Friday's Rally Was Mega-Cap Focused, but Is This Restaurant Chain Turning Bullish?
It was an oversold rally in the mega-cap tech names, while the rest of the market sat it out.
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The Market
Friday’s rally did nothing to change the indicators. It did nothing to change the charts. And it sort of did nothing to change the sentiment.
Let’s start with the market’s internals. For a day, the S&P tacked on 47 points, breadth was pretty mediocre. Let’s not call it bearish because breadth continues to make new highs overall. The McClellan Summation Index continues to rise, albeit rather lethargically. It will require a net differential of -400 advancers minus decliners on the NYSE to halt the rise. As I said on Thursday evening, it’s not much of a cushion.
And while the Russell 2000 ended the day in the red (barely), the Small Cap 600 did not. And the Mid-Caps made a new high. However, what you might have noticed is what I have been harping on for more than a week now: tech (not all tech) enjoyed an oversold rally while the overbought 493 pretty much sat it out. We can see that in the fact that volume on the upside was a mere 58%.
Of course, we see it even more acutely on Nasdaq, where the rally was very mega cap-centric, with only 52% of the volume on that exchange on the upside.
Yet the put/call ratio remained relatively high for an up day (.90), and over on the ISEE, the call/put ratio nearly fell out of the triple-digit range; it was 1.06. That makes it the lowest reading since April 30th when it was just under 1.0 at .98.
So, sentiment did not change much in that respect, but my guess is the rally in stocks like Alphabet and Meta made some folks feel better. Software continues to be a drag, but as I have expressed, we are seeing the early stages of the software names differentiating themselves. I believe that process is a long one, but at least there is some sign it has begun.
The biggest change to me, and this is strictly anecdotal, is that the private credit market is getting much more attention in the last few days. So it might not be ‘just tech/software’ that has folks focusing on puts over calls.
New Ideas
Someone asked about Cracker Barrel (CBRL) a week or so ago, so I have kept my eye on it because, at the time, the stock seemed iffy. But Friday, it started peeking out over that downtrend line. A stop would be quite far away (under 30), but if the chart can have some follow-through to the upside, I’d think this is a change, a positive for the chart.
Today’s Indicator
The new highs have fallen off quite a bit, but Nasdaq’s new highs have also tailed off. I would still love to see another push down to see if we can get fewer new lows again.
Q&A/Reader’s Feedback
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(XME) is one of those charts that did not move on Friday, but it did bounce off support earlier in the week, so as long as it holds over 110, these last four weeks look like just a correction. Crossing over 120 would be a plus.
A few weeks ago, I said I thought if Uber (UBER) could hold that 78-80 area, I thought it was okay. It promptly collapsed to prove me wrong; it was not okay. It is, however, short-term oversold enough to rally some more. Ideally, you want to see it map out with a pattern somewhat akin to what I have drawn in blue, but on a more intermediate-term basis, that 80 level is serious resistance.
Moderna (MRNA) is still a good chart (another stock that did nothing on Friday), longer term, but in the near term, that spike high from January is going to be resistance. I just don’t see much to do right now except that you don’t want to see it break that uptrend line.
Spotify (SPOT) had a great pop on earnings, gave almost all of it back, and is now right back at/near resistance. If it can get through 500, there is still a lot of resistance in that 520-540 area. For the time being, I’d say it’s one of those charts that is trying to bottom, but there is a lot to chew through on the upside.
Broadcom (AVGO) is yet another stock that did nothing on Friday, which is surprising because it was a mega/big cap rally. It recently filled the gap from September (I had been looking for that for a while). So, I will say the stock is okay as long as it doesn’t break that low. Get it up and over 350, and that gap overhead around 395 should draw it in.
One thing to watch very closely, especially as NVDA reports earnings later this week, is that it hasn’t made a higher high since December, which is why if it comes down into that 300 area this time, I would not like it.
