I would love to report to you that I have a ton of
positive divergences after today’s decline, but I don’t.
In fact, the number of stocks making new lows increased
The market isn’t even at a good oversold condition. I can
envision a down open tomorrow and a reversal for a one-
or two-day rally and then down again but that’s the best
I can see right now. We need some extremes and we just
don’t have them.
The thought behind a one- or two-day rally after a down
opening comes from the put/call ratio pushing over 100%
for the first time since Sept. 11. And the fact that the
Russell 2000 is now not terribly far from the uptrend
line I drew in weeks ago (around 1120).
Then there is the ISE equity call/put ratio. It fell
below 100%, which is not very typical. This is only the
third time this year we have seen this. In 2013, it
happened six times. That makes eight times in the last
two years. Five times, we had a one-day rally and then
fell hard back down. Twice, it just kept on falling for
another day or so. Only once did it just simply chop.
That is another reason why I can see a one-day rally and
then back down again.
But mostly it’s because I did not see much panic today.
The Market Volatility Index (VIX) was elevated but not
jumpy. The TRIN was not far over 1.0. The down volume on
the NYSE was “only” 84%.
As far as oversold conditions go, the oscillator I use
looks oversold but there is plenty of room for it to keep
on falling. The Nasdaq Momentum Indicator shows no signs
of turning up. And the McClellan Summation Index, where I
calculate what it will take to turn it from the current
down to up, needs a net differential of plus 3,200
advancers minus decliners on the NYSE. Over 4,000 and it
is oversold, so you can see it is not “there” yet.
Finally, continue to keep your eyes on iShares iBoxx $
High Yield Corporate Bond (HYG), an ETF to be long
high-yield bonds. I have been talking about this pattern
looking similar to the one in July and you can see so far
it is desperately trying to play out.
Keep your eyes on Chevron (CVX) (no chart shown)
because it did not make a lower low today. If CVX can
hold, it could be a turn in the oils. In the meantime,
Halliburton (HAL) finally fell apart (how long ago
did I highlight the negative chart? It has to be months!)
The measured target is near $62.
If you are looking for a head-and-shoulders bottom, then
Philip Morris (PM) is trying to carve one out. I
think it will get stuck at that gap just above $88, but
longer term it would measure to the old high near $91.
The 30-day moving average of the advance/decline line
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Qihoo 360 Technology (QIHU) has had one heckuva
fall from $105. It closed today at $74.94 -- that’s
almost a 30% decline. So the next time some idiot on
television acts as though the market is just fine because
the S&P 500 is sitting at 2000, please show them
In any event, there is support at the $75 area. And it
will probably have some sort of bounce from this level.
But be aware that in this market these types of charts
have had terrible bounces or sideways moves only to fall
again. If this breaks $75, it will crack a yearlong low
that has been in place so the measured target will be
significantly lower, perhaps down to the $20s longer
I look at CVR Refining (CVRR) and see support in
the $22 area. I also see a ton of resistance in the
$23.50 area. So while it has bounced off $22, if it
cannot get up and over $23.50 soon, then it will simply
use up whatever “oversoldness” it has by going sideways
before it breaks down. So those are your parameters:
Either over $23.50 or it ought to break $22.
Tesla (TSLA) has a head-and-shoulders top that it
is trying to complete. While it may bounce in a few days,
especially due to the end of the quarter next week, I
suspect it will eventually come down and tag that lower
line below $240. My inclination is to wait for it to tag
And we all know that, in the market, 'hope' is a four-letter word.
The key is to see if it can push through the resistance line that has held up for nearly three months now.
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