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”
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.
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.
The put/call ratio is discussed above.
Helene welcomes your questions about Top Stocks and
her charting strategy and techniques. Please send an
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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
About a month ago, I highlighted some retailers on the
negative side and Nordstrom (JWN) was one of them.
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.
This dreariness comes as the number of Nasdaq stocks hitting new lows expands.
The dollar had a reversal today, so let’s see if it can get any follow through on that.
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