It's Hard to Get Capitulation When You've Got an Either/Or Market
Here's why it can be problematic when nothing seems to move together. Are we oversold yet and if not, when? Plus, looks at gold, Amazon and more.
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The Market
The Either/Or Market remains undefeated.
I said Monday I thought the market would rally Tuesday. Well the 493 rallied, but the big-cap indexes were terrible. And that is the dilemma of the market right now.
We don’t have any sort of capitulation because nothing seems to go down (or up) together. We get selling in tech so the others get a chance to hold and hang out and rally. We get tech holding and rallying so then everything else goes droopy.
I’d love to tell you we have a great oversold condition setting up. I just don’t see it. Using the math behind my Overbought/Oversold Oscillator, we are not close to oversold. If I use the "what-if" for the McClellan Summation Index, I don’t see it either. Oh the Summation Index is heading down, it even scooted under the zero line Tuesday, but what will it take to get it to stop going down? A net positive of +1,900 advancers minus decliners. My experience is +4,000 makes it oversold.
I can even check in on the Nasdaq Momentum Indicator, where I plug in lower prices over the next week (in this case I walk the Nasdaq down 1,000 points) and I look for the point in time when the indicator stops going down or preferably goes up. We get it to stop going down on the 25th (next Tuesday) and it turns up two days later (a week from Friday). In other words, while this indicator is not supposed to find the exact day, it is still several days away from being oversold.
Yet instinctively I know that when the Nasdaq has been red for seven of the last nine trading days we can’t say it isn’t oversold, can we?
The HiLo Indicator only ticked marginally lower Tuesday. It now sits at 0.30. This gets oversold under 0.20.
Maybe sentiment can tell us something. The 10-day moving average of the put/call ratio is still rising. Monday’s equity put/call ratio was 0.76 (bullish). The Fear & Greed Index, which two weeks ago folks were trying to convince me showed too much bearishness (I disagreed, called it an outlier) is definitely into "Fear" now.
I suspect the Investors Intelligence survey, which we will see Wednesday, will show a marked change. Recall that three or four weeks ago the Bull/Bear ratio got to 4.2, which I said meant folks had gotten giddy. Will it show fear? I doubt it, I think it will show folks are no longer giddy, maybe not even complacent.
The AAII will surely show more bears but it did that last week and the market has been red every day since.
At least the VIX is on its way to jumpy. Maybe everyone is just waiting on Nvidia (NVDA) to move the market. It just doesn’t feel complete to me.
New Ideas
Western Digital (WDC) ought to come down and tag that uptrend line before this is over. A break of $152 should do it.
I was asked where Visa (V) measures to and I get an initial target around $315 (it got to $318 Tuesday).
Today’s Indicator
The McClellan Summation Index is discussed above.
Q&A/Reader’s Feedback
Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.
Amazon (AMZN) fulfilled its measured target when it gapped up on earnings. It would have been natural to have it come back and test the breakout and/or fill the gap. But it has gone beyond filling the gap, much the same as Meta (META) and Oracle (ORCL) have. My guess is it is oversold and rallies but for now I think I have to say it is trapped between $210 and $240. Any move out of that range and I’d have another look. I think a pop to $235-ish sees it come back down.
I have said I am unsure if SPDR Gold Shares (GLD) will go into an extended sideways action as it did off the spring high or if it was "done." For now I am leaning on some more sideways action. Let’s call it a range of $360 to $400-ish for now. I would turn bearish if it breaks $360.
I am interested in Freeport-McMoRan (FCX) because it did not make a lower low on this last turn lower. If it can cross that downtrend line it would be a major improvement.
