If Stocks Sell Off on Fed News, Will Sentiment Finally Hit Fear?

Fed Chair Powell Speaks At Chicago Economic Club Event

The Market

Another day with little or no conviction in the market. I mean, volume on the NYSE fell off to levels not seen since mid-January. Nasdaq had a touch better volume, but mostly it was lethargic.

Breadth was better than yesterday, but so many stocks closed at the low of the day. Heck, the Bank Index has closed on the low for four straight days. Is this the best we can do when oversold?

Let me say once again that the intermediate-term indicators are not oversold. However, I do think if we see the market sell off tomorrow on the Fed news (the statistics are such that we are often down on Fed Days, not always, but often), we might get some fear.

The put/call ratio was 1.05 Monday, and today was 1.01 (preliminary reading for today). Those are the first consecutive readings over 1.0 during this pullback. I have noted for weeks now the buildup in puts. I noted on the weekend the build-up in puts for the Russell 2000.

The ten-day moving average of the put/call ratio is now at .97. This is the highest reading since we had some panic back in April of last year when it surged to 1.07. To me, this says gloom, not fear.

New Ideas

I was asked why I thought (GLD) wasn’t responding well since the war began. I don’t have an answer for the ‘why,’ but I can tell you that GLD has made a lower low. And now it finds itself back at the uptrend line that has been in place since last summer. If that breaks, I would feel compelled to sell some because even though I think it would at first find support around 440, the fact that it broke from a lower high would be a negative for me.

Today’s Indicator

The McClellan Summation Index is still heading down. It would need a net differential of +1600 advancers minus decliners on the NYSE to halt the decline. I would point out that it is rare to see the Summation Index get this close to the zero line and not cross under it.

Q&A/Reader’s Feedback

I have been concerned about JP Morgan (JPM) for weeks now. If it breaks under 290, it completes a top. If it can hold on, I still think resistance is in that 300-ish area, but at least it would put some distance between the breakdown level and the price.

Eli Lilly (LLY) broke down from a top. There is a measured target around 850 with some very light support around 900.

United Parcel Service (UPS) has some support in the mid 90s, but the concern should now center on that resistance at 102. The longer that lives overhead, the more it looms. I would expect a rally from the mid 90s.