Let's talk about the banks. They have been an issue
in the market since mid-December when the Fed hiked
rates. Today they were slammed even more and on massive
I had a downside target for Bank of America (BAC)
that didn't even see a pause. The same is true for
Citibank (C). The target for the Bank Index was
measured to 56. The giant top measures to the 50-52 area
on the index. A smaller top measures to 56. The uptrend
line comes in around 54, so we are coming into an area
that really must hold.
After the close, it was announced that Jamie Dimon, CEO
of JPMorgan (JPM), bought about $25 million worth
of stock today. That's quite a sizable buy. We looked at
the chart of JPM last night and I noted that if it broke
$53, the next target was in the $50 area. It only made it
to $52.50 today. So here's what we need to watch in
relation to this stock, and other banks in the coming
Does it gap up and leave an island behind? An island is
just as it sounds; it needs to leave today's price behind
with a body of water around it. If there is any
"connection" to the "land," then there is no island. So a
gap up where the gap does not get filled is bullish. A
gap that can't get over $56 and fills the morning gap
leads me to believe there is still unfinished business
Aside from that, we had a moderate reversal off the lows,
but breadth stayed poor again. The number of stocks
making new lows contracted, so there are still fewer new
lows than the previous peak reading. I maintain the view
that we have a trading low coming, but I also find it
hard to believe folks will throw caution to the wind and
rush to get long before a long weekend where the rest of
the world trades while the U.S. does not. The best news
is that we are finally heading toward a short-term
oversold condition, although I still find it hard to be
able to pinpoint it.
General Electric (GE) had a fresh breakdown today.
The top now measures to the $25 area. It gets a day or
two to recapture $28, and a failure to do so sets up that
I remain skeptical of the oil stocks and especially with
OPEC rumors running rampant, but I do expect the
Energy Select Sector Fund (XLE) to have one more
rally before we roll back over. That's why the chart of
Schlumberger (SLB) is interesting to me. If it can
break out over $70, I think it can rally to $72-$74. If
it can't, then the channel stays in effect.
The 10-day moving average of the put/call ratio has
turned back up (bearish).
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When we last looked at Twitter (TWTR), I noted the
stop was at $24 because if it broke from there it was a
long way down. It measured to $14. This is where it sits
today. Again, just because a stock gets to its downside
target doesn't mean it's a buy, just that a short should
be covered. There is plenty of resistance at about $16,
so I would sell it if it should get back there.
I am so afraid to trust the base that has been built in
Deere (DE) because how many of these bases have
worked lately? But if DE gets over $80, that will be a
breakout that would measure to fill that gap in the $90
area. I can say this: I don't know where the stop should
be, but if it trades back to $72, even if it holds down
there, then I would not like it. A breakout would be much
better if it doesn't make another trip to the lower end
of the range.
We had a good short call on Disney (DIS) in
December when it formed that head-and-shoulders top. Our
first target was near $100, where all it did was have a
rest before breaking again. That top measures to about
$82. Was this week's plunge enough? If it was, then DIS
will need to get through $93 to $95 to impress me.
Otherwise, this is simply a rally back into resistance.
And there certainly is no base to speak of. What would
impress me is if it rallied to about $95-ish then pulled
back to $90-ish to form a head-and-shoulders bottom. Then
I might be more interested in making a larger bet.
This will add to anxiety heading into holiday weekend.
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