It's a New Month With New Money That Still Flows to the Recent Winners
Meanwhile, sentiment remains complacent.
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The Market
There will be those who think today’s rally was great and those who think it wasn’t.
For example, my old friend the Transports surged to a higher high while software continued its heavy trading.
Meta gave up quite a bit of its rally while Google keeps on going. Micron keeps surging while NVDA languishes. A stock picker’s market. How long has it been since we’ve had that?
Noteworthy to me is the Bank Index. I know I have talked about it for a few days now, noting that it has refused to break support. Today it rallied. The Utes traded poorly, as did bonds.
In terms of the indicators, there really was no change. Despite the move in the Russell breadth was a laggard. It did not put in a good enough showing to change the McClellan Summation Index; it is still trying to roll over.
The number of stocks making new highs lags, while the new lows picked up, but not enough to be more than they have been. Upside volume on the NYSE was 51% which is quite a poor showing for a day the S&P was up so much and closing almost at a new high. Nasdaq didn’t fare much better with up volume at 55%.
To me, today felt exactly as it should have: new month, new money, and it goes to the recent winners.
The one change is sentiment. Oh, don’t worry, it remains quite complacent, but the ISE call/put ratio came down to 1.29, which is the lowest reading since December 18th. It’s unusual to get a low reading on an up day.
I want to end with a word on software. I have called (IGV) , and many of the software stocks we’ve looked at tops. That’s because they are. If we flipped this chart upside down, you’d love it because it would look like a base.
There is a measured target around 86 on IGV, and there is a gap there. My guess is everyone can see it and knows it. Today was the fifth day down after that short-term rally, so we know it’s getting oversold.
Late this week, the Overbought/Oversold Oscillator for Nasdaq will get oversold again. That ought to mean a rally in these software stocks. If, however, you are looking for more than just a trade, then I would say stick to the stocks with bases (drugs, staples, transports, materials, etc.).
I suspect the software names will start to differentiate themselves, and some will start the process of base building, while others will see the selling continue.
New Ideas
I was asked to update my view on United Parcel Service (UPS) , which I have liked for months now (I believe since October, perhaps September, because that was when I warmed up to the Transports). A few weeks ago, I thought it needed to back off from resistance, and it has. It still has not crossed this downtrend line. My target, should it cross that line with some oomph, would be first that 117 area (spike high from a year ago) and then into the gap. I do not expect it to do so in one fell swoop. The stock has gone up in fits and starts and ought to continue that pattern.
IBM (IBM) is not a base, but it also hasn’t gone anywhere in three months, so if it can get over 320-ish, that is a breakout.
Today’s Indicator
The 30-day moving average of the advance/decline line should turn back down tomorrow.
Q&A/Reader’s Feedback
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I haven’t liked the chart of SoFi (SOFI) since I was asked about it in early January, and I don’t much like it now. Yet there is support in this 21-22 area, so I would not be surprised at a bounce from here. It might even bounce all the way up to 25. If I am wrong and it breaks 21, the measured target is 18.
When we looked at Cheniere Energy (LNG) a few weeks ago near 195, I liked it. It’s had a nice run, and I figure it should rally again after this pullback. But I think that 217-220 area is going to be some serious resistance if/when it gets up there.
When I was first asked to look at Venture Global (VG), and I saw the ticker, I thought, wow, Vonage is still around! The stock has minor support at 9, but the resistance at 11-12 is what I am eyeing, so as long as it stays over 9, it has a shot at getting to 11-12 yet the chart seems to have lost its momentum.
The top in Axon (AXON) that broke at 700 measured to 520, so I would have thought that would be the low. But all it did was rally and not fill that gap at 700, and now it has collapsed, blowing right through 520 and now through 480. Of course, the chart is getting short-term oversold, so should bounce, but that decline in the last week tells me to wait until a pattern shows up.
