Well, we did get a little oversold today with the move
down. Had we closed on the lows, I think we would have
reached a better oversold reading.
The obvious pluses in today's market include the oversold
reading, the Russell finally outperforming, the
transports not breaking and the fact that Nasdaq broke
last week's intraday low and there were fewer stocks
making new lows.
All of these are reasons to have a short-term bounce.
But let's think about the indicators. The McClellan
Summation Index has made a lower low for Nasdaq. The
number of stocks on the NYSE increased over last week's
reading, so there was no positive divergence there. The
10- and now the 21-day moving average lines of the ISE
ratio are heading down (I will show this chart here
tomorrow evening). This couples with the moving average
lines of the various put/call ratios that are still
heading higher (bearish).
To this I would add that breadth made a lower low. That
is something "new." We haven't seen that since the summer
and fall of 2014. It might not be that clear on the
chart, but you can see in Box A the S&P (brown line) has
held its previous lows while breadth (blue line) has
broken the previous lows rather handily.
In Circle B from last summer, you can see the blue line
(breadth) was heading down while the S&P (brown line) was
still trading upward. That divergence, as you know, led
to the October decline. Thus when breadth diverges, it's
In sum, I do think we can and should bounce, but I don't
think the correction is done yet.
I would end with a note on bonds, which have refused to
enjoy a bounce. The longer they go without a short-term
bounce, the more vulnerable I think they are to the
employment number. A pullback would be good for higher
rates. The lack of one makes it feel overextended.
Keeping in mind that "high bases" are not what I am good
at, I was asked about Broadcom (BRCM) and it has
held up rather well during this rout. Therefore, I do
think it can at least make a try for that spike overhead
(leftover from earnings). If the market were stronger, I
would be inclined to think it could break out over that
spike, but as you know, I don't think the market is all
Facebook (FB) was actually green most of the day
today. It broke down from a double top about a week ago.
That top measured to the $76-$77 area and since it tagged
$77 I'll figure that was sufficient for now. A rally back
to the $80-$81 area is where I would look to sell it. A
rally that stalls shy of $82 will map out a head-and-
shoulders top (left shoulder in early March). So a bounce
to $80-$81 and then down again is my view.
The Volume Indicator is hovering near 50%, so it's not
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I have been bearish on the retailers for several weeks,
but when asked about Ralph Lauren (RL), I found
myself drawn to the potential bottom that is developing
in the chart. If it got down to the line around $130, I'd
probably take a look at it from the long side. It's still
a bit early but at least the chart is making higher lows
The best thing I can say about the chart of KLA-
Tencor (KLAC) is that it hasn't broken $57 yet. A
break of that level and the target of $54 comes into
Once again there are so many questions on Apple
(AAPL). It will be obvious to all that this $122-$123
area is support and a break of this will complete a
double top of sorts. I don't know if it will hold or not,
but unless it has a very strong rally off this level, I
think the best it can do is chop around. If I had a gun
to my head, I would think it will try and save itself and
break later on. The worst thing it can do now is have a
mediocre rally that stops at about $126.
We just need a couple more days on the downside.
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