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Top Stocks With Helene Meisler

Market Makes Some Subtle Changes

By Helene Meisler | 08/24/16 - 06:17 PM EDT
Stocks in Focus: XLU, IBB, T, AGN, CBI, CMG

The Market

Something changed in the market today. Oh, I know you're thinking, sure, the market went down. But I am here to tell you there was something more subtle than that.

Since the market took off on that employment number in early July, there have been exactly three days where the S&P had a double-digit decline. Today was the third day. Here's the change: During the other two, the put/call ratio zoomed right up; today it didn't.

In early August, the S&P fell by just over 13 points and the put/call ratio that day was 115%. The put/call ratio for ETFs was 225%!

Last week, the S&P fell by 12 points and the put/call ratio was 103%.

Today's decline of just over 11 points saw the put/call ratio at 93%. OK, that's not such a big deal, but the Index put/call ratio was under 100%. Now that is something, or at least it's a subtle change.

The McClellan Summation Index continues to go down, as it has done for nearly four weeks. The change today is that the Nasdaq McClellan Summation Index, which has been flirting with rolling over, did so today. For Nasdaq, I use volume (up minus down volume) so it will need a net differential of +900 million shares to get it to stop the current decline. That's not huge, but consider that the last time Nasdaq had a net differential of +900 million shares for volume was July 20. So it's going to take quite a bit of action to get it to stop going down.

The other change is the line I have been drawing in here on the Nasdaq Composite chart finally broke. I think a break of 5200 would "complete" the break because then it would mean we'd made a lower low. So far, we have not.

But the biggest change is that folks moved back into the defensive names today. Look at the Utilities Select Sector Fund (XLU). There is a lot of risk playing it before Jackson Hole, but as long as it stays over $49.50, it could be forming a trading bottom again that would be confirmed over $51.

I am still not a fan of AT&T (T:NYSE), but notice that it finally stopped going down today as well after eight straight red days. It deserves a bounce.

So to me those were the changes in the market and we finally got some volatility. I think we could/should see more.

New Ideas

We've looked at iShares Nasdaq Biotechnology ETF (IBB:Nasdaq) numerous times lately with this same uptrend line. It threatened to break and today it finally did. By now we all know the news; what bothers me is there doesn't seem to be much panic, so any failure to get back over $290 tells me this is likely going back to about $275 (at least). The good news is that the top only measures to $275-$280. The bad news is that, like last September, Congress and the politicians have it in their sights again.

Today's Indicator

The Volume Indicator is nowhere near oversold, but it has come off the overbought level where it has been for so long. Oversold is in the low 40s.


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.

I quite liked Allergan (AGN:NYSE) a few months ago when it had formed a head-and- shoulders bottom. I had a target of $250. It ended up filling the gap at $260. Along with all the other biotech and drug stocks, it is taking a hit now. There is some obvious support at $240 and I suspect it will make an attempt to hold there the first time down due to the trendline and the spike low. I won't love the chart at $240 and if it breaks that then I think it is going to $220. At that point, I might find the chart interesting again. Right now I think the upside is capped at $260.

The reason I do not like the chart of Chicago Bridge & Iron (CBI:NYSE) is that it broke that uptrend line -- and it did it in a market that hasn't gone down in forever. If we get a real decline, maybe this will go down even more. When would I buy it, or at least try to take a stab at a bottom? If it rallied back up over $33. It runs smack into resistance there, but any stock that can recapture a broken trendline gets the benefit of the doubt that the decline is over.

In the category of what's down and out that potentially has a lot of shorts, Chipotle Mexican Grill (CMG:NYSE) comes to mind. I had thought it would go to $325 (measured target), but the fact that everyone hates it and it refused to break $390 has me intrigued with the chart as a long candidate here.


Helene Meisler
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Chart of I:DJI
DOW 18,481.48 -65.82 -0.35%
S&P 500 2,175.44 -11.46 -0.52%
NASDAQ 5,217.6950 -42.3830 -0.81%