If You're Disappointed by the Market Today, There's Some Good News
Backing off should ratchet bearishness up.
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The Market
If today was a disappointment to you, then that’s actually good news. This is exactly what I was talking about yesterday: backing off should ratchet bearishness up.
Of course, the emphasis is on "should" because today’s options ratios did not see one ounce of fear. The put/call ratio was .82.
The Overbought/Oversold Oscillator I use is overbought. That’s because breadth has been positive for seven of the last eight trading days (this indicator is based on breadth). Recall we discussed how many stocks made their lows on the FOMC Day.
This indicator is based on the 10-day moving average of breadth, so I like to look back and see what numbers we are dropping. When we are dropping a long string of red numbers, we’re oversold. A long string of positive numbers and we’re overbought. I just noted that we’ve had seven of the last ten days with positive breadth so there is a string of positive numbers to be dropped.
Each Monday, I show you the more intermediate-term oscillator, using the 30-day moving average of net breadth. It’s the same situation where I look for a long string of red numbers to be dropped. The chart is shown below.
So, let’s take a look at the long string of positive numbers to be dropped off both the 10- and 30-day moving average lines this week (it’s a weird week, with Thursday being a market holiday). But take a gander at what we’re looking at the week of January 21 (circled in green). Imagine if we get breadth negative for the next several days. It need not be every day but many of them, then we’d be looking at both the 10- and 30-day moving average lines being oversold at the same time. That is what tends to produce a good rally.
And if we fall back and breadth is negative I think folks will get bearish quickly this time. And that is how we can get that good set up. We have not been able to get such a set up since June of last year, so let’s see if 2025 can bring us something new.
New Ideas
Let’s go back to the chart of XME that I liked yesterday. It popped on the open but closed near the low of the day. Yet, look at all that support below. It is my belief that if we do come down this chart is not going to break down under the mid 50s but rather offer us a trade to the upside.
Today’s Indicator
The 30-day moving average of the advance/decline line is discussed in full above.
Q&A/Reader’s Feedback
QuidelOrtho QDEL is a pretty base. It’s run quite a bit (25%) in the last month, so as it reaches resistance I think it will be tough to get through. But if we can get a pullback this week/next week into that 43 to 45 area I would be a buyer with a stop under the uptrend line.
Carnival CCL has had a great run but it had good news a few weeks ago and it could not breach 27 which tells me there’s a lot of good news priced in now. It hasn’t broken the uptrend line yet but I’d lean toward profit taking in this stock.
C3.ai AI has a great ticker symbol. It also broke out of a big base in November and met its upside target. If it can go sideways for some time now then I would like it again but right here it is in the middle of nowhere and a break of 34 would look to me like a retest of that breakout is in order. Sideways between 34 and 44 would be the most bullish thing it can do now.
