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Top Stocks With Helene Meisler

Market Swings, but No Whoosh Yet

By Helene Meisler | 10/20/16 - 06:32 PM EDT
Stocks in Focus: PM, UAL, MYL, LOW, IBKR, MKC

The Market

It was a relatively quiet day if you just look at the indexes on the close, but intraday we had some big swings. A few things stood out.

NYSE breadth was negative, though not nearly as bad as it was early on, but it wasn't positive. Yet up/down volume was positive on the day. I'll call it a draw but what it tells us is in the stocks that were up, there was more volume than in those that were down.

This keeps the McClellan Summation Index hovering, unable to turn up, but not yet turned back down.

But I want to discuss sentiment because it really is at an interesting point. As I have indicated several times, it is definitely no longer complacent but it never got panicky. The Investors Intelligence bulls are now at 42.9%, down from the mid-50s this summer. Somewhere under 40% is what I would consider panicky.

The American Association of Individual Investors has seen the bulls back off to 23.7%. Panicky was in late May (when Nasdaq was crumbling) and we saw 17% bulls.

The Fear & Greed Index (from shows 38%, which is leaning toward fear. Under 20% represents panic.

Then there are the put/call ratios. Today's were really curious as the equity ratio at 53% is low, the lowest since Oct. 4. That tells me there is no Wall of Worry for individual stocks. A Wall of Worry is bullish. The 10-day moving average of this indicator continues to sit sideways.

Also today was the put/call ratio for ETFs, which was very high at 201%, which says there is a Wall of Worry for ETFs. We last saw a reading over 200% one week ago, which I think was a contributing factor to this week's oversold rally.

If we step further back, we see the 30-day moving average of the equity put/call ratio is low and rising, which is typically bearish for stocks.

If we step back, we also see the 21-day moving average for the VIX put/call ratio has sunk like a stone. Previous times it has come down to these levels, the market has either had a short-term whack or has made very little progress on the upside as a top formed. This indicator would be bearish.

Then there is the put/call ratio for ETFs tracked on the 30-day moving average. You might recall we looked at this chart several times in August and September, noting that when it got to 120% it was bearish. We haven't gotten the full-fledged decline the way we have in other cases, but the declines in individual stocks have clearly caused this indicator to rise sharply. Typically, once it gets over 160%, we are near a low, not a high.

This brings me to the notion that everyone seems to be looking for a big whoosh. The kind of whoosh that brings out panic. The kind of whoosh that gives us a day where 90% of the volume is on the downside. The kind of whoosh where we see the VIX spike. The kind of day where the TRIN soars to over 2.0. The kind of whoosh where the put/call ratio zooms up to 120% or more. And if you look at the chart of the S&P or the Russell, you can easily see it happening because as I have noted all week the resistance overhead is strong.

So what if next week (when I will be on vacation, so be alert!) we do see some sort of whoosh? Then that would satisfy the folks looking for a whoosh. But is the market ever that accommodating? The indicators are all over the map, as you can see.

For now, I have to stick with this being just an oversold rally that shows some improvement in some areas and deterioration in others.

New Ideas

I was asked to follow up on Philip Morris (PM:NYSE), which I have not liked for quite some time. It has dribbled down but has not yet really broken. As long as it does not trade back over about $97, it ought to make its way down to the target in the $90 to $91 area.

Airlines have been terrific, but as you know, my favorite has been United (UAL:NYSE) followed by Jet Blue (JBLU:Nasdaq). This is a reminder that UAL, which when we first discussed it had a measured target of $58, is getting very close to there and filling the gap. I'd consider some profit taking up there.

I also wanted to follow up on Mylan (MYL:NYSE), which I was asked about not long ago. It seems to be trying to bottom despite all the bad news. As long as it stays over $36, it might be an interesting speculative play, although I do not have any targets.

Today's Indicator

The put/call ratios are discussed above with charts.


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.

When we look at the chart of Lowes (LOW:NYSE), we see a top that has broken down. We discover that the measured target for this top is $66 to $68. Therefore, with as awful as the chart looks, I would say it is likely getting late in the decline.

I have no idea why all the online brokers have rallied and Interactive Brokers (IBKR:Nasdaq) has sunk to the lowest level in months, but it is at support and I would say it ought to bounce from here. I am inclined to think a rally that cannot get over $35 would mean the next trip down would see a break of this line and a retest of that $30 to $31 area. So I'd sell a rally.

The chart of McCormick (MKC:NYSE) looks like it's trapped. There is a measured target around $93 but the support is at $90 and resistance at $100. For now, I would call this a stock trapped in that $10 range. If I had a gun to my head, I'd say it sees $90 before $100, but that is just a guess.


Helene Meisler
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Chart of I:DJI
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