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Top Stocks With Helene Meisler

Health Care Vote: Bad Medicine for Market?

By Helene Meisler | 2017-03-22 18:32:15.0
Stocks in Focus: IWM, WFM, CMG, OMER

The Market

There is a consensus that the vote scheduled for Thursday in the House of Representatives on the new health care bill will make or break the market. Quite frankly, I am at a loss to understand why.

I have no idea if it will pass. At this point, the pundits say there are not enough votes. Some have likened it to the TARP vote in October 2008, which failed on the first go-round and stocks cratered, and so it was passed on the second go-round.

I say let's see what the statistics say. They say today was a standard rebound. Crummy in some ways, not surprising elsewhere. For example, the financials simply rebounded from the lows but went nowhere, while Nasdaq led the way with its handful of big-cap technology stocks. Yet Nasdaq saw another increase in the number of stocks making new lows.

I think we are caught between a rock and a hard place in the market. Several areas like the transports and financials and even the small-caps have come down to areas that say they should bounce. So far, the bounce has been lethargic. To me, the correction hasn't caused enough of a shakeout to be considered a cleanout.

Maybe if they can get enough votes to pass the health care law, we'll get a better rally than we saw today. But I still think we're looking at a rally and another push down.

The volume indicator (shown below) is at 48%. When this indicator gets into the low 40s, I consider it intermediate-term oversold. If the market can come back down, say, next week, we could get this indicator down to the low 40s at some point in the next few weeks. Of course, if that happens, the VIX will get jumpy and all this talk of "buy the dip" will evaporate. It always does, so why should we expect it would be different this time?

New Ideas

The Russell 2000 ETF (IWM) did in fact break and in my view it completed the head- and-shoulders top. But it should now bounce off that previous low/support area, so a rally toward $136-ish would be a good place to sell it again.

Today's Indicator

The volume indicator is discussed above.

Q&A

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 TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.

I feel as though I say the same thing every time about Whole Foods (WFM:NYSE). It is a triangle and is trapped between support and resistance. What would change my mind? A rally toward resistance followed by a pullback that was shallow, but so far every pullback comes all the way back to support, which tells us folks aren't chomping at the bit to buy it. So it's still a $28.50 to $31.50 trading range.

I thought Chipotle Mexican Grill (CMG:NYSE) was poised to break out when we last checked in on it, since I believed a move up and over resistance would be terrific for it. But instead of breaking out it collapsed right back to support. So now I think a rally to $430-$435 is the best it can do. The good news is that there is a series of higher lows, so if you're long, the stop is very obvious (under that uptrend line).

I can't say this pattern will work; I would have been much more confident had this pattern appeared three or four months ago, but Omeros (OMER:Nasdaq) is working on a terrific head-and-shoulders bottom. If it spins out of control and goes under $10, it won't be nearly so intriguing, and clearly under $9 there would be far too many issues to like it anymore. However, if it can hold over $10.50 and get going, and of course if it can eventually move over the neckline (very far away at $14-ish), this has potential. I'd say it is a chart to watch in the weeks ahead.

Regards,

Helene Meisler
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