If the Banks Break Support, Will the Move Be Violent?

NYSE Wall Street Entance

The Market

Based on what I see and hear anecdotally, it seems folks were not quite prepared for the 493 to pull back quite as much as they have. I sense a huge shift in sentiment in the last 24 hours.

By that I mean I think folks were fine with a pullback in the 493, but they were not fine with the groups getting seriously whacked, which is what occurred. And sure, the growth stocks are up and were solidly green today, it seems that’s not where the pain was. Not today.

Statistically, breadth was terrible. It’s been a long time since we have had the S&P down not quite 40 points and net breadth -1335. But wait, there’s more. Despite all the growthy names rallying over on Nasdaq, net breadth there was -2040.

Downside volume on the NYSE was only around 70% so there wasn’t panic as there was a few days ago. Today felt more like a ‘sell the others’ day. Net volume on Nasdaq was mildly positive, nothing great. But Nasdaq was red today.

So I’m not sure much changed today. I think software is a bit stretched and overbought short term. We discussed a few days ago that a push through 83 should take it to that 86-88 area, and it is basically here. The tiny little bottom measures to 90. I can easily see IGV backing off tomorrow.

One observation I have that I want to hammer home. Sure, I think this is an Either/Or Market, and I’m just trying to find the groups and charts that can move. But it’s the violence of the moves that I find concerning. It’s as if every move is more about who is caught offside rather than any thoughtful buying and selling.

Look at the violence in the metals. Look at the violence in the staples. The violence in the Transports. The violence in materials, etc. It’s as if there is a stampede to get in and one to get out. That is just not terribly healthy for the market.

There is one group that has not had much violence: the banks. They have had selling as I have noted, but for example, JP Morgan (JPM) has declined about 13 percent, but it has done it gradually over the course of two months.

Right now, the support at 290 (and then some at 280 as well) is obvious. I have thought the banks will eventually get sold. So I wonder, if they do, will it continue gradually, or would it be violent? It’s about the only place we haven’t had violence

New Ideas

I was asked about Marvell (MRVL) yesterday, and let me say that I was wrong not to check before I commented that earnings were due the next day. Typically, I will refrain from commenting prior to earnings because it is a coin toss in my view. It’s gambling.

But there were many questions about it, and I see the stock is trading around 85 after hours. I had said if it crosses that downtrend line, I would consider it a positive. I don’t like gambling, and I don’t like chasing, so this is just to inform you that it appears it will cross the line, which is a positive.

I want to do another follow-up on Dutch Bros (BROS) because Starbucks (SBUX) , a name I recommended some time back, continues to act well, yet this is the stock most care about. It should try and make it to that upper line. That spike high at 60 will be problematic.

Today’s Indicator

The ISE Call/Put Ratio’s 21-day moving average continues to fall. It is now at 1.22, closing in on the 1.17 low that we saw almost a year ago in April. So this indicator is still showing folks are not bullish, which is good for sentiment.

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You are going to see there are several software/tech/growth names being asked about. While I have been advocating a rally in them, I still think there is a vulnerability to the market, so I am not interested in chasing.

If (MAGS) , an ETF to be long the big tech stocks, can get back up and over 62-ish, then the chart can improve. If it can’t get back over it, then I would expect it would eventually work its way down to the 58-ish area.

DoorDash (DASH) ran smack into resistance, but like so many of these growth/software stocks it is doing what it ought to. A pullback that holds over 170 should then make another try upward. I think it is in that back-and-forth period. It’s too soon to tell if it will break down again and too soon to plow through resistance.

For now, I will call the pattern on Robinhood (HOOD) a way station, but I will respect a break over 85 or under 70. A breakout to the upside measures to 100, and a break to the downside measures to 50-ish.

Service Now (NOW) will fill that gap around 125, maybe 130. I am not a chaser, so I cannot like it here. In fact, if you are trading it, the stock is up 20% already, so I’d advocate for selling a little in this 125 area. There are just layers of resistance all the way up. This was one of the first software stocks to hold, though. I think it is too soon to look for a big rollover.