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Top Stocks With Helene Meisler

Market Is Bending but Not Breaking

By Helene Meisler | 09/29/16 - 06:27 PM EDT
Stocks in Focus: KBE, XLP, IBB, FTNT, DBA, AA

The Market

So the chop stays alive. Oh sure, it might seem like it was awful, but let's review a few tidbits.

First of all, as bad as breadth seemed, it wasn't nearly as bad as it could have been. For example, if we add up yesterday and today, we get an S&P that is down nine points with breadth at -250 issues. If you're bullish, that is a good showing. Heck, net volume is +560 million shares with the S&P down 9 points.

But breadth doesn't tell the whole story. To me, the story is not about the chop. It is not about the breadth. It is not about the volume. It's about sentiment. Panic in markets gives us a cleanout. And we don't have panic. We have surely lost the complacency that was with us for so long. There is now concern, especially with the Deutsche Bank (DB:NYSE) news. But as you know, I consider panic a high TRIN (it was under 1.0 today). I consider panic a high put/call ratio (it was 104% today -- two days ago it was 115%). I consider panic a jumpy VIX and we simply don't have that.

The best news is that folks did get somewhat scared with the DB news. But you know what? I am not a fan of the banks, as you know, and even I can't believe with all the bad bank news that we haven't taken out Monday's lows in the S&P Bank ETF (KBE) yet.

And the drugs? I don't have much love for them either. Just a week or so ago, I highlighted Pfizer (PFE:NYSE), Johnson & Johnson (JNJ:NYSE) and Bristol-Myers (BMY:NYSE) as negative charts, but they just drip lower, they do not collapse.

Then there are the semis. I thought the SOX index would stall out and go down from 810. It has been stuck there for a month, but today a takeover took it up to 820. I am still of the mind that the semis need a correction, but here again, with all the negativity, there was nothing there.

Or what about the Consumer Staples Select Sector Fund (XLP)? Here's an ETF I have been negative on for months. And still it can't break under $52.25.

My point is that if these charts broke, I would take that as part of the panic, but they dribble, they don't break. Maybe it's due to the end of the quarter. Whatever it is, when there is panic the selling breaks levels. And we didn't get that today.

New Ideas

In the wake of the health care selloff, I was asked to update the chart of iShares Nasdaq Biotechnology ETF (IBB). You can see the line I have been using for the last few months. I will continue to use it as a guide until it stops working. So somewhere in that $275 to $280 area, I would probably have an interest in IBB again.

Today's Indicator

The various put/call ratio moving averages haven't budged in a week. The most interesting options ratio I have is the 10-day moving average of the ISE equities. When it stops going down and starts going up, the market typically rallies. I can't tell yet when it will turn, but as you can see it has plunged quite a bit this week, so it's worth watching.


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.

Fortinet (FTNT:Nasdaq) on the one-year chart appears to have a big base that, if it can get through $38, would be a breakout, so let's also take a look at the shorter- term chart to see it closer up. On the shorter-term chart, you can see the resistance in this $37.50 area and the support at $35. I would probably be willing to give this a shot on the long side near $35 to $35.50 because then the stop is so close at just under about $35. What I don't like is the spike high late last week because that implies we have trapped longs up there.

PowerShares DB Agriculture Fund (DBA) is an ETF to be long agricultural commodities, and as you can see it is pretty down and out. Note that there is a crop report out on Friday that ought to have an influence on the chart, but if it tagged the $20 area I would think it can bounce from there. Otherwise, I see a chart in a downtrend that, if it rallies, will probably make another lower high.

We looked at Alcoa (AA:NYSE) a couple of weeks ago when the stock was near that uptrend line and I said it ought to bounce from there, but I wasn't sure how far it could run since there was so much resistance as it got near $10. It is at $10 now with quite a bit of resistance overhead. I still think the resistance in this $10.20 area is strong for now. However, I am impressed that on a day like today in the market it can still be green. The bottom line is the stock is OK as long as it stays over that lower line, but eating through that resistance overhead may be difficult.


Helene Meisler
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Chart of I:DJI
DOW 18,143.45 -195.79 -1.07%
S&P 500 2,151.13 -20.24 -0.93%
NASDAQ 5,269.1540 -49.3940 -0.93%