over because of the resistance that
lives right overhead at $8.
I look at the chart of Cisco (CSCO) and think it
can get to that resistance line without much trouble. To
get beyond that, though, I think will take a lot more
work, so let's call the upside limited to about $29 for
I realize that $95 is a support level that is quite clear
for Gilead (GILD), so if you wanted to own it then
the stop is quite defined. My problem is that declining
trendline, which right now comes in around $108, but by
next week will be $105 and the week after about $102.
That leaves me with an uncomfortable sense that GILD
might not break, but I'm not sure it's going anywhere
special on the upside. The biotechs feel like they are
still overowned and now a political football as we go
into a big election year.
The biggest difference is today's haves and have-nots.
Though a rally may be on the way.
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