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Top Stocks With Helene Meisler

Market Catches a Lifeline

By Helene Meisler | 07/26/16 - 07:10 PM EDT
Stocks in Focus: CHK, COST, PLOW, TIF, BIDU

The Market

Each time the market is on the verge of selling off, it has been saved. At least in the last two weeks it has been like this. And each time it has been on the verge of cracking through that 2175 area, it has retreated. Today the S&P churned, but breadth was terrific.

The terrific breadth has not yet turned the McClellan Summation Index back up. It still needs another day of breadth like today to do that. Therefore, tomorrow will be key on that score -- which is the day the market hears from the Federal Open Market Committee (FOMC).

It will also be key because the small-caps (Russell 2000) finally outperformed the S&P, which took the ratio to the prior low. Therefore, if the small-caps outperform again tomorrow (or later this week), it would negate a potential negative divergence.

The other thing that surprised me quite a bit is for the past two weeks (or is it three now?) the small-caps have been underperforming the large-caps. For two weeks, the market indexes have been going sideways. Yet during these past two weeks, folks have been buying more calls than puts daily. Today, when small-caps finally moved, the equity put/call ratio spiked to the highest reading since the day after Brexit.

Now, 76% isn’t super-high but it surely leans there (over 80% I would consider high). It has caused the 10-day moving average of the equity put/call ratio to turn up, along with the total put/call ratio’s 10-day moving average.

As you know, I have been waiting and watching the 30-day moving average of the ETF put/call ratio, looking for it to move under 120%. That has not yet happened. It is still at 121%. A reading under 150% tomorrow should push it under 120% for the first time since last summer.

Finally, the SOX (the semiconductor index) is at levels not seen since October 2000. That’s pretty high. The ratio of the SOX to the Nasdaq Composite is over 0.146, the highest since spring of 2011. With all the takeover activity there, I can only sit by and marvel.

Does anyone think the Fed might actually hike rates on Wednesday? Or maybe hint they might?

New Ideas

A few weeks ago, when I first warmed up to the retailers, I looked at Tiffany (TIF:NYSE). At the time, I was unimpressed with it and noted I preferred Target (TGT:NYSE) and Nordstrom (JWN:NYSE) instead. Everyone loves the retailers now. These two have gone a bit too far for my taste, however, as I am not good at chasing. TIF is the same price it was when I checked in on it a few weeks ago. I think a move over $63 to $64 could get this one going, possibly back toward the $68 to $70 area.

A few weeks ago, I was bearish on Baidu (BIDU:Nasdaq) and was a seller near $162 for a retest of $155. It did a retest, then this week it did another. Now the chart is shaping up for the better. It’s got layers and layers of resistance overhead, but through $165 it should try for those spike-highs just over $170.

Today’s Indicator

The McClellan Summation Index is discussed in full 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.

Chesapeake Energy (CHK:NYSE) has been left for dead so often that when it slipped under $2.50 earlier this year, I threw my hand-drawn chart in the trash, figuring it wasn’t long for this world. Look how wrong I was. It has now formed a small -- very small -- base, measuring into the spring highs. There is resistance all the way up once it gets to $6, but that’s the measured target.

I was asked if Costco Wholesale (COST:Nasdaq) has a channel. I can only figure the question is about the small pattern up here, where I have drawn very thin lines. I will say this, on a short timeframe, a break under the lower line would be a near-term negative.

You might recall, a few months ago I looked at COST with a bullish eye. But when I look at it now, the only issue I have with the chart is it is back to the old high and there is a measured target in the $170 to $175 area, where the stock is now. So, in the near term, a break from the lower line will be negative and with it being near a target, I’d be inclined to take some profits off the table.

Douglas Dynamics (PLOW:NYSE) is a stock I have never heard of and it doesn’t trade very much, so note it’s a thinly traded stock and know what you’re getting into if you trade it. It has broken out of a big base and has a measured target near $29. If it dips back under $26, I’d probably get concerned.

Regards,

Helene Meisler
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