Now that is what I was looking for! OK, I did not get a
jumpy Market Volatility Index (VIX) or a positive divergence
in stocks at new lows. So this is not the kind of low that
is long-lasting, nor is it an intermediate-term low. But
there was a vast difference between the market of today vs.
that of the last few days.
Let me describe the difference by beginning with an
anecdotal observation. My concern Monday morning (aside from
my indicators needing more downside) was that we were
gapping up on the open. Typically, traders tell us to never
trust a Monday morning gap up opening, yet no one was saying
it. They were all too busy patting themselves on the back
for being ready for the rally.
Then in today's downside crunch, when the Nasdaq was
down more than 70 points, I saw absolutely no one willing to
step up to the plate. This is what happens when you keep
trying to play an oversold bounce too soon. Too many folks
today were tired of trying to catch the falling knife. And
thus we managed a heckuva rally. Moreover, it was the first
day we have reversed from the lows and closed near the
highs, so it was a true reversal.
It also arrives with the right date, as this is now the time
frame in which the Nasdaq Momentum Indicator starts to rise.
In addition, the Fear and Greed Indicator went down to 16
intraday and closed at only 21. The total put/call ratio
closed at a relatively high 97%.
In terms of statistics, there was another difference.
Yesterday, the Nasdaq's net volume was a rather
unimpressive +257 million shares, with the index up 22 on
the day. Today, when the index was up "only" 11, net volume
was +331 million shares. So while still not the most
impressive statistic, it was better than yesterday.
Finally, while many of these momentum stocks have hardly
made lower lows, they now have small little bottoms forming
-- the kind that lead to oversold rallies. Their charts look
different today. Some look like they had a retest.
So why don't I think this is a great intermediate-term low?
Let us start with last evening's discussion of the Nasdaq
McClellan Summation Index. Next, the increase in stocks at
new lows means we need a retest at some point. The Hi-Lo
Indicator is still pushing down, so it has not yet reached
To this I can add that the Russell 2000 continues to lag;
notice it tacked on a mere 3 points today. Sure, it was down
17 at one point, so the rally was impressive. But a few
months ago the index would have led to the upside and now it
is falling behind.
So the bottom line is that the time is now ripe to get an
oversold rally. It likely will not be an easy ride, but it
should take us higher, perhaps toward the end of the month.
The S&P 500 has that resistance at 1850 we discussed,
but my sense is we ought to get through it with some fits
Read Helene's latest column
Just a reminder that we are in the heart of earnings season,
so please check for earnings releases first.
LinkedIn (LNKD:NYSE) is a great example of a momentum
stock that had a decent retest. Notice that today's low was
a higher low. A move through that downtrend line (around
$172) completes a downtrend that has been in place since
mid-March. If we get the kind of oversold rally I envision,
this should make it to the $180-$185 area.
Beloved Facebook (FB:Nasdaq) also refused to make a
lower low. Now a move over $60 should improve the stock by
crossing that downtrend line. There is still resistance from
those twin spikes at $62.50-$63. But if it can cross the
downtrend line, give it a chance at improving.
Finally, in Momentum Land, there is Twitter
(TWTR:NYSE). We discussed the stock last week when it got to
$42, which had been my target on the downside. Some of you
told me that you own it and wanted a follow-up after today's
amazing rise. It is hard to imagine that the stock will keep
on soaring. But I would like to see it rally to that flat
line ($47-ish) and then pull back toward $45-ish to give us
a small head-and-shoulders bottom. If it can do that, the
target would become that $54-$55 area.
For those who want something a bit more defensive,
Clorox (CLX:NYSE) continues to base. A move over this
resistance around $90.50 would measure to the mid-$90s,
essentially the old high.
The McClellan Summation Index is still heading down. A net
differential of +1200 advancers minus decliners is now
needed to turn it around.
Helene welcomes your questions about Top Stocks
and her charting strategy and techniques. Please send an
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please remember that TheStreet.com Top Stocks is not
intended to provide personalized investment advice.
Email Helene here.
Intuitive Surgical (ISRG:Nasdaq) has an island top in
place now. Considering how much it has fallen, however, it
ought to have some sort of rebound. I advise you to be a
seller on a rebound to $440-ish. It is too soon to determine
what sort of target we can get.
Baker Hughes (BHI:NYSE) still has a longer-term
target near $80. But the shorter-term target is here in the
$66-$68 area. So I would expect it to continue to do well,
but would not be surprised if the chart went into a
sideways/corrective pattern in the coming weeks. Perhaps we
will see one more push up for the oversold rally and then a
trading range before it makes a move toward $80-ish.
I would look for Mattel (MAT:Nasdaq) to rally toward
$40 but not for a huge upside move. I suspect that we will
see a long period of base building in the stock. Typically,
when a chart breaks down as this has done, it takes many
months before the base is big enough to launch more than
just another oversold rally. Think of that Potash
chart we have looked at time and again.
If the market goes down tomorrow, I would still look for a lift as we head into the holiday weekend.
We are not there yet.
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