In This Headline-Driven Market, Can We Get Back to Short-Term Overbought?

Analysts at Stock Exchange

The Market

This has been and remains a headline-driven market.

It has also been a market that has embraced group rotation, which is why we never managed to get one of those wipe-out days with 90% of the volume on the downside. And the group that we’ve seen rotated into this week has been the Russell/493.

I believe that is because of all those puts that were bought in the Russell over the first few weeks of March. I expect that to finish unwinding by the end of this week. That is when my work says we’ll be back to a short-term overbought condition.

We can see it in the fact that the Transports have been green for six of the last eight trading days. Yes, I know, oil is great and wonderful, but the Transports are not buying it. My pick there for a trade has been United Parcel Service (UPS) . The 99-100 area would fill the first gap.

But we can see it because the S&P has been red for four of the last five days, and Nasdaq has been red for six of the last nine days. That’s why we see the ratio of the S&P to Nasdaq rising again. If it can’t get over those late February highs, I would take that as a sign that the Mag 7 are back in vogue. Alternately if it breaks under that blue line, that would be a sign that this play is over.

That doesn’t mean I think Nasdaq won’t rally again. I do. In fact, I think it rallies again before the week is out. But we’re still talking about short-term oversold rallies right now.

I do want to end by alerting you that the NYSE Hi-Lo Indicator has not budged and remains at .34, but Nasdaq’s ticked one point lower and is now at .20. Perhaps it will fall into oversold territory tomorrow.

New Ideas

Last Thursday, I said I thought American Express (AXP) could rally, and it has had exactly one up day since! But I still think it has a chance at a trade toward that 310-315 area.

Today’s Indicator

The McClellan Summation Index is still heading down. It needs a net differential of +1600 advancers minus decliners on the NYSE to halt the decline.

Q&A/Reader’s Feedback

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Fortinet (FTNT) is in what we call a rectangle, meaning that for approximately 3-4 months, the stock is in a very well-defined trading range. That means somewhere in the mid to upper 70s, you want to buy it with a stop under 74.

Stride (LRN) is my kind of chart because it gapped up and then consolidated the gap. However, unless it can get through 90 like it means it, I don’t want to anticipate the breakout because many of the stocks that held up (ex energy) in the recent decline have not rallied well when given the chance. Perhaps that will change.

Palantir (PLTR) has a lot of resistance in the 160-170 area, and that little bottom it formed in February measured to 165. You do not want to see it slip back under 148.

I want to hate the Tesla (TSLA) chart, but TSLA is like the bad guy in the monster movies who just keeps rising from the dead. If it can get back over 400, then this will look like a false breakdown.

At 132, I thought Walmart (WMT) had gone far enough. It has since sold off to light support. It’s not my type of chart, but if you want to buy it, then use a stop under that 117 area. Maybe if it maps out as I drew in blue, I would like it again.

Boyd (BYDDY) is forming a base. Earnings are out later this week, so be careful. However, this is a base in the making and a pullback into that 12-12.50 area would be a positive and buyable.