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Top Stocks With Helene Meisler

Market's Weakness Is Showing

By Helene Meisler | 2016-12-01 18:30:02.0
Stocks in Focus: XLE, XLP, BG, MMP, JBLU

The Market

If you listen to the folks who actually own stocks, they are unhappy. They feel the pain of the last several days, or actually the last week or so, as individual stocks are getting creamed. Those folks who trade the S&P cannot understand the fuss since, well, heck, the S&P is down marginally, they say.

Here's the reality: Stocks make up the S&P. It's an index. And as we have seen countless times over the last few years, the S&P holds its own for months at a time and then, out of nowhere, all that underlying weakness catches up and down the S&P goes. And while everyone is so focused on the S&P hanging tough, Nasdaq has lost 150 points this week. That's 3%. That is no small potatoes.

Yesterday I noted the McClellan Summation Index for Nasdaq was on the verge of rolling over. It surprised the heck out of me how fast it did, but today it rolled over. It will now take a net differential of +1.2 billion shares (up minus down volume) to get it to stop going down.

There is some support for Nasdaq just around these levels, so I can see it bounce, but in general I would like to point out that it seems in the last few years that once a group becomes "for sale," it tends to stay for sale for quite a long time.

Just look at the chart of the Energy Select Sector Fund (XLE). It peaked in June 2014, it had a ton of short-term rallies and some intermediate-term ones, but it went from $80 to $50 in 18 months. That's about 40%.

Now take a look at the Consumer Staples Select Sector Fund (XLP). I turned bearish on this in July. I had a target of $50.50 to $51. Look how many short-term bounces we've had along the way. Yet it has been a five-month downtrend.

SOX, the semiconductor index, also has support just below (near 820), so I would expect a bounce from here as well. Yet again, the experience since 2014 has been that once the over-owned start down, they tend to have lower highs and lower lows. If it makes a lower high, then we'll know the pattern has begun.

Tomorrow, we'll get the monthly employment report, which is typically a market mover. I have been in the camp that says we should get a pullback (we are) and then another rally mid-month (that remains to be seen). But the underpinnings of a market that is weak underneath are starting to show.

New Ideas

Bunge (BG:NYSE) has broken out of a long base and retested that breakout. It measures to the old high near $77. I suspect it doesn't get there easily; there will be plenty of shakeouts along the way.

For those who have asked, I had to give up on the iShares 20+ Year Treasury Bond ETF (TLT) today (so now it probably rallies). I have not given up on the VanEck Vectors Gold Miners ETF (GDX) yet, though, but it scares me that folks are coming out of the woodwork recommending it now.

Today's Indicator

The 10-day moving average of the equity put/call ratio is rising, which in general is bearish for the market.


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.

Several months ago, when I first liked oil and oil stocks (near that low in early August), I had an upside target on the Energy Select Sector Fund XLE in the mid-$70s. I see it tagged $76 today and reversed. It is obviously overextended and, having hit the short-term target, some profits should be taken. I'd like to see a pullback toward $73 to $74 since a retest of that line would probably look good.

Magellan Midstream Partners (MMP:NYSE) looks to me as if a pullback or sideways action here (over say $67 to $68) could set up a funny little head-and-shoulders bottom. The key here is it needs to get over $71. If it can, then the measured target is the old highs in the $75 area.

There is still an unfulfilled measured target of $22 on Jet Blue (JBLU:Nasdaq). There is also a gap to be filled there. This stock has lagged the other airlines, probably due to the fact that Jet Blue tends to fly south to areas that have had Zika breakouts. But as long as the stock stays over $19, it ought to find its way toward $22 eventually.


Helene Meisler
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Chart of I:DJI
DOW 19,170.42 -21.51 -0.11%
S&P 500 2,191.95 +0.87 0.04%
NASDAQ 5,255.6520 +4.5450 0.09%