Another Day, More Group Rotation. (Pharma Got the Love.)

The Market

It was another day of group rotation. Today it was the drugs that got the love, to which I say: ‘About time!’.

It is possible that the action today was mostly end-of-the-quarter-related, but the day's most interesting facet was not that the drugs finally rallied (!!). It was that the financials took it on the chin.

Last week I highlighted some of the asset managers like  (KKR)  and  (ARCC) . They had no bounce off those declines, and today they dropped more. Some of the drops were worse than others. KKR is now at support (blue line) but the top it broke from measures to 120. 

The good news is last week no one cared about the moves and this week there is a lot of chatter. I don’t have a strong view as to whether stocks like KKR hold here but it ought to be on your radar.

Also, the indicators did not change again today. Breadth was flat as it has been so often over the past six weeks. I’m not sure I recall another time that breadth was so flat so often. In the past 10 trading days we have had exactly two quadruple-digit moves (meaning net breadth was plus or minus 1,000 issues) and one was up and one was down. Yet we had five days where net breadth was plus or minus 200. That’s a lot of flat.

For now I think we’ll just stick with trying to find stocks.

New Ideas

You might recall that I highlighted Paychex  (PAYX)  as a negative chart in August as it was breaking down. Today it tagged 120 on poor earnings, which was the measured target.

A few weeks ago I was asked about Verizon  (VZ)  and I was uninspired. But the stock spent September trying to hold and curl under, so as long as it holds this 43 area, I think it will be okay.

I have been waiting for Travelers  (TRV)  to break out and all it has done is cross a resistance line and sit there. I’m still waiting, not so patiently. If it trades back under 270 I am wrong. If it rallies I will lift that to 275.

That brings me to Progressive  (PGR) , which has done absolutely nothing since I recommended it in September. Yet I cannot stop thinking it is trying to base. I would feel better if it would get over 250.

Finally I think Baidu  (BIDU)  is due for a correction. It is just way overextended.

Today’s Indicator

The McClellan Summation Index is still heading down.

Q&A/Reader’s Feedback

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Teck Resources  (TECK)  is at resistance — but it is also basing. A pullback into that 40-42 area would be helpful, or even just some sideways. I’d like to give it some time to move that action on the left side of the chart (last year’s fourth quarter) off the chart, but overall I lean positive on it. Just the timing might take some time.

The best thing you can say about the chart of Freeport McMoRan  (FCX)  is that it is bouncing off that line (support). I imagine it will eventually fill that gap just over 44. For the time being we may be looking at a trading range (35-45/46).

Southern Copper  (SCCO)  has an unfulfilled next target around 130. It is a bit overextended, so it could use a rest or a pullback. A pullback to the line (around 108) might be too much to ask but maybe you get something in the 113-115 area.

Zeta Global  (ZETA)  is one of those small-cap stocks that tend to trade so gappy. As long as it doesn’t break 18ish, it gets the benefit of the doubt in the near term. It hasn’t done anything wrong; it just doesn’t have a pattern that feels like a good setup to me yet.

Boeing  (BA)  looks downright awful, doesn’t it? Yet I am unsure whether it holds 210 or breaks it and takes one more dive to 200. I suppose I would dip a toe in here but leave some room in case it takes that last tumble. That little top it from which it broke down measures to 200-ish.