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Top Stocks With Helene Meisler

Numbers Don't Impress as Chopfest Continues

By Helene Meisler | 09/27/16 - 06:24 PM EDT
Stocks in Focus: XLU, IYT, PYPL, EOG, GDX, AMLP

The Market

So we got the rally, keeping the chopfest alive. And it was another day where the market was up and so was total volume. I will continue to monitor since I find this change fascinating.

Away from that, there wasn't much impressive over today's market. Breadth was quite poor. To give you an example, yesterday saw the S&P lose 18 points and net breadth was -1,350. Today we gained nearly all of that back with the S&P up nearly 14 points. Net breadth was +530. That's very disappointing.

Then there are the number of stocks making new highs. Once again we'll focus on Nasdaq, since that's where we are closest to a new high in the index. With 90 stocks making new highs, we're not exactly impressed. Recall that a week ago there were just over 200 new highs, and in early September there were 278.

The Russell obviously underperformed as well. Was this all related to the end of the quarter? It is possible that as folks want to play the upside, they go into the same names over and over, quite similar to 2015.

Having turned positive on the utilities two weeks ago, I encouraged folks to take some profits when the Utilities Select Sector Fund (XLU) hit resistance last week (red line). Today's reversal was really ugly. Again, was it end-of-quarter stuff or was the selling real? My guess is somewhere around $49-$49.50 we'll see the XLU rally again. I would prefer not to see it slide all the way to the black line. But understand that if the utes weaken considerably, it is not bullish for stocks over time.

What was positive was the transports were on the move again, to the upside. I am still waiting quite patiently for the iShares Transportation Average ETF (IYT) to have a breakout over this $144 to $145 area. It has teased me three times already and turned me back each time.

There was an outside day in the S&P and the DJIA. An outside day is when the market trades both lower than and higher than the previous day. Some will fuss over this; I have seen it matter and seen it not matter. If we get follow-through to the upside, then it matters.

As for sentiment, I do not think it's complacent but I still see no signs of panic.

I continue to believe we're mired in a chopfest for now.

New Ideas

I was asked to follow up on PayPal (PYPL:Nasdaq), a stock we discussed here about two weeks ago. At the time, it was around $40 on its way to $41. I noted that I preferred to see it have a rest prior to a breakout. If it can clear $41, it should do well with a target in the $44 to $45 area. One word of caution: These high bases have tended not to work of late, so if it doesn't seem to be working, I wouldn't hang around.

Today's Indicator

The McClellan Summation Index held its own in the recent down move, but it has made no progress on the upside. It needs decent breadth to do that and as explained above, decent breadth was not part of the action today.


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.

About a month or so ago, I liked the chart of EOG Resources (EOG:NYSE). When it popped up to $95, I noted that it had tagged an upside target and therefore some profits should be taken. Now the question is can it be bought back? I think it's too early. I think it is oversold and has some support here -- enough to have a rally. But I would feel more comfortable having another look at the stock somewhere near $64, after it fills that gap below. So a short-term bounce but then I think another push down.

I have been in the camp that says VanEck Vectors Gold Miners ETF (GDX), an ETF to be long gold stocks, is in a chopfest right now. Quite frankly, while it looks like a top is forming, I am uncertain if it will break down. If it breaks $25, I think it goes to $22-$23 pretty quickly. In fact, I think I would like to see a break so we can flush out weak holders.

Alerian MLP ETF (AMLP) is an ETF to be long MLPs, and all it has done for the last several months is go sideways. The good news is that it hasn't followed interest rates (i.e., did not sell off with the bonds); the bad news is the chart looks like a top. Considering I think the utilities need a correction, I'll say that for now the range continues on the AMLP chart, but a break of $12 and $11.25 is next. Then a move up and over $12.75 and $13.50 comes. Call me skeptical that it can break out to the upside.


Helene Meisler
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Chart of I:DJI
DOW 18,270.38 +42.08 0.23%
S&P 500 2,162.20 +2.27 0.11%
NASDAQ 5,309.9980 +4.2860 0.08%