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Top Stocks With Helene Meisler

Market Is Now Flat as a Pancake

By Helene Meisler | 07/21/16 - 07:22 PM EDT
Stocks in Focus: FXE, AMGN, TWM, FXY, DXJ, INFN

The Market

Three of the last five trading days have seen the S&P in the red, and it’s now flat as a pancake over the last week. The Russell has been flat as a pancake since July 12, which is two days shy of two weeks in the market. If you want to know what an overbought market looks like, this is it.

Oh sure, I know it feels like the market has been nothing but up for the last week or so, but it hasn’t. What has been up is breadth. Yet for the life of me, it’s hard to find it in my charts. There is a few days of rallying here or there, then the stocks slump, and it repeats itself once again.

I realize folks think the group rotation is bullish, but bullish trends take more than a smattering of ups and downs. In other words, much of the market looks like a lot of going nowhere.

In the meantime, I want to go back to a chart I looked at earlier in the week, CurrencyShares Euro ETF (FXE:NYSE). I have been a fan of the dollar index for months and, in the big picture, I still am. But, in the near term, when I see people who invest in stocks but never discuss currencies begin to fawn over the dollar index breakout, it makes me think it needs a little shakeout.

The other day, I noted the FXE chart had a spike low at $107 and the trend line you see on the chart came in somewhere between $107 and $107.50 and I thought it could/should bounce off it. It bounced enough to get to flat today, but I think it might even see a bit more toward the $108 or more area.

As for today’s statistics, the only thing that is a bit of a highlight is some caution crept into the market today, with the put/call ratio for ETFs jumping to 161% -- the highest since late June. The 30-day moving average of this indicator has still not gotten under 120%. It sits at 124%, as of now. The chart is shown below.

The other highlight is one more day of negative breadth and the McClellan Summation Index will stop rising. I admit it took me by surprise, regarding how fast and easily it got to this spot.

Again, I would not be surprised to see a rally on Friday, but I remain in the camp the market could use a pullback/correction, even though all it has done so far is a giant sideways chop-fest.

New Ideas

After the discussion about biotechs earlier this week, I was asked about Amgen (AMGN:Nasdaq) and the big base it has. If AMGN gets over $165, it would be a nice breakout and would measure long- term, over six to 12 months, to the $190 area. A move back to under $160 would keep it in the base, offering us nothing but continued chop.

I was asked once again about ProShares UltraShort Russell 2000 ETF (TWM:NYSE). It has gone nowhere since I discussed it a week ago. I continue to think charts like this have a tendency to fall one more time and then reverse and rally, so I wouldn’t know where to put a stop. I just think if it can get over $32, then it should make a try to $33 or $34.

Today’s Indicator

The 30-day moving average of the ETF put/call ratio is discussed above. A move under 120% would be bearish for stocks.

Q&A

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

When I last checked in on CurrencyShares Japanese Yen (FXY:NYSE), it was near the highs and top of the channel and appeared to be looking for a pull back. It’s got some decent support at the green line, so it is enjoying a bounce from here. My best guess is the bounce will fail around $93 to $94, leaving us to see how it looks on the downside again. In other words, if it rallies to $93 and then falls again, by the time this happens the black and green lines may intersect and become major support. I would probably be a buyer.

I know everyone seems to like WisdomTree Japan Hedged Equities (DXJ:NYSE), but I see a series of lower lows and lower highs. Rather than guess at it, I’d much rather wait to see if it can get over the downtrend line. If it can, then I would think it is an intermediate- and maybe a long-term change in the chart. It still has plenty of base building to go, but at least you know the downtrend is over.

Infinera (INFN:Nasdaq) would have to get over the downtrend line for me to believe it has bottomed. In fact, I have drawn in blue what would make me get excited over this chart. If it could map out a pattern, such as I’ve drawn in, it would give me confidence the stock wanted to fill the gap up above.

Regards,

Helene Meisler
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