I have complained about the market's breadth over and
over again and so did everyone else. So what did the
market do? It improved breadth, when using the
advance/decline line. Even the number of stocks making
new highs improved. The Russell 2000 improved too. Heck
it has rallied 5% instead of the 3% rally we've seen in
This has helped the McClellan Summation Index improve.
The Hi-Lo Indicator has turned up as well. These are all
positives in the market.
Yet while the advance/decline line has been positive for
six days in a row, net volume -- that's up minus down
volume -- has been negative for four of those six days.
That is not exactly the kind of better breadth readings
you want to see. What you want is more volume on the
upside than the downside.
So while I can't scoff at the rally as much as I have,
there is still plenty to nitpick. But what we should be
concerned about is the upcoming overbought reading. As
previously indicated I expect it to arrive just after
Thanksgiving. Based on my own Overbought/Oversold
Oscillator, I have it pegged around Tuesday of this
If we use the Nasdaq Momentum Indicator, it arrives on
Friday of this week, the day after Thanksgiving. On the
charts below, you will see Nasdaq as well as the Momentum
Indicator. This is based on price; what I have done is
plug in a higher close of 20 points for Nasdaq over the
next several trading days. No matter what I plug in, you
can see the Momentum Indicator goes down starting Friday.
What is even more curious is that it does so from a lower
However, since the Fabulous Five stocks have actually
been rather quiet of late, I did the same exercise using
the Russell 2000. In other words, I went to where the
action has been. Here, too, it gets overbought, but the
Momentum Indicator does not roll over the way Nasdaq's
does. Rather, it churns for several days (chart not
We have a lot of market moving news during the first week
of December, with an OPEC meeting and an ECB meeting.
Both are widely expected to be positive (OPEC for Oil and
the ECB for stocks). Keep in mind the market rallied on
bad news because we were oversold. Perhaps we'll sell off
on good news because we are overbought?
Reminder: there will be no Letter this weekend. I will
write again Monday evening.
JB Hunt (JBHT) has layers of resistance overhead
but each time I put the pencil to the paper I think this
stock doesn't want to go down anymore. A push over 78.50-
79 should get it to 81-ish pretty fast and then dips back
to 79 would be buyable. I'd be inclined to buy it now in
anticipation with a stop under 77.
The ISE Ratio's 21 day moving average continues on its
I am not a fan of charts like iShares MSCI United
Kingdom (EWU), an ETF to be long the U.K. stock
market, because of its total indecision, with lower highs
and higher lows. Yet I can't help but recall that Europe
was supposed to be the outperformer this year and has
instead been an under performer. For now it's trapped
between $16.75 and $17.50, so I would expect a breakout
in either direction, but my sense is that if the dollar
can back off, this would break out to the upside.
For iShares MSCI Germany (EWG), an ETF to be long
German stocks, we have a similar picture. The same is
true; we're in a trading range of $26 to $28 for the time
being. If the dollar can back off, then the upside seems
ADT Corp (ADT) has a nice base it's working on.
There is resistance at $36, but if this starts to move up
the target will be around $38-$40, where we see a gap on
the chart. I like this with a stop under $33.50.
Gol Linhas (GOL) is an awful chart even I don't
want to bottom fish in! If it breaks that line then it's
another leg lower (although with a sub one dollar price,
how much lower is debatable!) Considering most of the
airlines look awful, I'd be inclined to stay away from
this for the time being.
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