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Top Stocks With Helene Meisler

Bring Out the Bears

By Helene Meisler | 08/25/15 - 06:42 PM EDT
Stocks in Focus: USO, TIF, FXF

The Market

Today's action was definitely not what I expected, since I figured we'd at least continue to close in the green for one day. But that was not to be the case. The good news is that today certainly brought out more bears and more panic than yesterday did. Heck, my mother finally called me!

What really caught my eye today was that the Investors Intelligence weekly survey chimed in with a massive move down in bulls. The bulls are now at 31.5%, which is the lowest reading since we saw 29.4% in late August/early September 2010. I realize that was a long time ago -- five years! -- but it turned out to be quite a low in the market.

Of course, that coincided with the end of the volatility we'd seen since the flash crash in May 2010, and that wild summer when we first realized Greece was a problem. The main difference once again is that the bears are nowhere near where they were then. Back then the bears had soared up to 37.7%. Now they are relatively high at 22.9%, but they ought to be higher by now.

The bears were last here in July 2013. I believe what has happened is that everyone has become accustomed to buying the dip because the Fed or some other central bank will come in and save us. In the old days, selling just exhausted itself and slowly buyers showed up. Now everyone just waits for some announcement from a central bank.

What we should watch in the next few days is the number of stocks making new lows. We find ourselves right now at the same low as we had yesterday on the S&P, and a new closing low, with far fewer stocks making new lows. Yesterday we saw well over 1300 new lows, whereas today we saw 250 new lows. If this number continues to contract, it tells us the selling is drying up.

All the same indicators that were in place yesterday for an oversold rally are still there. But the process is also still ahead of us. The process still means volatility is not going away. It means we should continue to expect plenty of ups and downs. Therefore, that's still the pattern I expect to unfold in the coming weeks/months.

To offset my mother's phone call (which is bullish) is the fact that I leave on vacation Wednesday (bearish). The next Letter will be on Labor Day, Sept. 7.

New Ideas

Again, I see no reason to rush into anything until the market settles down. If you want to play for a rally, then the indexes should be your focus.

Today's Indicator

The McClellan Summation Index continues downward, but the "what if" that tells us how oversold the market is remains in oversold territory, since it will now take a net differential of +5000 advancers minus decliners on the NYSE to halt this indicator's decline.


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 Top Stocks is not intended to provide personalized investment advice. Email Helene here.

People continue to ask me about oil and U.S. Oil Fund (USO), an ETF to be long the commodity, and I continue to believe I will not be able to identify a bottom there until we see a prolonged basing in the chart. If we do a measured target, we can get a target of $11 to $12 on USO, so I would have to say at the very least it's getting too late to sell or be short.

Tiffany (TIF) is oversold enough to have a bounce, but I think if it can even get close to $88-$90, I'd be a seller. And if it breaks under these recent lows, it's got a target of $70 coming its way. I like to bottom- fish, but this one doesn't do it for me.

CurrencyShares Swiss Franc Trust (FXF) is an ETF to be long the Swiss franc vs. the dollar. Until it breaks out over $106 to $107, it remains in a trading range, but I must say I wonder if this is a rectangle pattern, which would ultimately be bullish if it breaks out. For now, I'll call it a trading range between $98 and $107, but I now have my eye on it, especially since I suspect there is at least another attempt at the high end.

Regards, Helene Meisler

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