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Top Stocks With Helene Meisler

Optimism Appears on the Wane

By Helene Meisler | 05/05/16 - 06:55 PM EDT
Stocks in Focus: DWTI, BDX, JWN, FSLR, IYT

The Market

This was one of the dullest days in the market that I’ve seen in a while. In fact, there seems to be more action in after-hours trading, than during trading hours.

The main difference between one week ago and today is that one week ago, folks were still optimistic. One week ago, the put/call ratio for the VIX was 227%. Today, the total put/call chimes in at 120%, which is the highest since the final day of February.

As a review, a high put/call ratio is a bet on the underlying index going down, therefore, a high ratio for the VIX means folks think the VIX is going lower. As a result, it is a bet on a higher stock market. Here, one week later, the bet is quite high on the collective group of all individual stocks, indexes and ETFs, which means folks are now betting heavily on a lower stock market.

These are considered contrary indicators so in the case of the VIX, you see that the market opted to go down and make the VIX put buyers wrong. The employment number will be out early tomorrow, so it will become clear if the heavy overall put buyers are wrong.

Quite frankly, I would have loved to see a high reading in the total put/call ratio like this on a day the S&P was down hard, on a day that breadth was lousy, and sometime midweek next week. Why? Because midweek next week is when I estimate it could be oversold again.

Two days ago, I did an exercise where I discussed what it would take to turn the McClellan Summation Index from down to up. When it gets to the point that it needs the net differential of advancers minus decliners on the NYSE of +4000 or more, then it is oversold. It is currently at +2900, so that says it needs more selling to get a “good” oversold reading.

Down below, you can see the 10-day moving average of the put/call ratio chart. It is still rising. When the moving average is rising, it is generally bearish for stocks. When it peaks and rolls back over, it is generally bullish for stocks.

Then there is the chart of the Transports. You can see it is coming into support near $137. This is a level I have discussed before. I am surprised no one is discussing the poor acting Transports, but I would love to see a break so that there could be a panic -- perhaps coupled with an oversold reading. But so far, it’s been a drip down. I think iShares Transportation Average (IYT) eventually makes its way to the $134 area, and perhaps to $129 or $130.

The employment number tomorrow morning could just as easily rally the market, as well as help it go down. I continue to believe the market is in a correction, and I am awaiting an oversold condition that tells me the market is worth buying for a trade.

New Ideas

There is something that changed in the market in the month of April that I would like to share with you. In early April, I looked at First Solar (FSLR) on the short side. That head-and-shoulders top (black line is the neckline) has a target around $60. It got there in a hurry and then milled around, as it should have. What it should not have done though, at least in my opinion, was then collapse again. Yet it has. So has United Continental Holdings’ (UAL) stock. There seems to be no bounce in them.

I do think FSLR has some support here and should attempt a bounce, but now there is a lower target in the $46 to $48 area. A bounce from here to the $55 to $57 area is another chance to sell the stock. I do think it bounces. But the fact that it has collapsed as fast as it has is what is so concerning about the market.

Today’s Indicator

The put/call ratio is discussed above.

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.

This is a follow up for VelocityShares 3x Inverse Crude Oil (DWTI), an ETF to be short on crude oil. Notice it crossed the downtrend line then retested it. Now, it looks to me as though it wants to go higher. Crude oil down, this inverse ETF up. The obvious stop is under today’s low, but I do not have a target. With these inverse 3x ETFf’s, you always need to be careful. However, if it can get over the highs from earlier this week, it could make a try at $125. Gulp.

I was asked about Becton Dickinson (BDX), now that it has joined Baxter International (BAX), since I looked at it a month or so ago with a positive eye. I hate to chase stocks in markets that are not oversold, so I will simply note that the chart measures to the $175 area.

About a month ago, I highlighted some retailers on the negative side and Nordstrom (JWN) was one of them. I thought it would stop around $50, but it only stopped there for a week or so before falling again. I think the support in the mid-$40s really ought to keep this stock contained for the time being. I would, however, look at sell it on a rally back near $52. If I wanted to take a very negative outlook on a longer term basis, then I have two targets, neither of which is pretty: $38 and $25.

Regards, Helene Meisler

Gloom, Not Panic, Settles Over the Market
Stocks in Focus: SRS, TNK, KKR, EEM, TUR, IWM, KORS

This dreariness comes as the number of Nasdaq stocks hitting new lows expands.

05/04/16 - 06:59 PM EDT
Dollar Is Due for a Rally
Stocks in Focus: AAPL, UUP, EEM

The dollar had a reversal today, so let’s see if it can get any follow through on that.

05/03/16 - 07:06 PM EDT

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