Oh my, was that dull! Without a proper correction, rallies
are just grudging and have no life in them. It really would
be better to clean out some of these weak holders.
The most interesting statistic of the day was that the
put/call ratio on the Market Volatility Index (VIX) once
again shot up to a reading over 100%. As a reminder, this is
a bet that the VIX will fall, as too many puts vs. calls are
bought on the VIX. A bet that the VIX will fall is generally
a bet that the market will rally.
The last time that the ratio got a reading over 100% is
shown on the chart below. It was not the end of the world,
but you can see we spent the next five days going sideways
and the next several days ticking downward.
Another point I would make, and this one is so obvious, is
that the Russell 2000 continues to underperform. This
underperformance, especially vs. the Nasdaq, has caused
breadth to be poor on both the Nasdaq and the NYSE.
Also please notice that bonds did not sell off hard on the
employment number last week. The iShares Barclays 20+ Year
Bond Fund (TLT:NYSE) held the uptrend line. I have been
neither a bull nor a bear on bonds for a while, as we seem
to have been just sitting at the same level. But if the TLT
can get through this $104 area, it is going to change that
chart from the current higher rates to lower ones. That
should help the homebuilders and especially Realogy Holdings
(RLGY:NYSE), which we have looked at a few times.
It is important to note that if the breakout in either
direction does not come soon (i.e., this week), then we
should not necessarily trust the breakout as we will be too
far into the apex for it to matter.
I am still hopeful that we can get some downside in the
market this week. If we do, it would set us up for a better
Christmas rally. If we do not, then I think we will continue
to get more of the current chop-fest.
Read Helene's latest column
Reminder: If you would like a follow-up report on a stock I
have reviewed in the last few months, please do not hesitate
send me an email. I will try to do updates this week.
I would have liked General Dynamics (GD:NYSE) to have gotten
to its target of $94 already. I hate when stocks get so
close to their target but do not reach it in one fell swoop.
The GD target remains $94, and there is still a chance that
the 90/100 rule will come into play. (That is that 90% of
the stocks that reach $90 will make it to $100.) You should,
however use a stop under $88 now. If the stock falls below
$88, that would not be dire, but it would muddy the
shorter-term picture and give the chart a lot more work to
Cliffs Natural Resources (CLF:NYSE) had a great run and has
since corrected back toward support. As long as it stays
over $24, I think the chart will keep an upward bias. It
should have a long-term target around $33, but I think many
months will be needed to get there and that it will not be a
smooth ride. First resistance is $26-$27, and I do think it
will try to get there before year end.
The chart of Packaging Corp. of America (PKG:NYSE) was
terrific and gave you a great long-side trade months ago.
But it now appears to be failing. A break of that line
around $59 would complete the top. Of course, it will not
roll over easily. But if it breaks that line, I would advise
you not to be long the stock anymore, as the measured target
would be down in the $55 area.
The SPDR Gold Trust Shares (GLD:NYSE) is trying desperately
to cross this steep downtrend line over $120. Should it do
so, I would consider that a major victory as it would then
begin to insulate the downside.
The 30-day moving average of the advance/decline line is
actually getting oversold, although it is not a great
oversold reading. But at least it is no longer overbought.
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.
Continuing the Chinese theme from this morning, let us
revisit China Mobile (CHL:NYSE). Several months ago, I liked
the chart based on the head-and-shoulders bottom. It
achieved its target of $57 and is now trying to create
another bottom. I am inclined to think that a trip down
toward that $54 area, or even a move sideways here at $55,
suggests a funky head-and-shoulders bottom that would imply
a target of $59-ish. For now, use a stop under $54 and a
target of $57-$59.
Considering other Asian names, the chart of the PowerShares
India Portfolio (PIN:NYSE) is completing a
head-and-shoulders bottom. I see a lot of resistance
overhead at $18-ish, so I do not think it will get through
there easily. However, if you take a longer-term view, that
weird-looking head-and-shoulders bottom measures eventually
to the $21.50 area. This chart is reminiscent of the iShares
MSCI Emerging Markets ETF (EEM) chart we reviewed a few
weeks ago, of which I also was fond.
I would like to be positive on Brazil iShares (EWZ:NYSE),
but I cannot yet find a reason to believe it will do well.
That resistance starting at $46 is what keeps staring back
at me. The chart measures to the $41 area. So at the very
least, before advising you to buy it, I would like to see
EWZ either retest $44 and hold, or take a trip into the
lower $40s. For now, I suggest being a seller in the $46-ish
I would still like to see the market come down this week because I think that would set up a decent year-end rally.
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