Looking for a Break in the Pattern
The last four Fridays have been red days. Will it continue? Also, options traders are still a little too bullish.
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The Market
Are you enjoying the chop? I will be honest with you: I am not enjoying it.
And yes, I know the indexes were lower today, but it was mostly a giant chop fest once you stepped away from the stocks that have been up so much, having their big pullbacks.
For example, remember how folks were upset with the breadth of the market on Wednesday because the indexes were up? Net breadth on the NYSE was -385 on Wednesday. Thursday, it was -375. Up volume on the NYSE on Wednesday was 48%, while today it was 47%. So, if Wednesday was bad, then was today good? It’s all chop!
The McClellan Summation Index stopped going up today. But was breadth bad enough to turn it down? Nope. Chop.
The new highs can’t seem to expand. That’s bearish. The new lows, though, can’t seem to expand either. Isn’t that bullish? Chop.
The AAII bears pulled back a bit from their extreme bearishness this week, and they now reside at 40%. Some would say that’s bullish. But the NAAIM folks upped their exposure to 91.4, so isn’t that bearish? It’s all chop!
The SOX couldn’t break down and it rallied. The Banks couldn’t break out and they sold off. I am waiting patiently for this period of chop to be done with. My patience is wearing thin.
I love to see if patterns break in the market. For the last four weeks, Fridays have been red, so tomorrow is a good test to see if that pattern breaks.
New Ideas
I am going to do some follow ups today.
It has been quite some time since I followed up on Johnson and Johnson JNJ since I recommended it a few months ago. Today, it crossed a downtrend line. But it also ran into some resistance. It’s been a great run, and my measured target is up near those old highs, but I would say another up day, and this is going to be quite vulnerable to a bout of profit-taking. I think 154 is good support, so I don’t want to see it break that.
Pepsi PEP had quite a day. It has filled that gap from early February and has some resistance at the downtrend line. I would really like to see it cross that downtrend line on this push upward. But know that resistance gets quite heavy at 155-ish, and it’s going to take an awful lot to eat through that.
Today’s Indicator
The ten-day moving average of the put/call ratio did not make a lower low on this recent run-up in the S&P. It’s still too low for my taste.
Q&A/Reader’s Feedback
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Vertiv VRT looks toppy to me. It’s got the island up overhead at 150 and the gap down under prior support. On a shorter-term basis that spike low around 100 should keep this push down contained on the first visit there. In other words, for a trade, it’s probably a buy near 100. On a more intermediate-term basis, there isn’t much to like until it proves it is tired of going down.
Vistra Energy VST is very thinly traded and has not been able to fill that gap it left overhead in January. It looks to be in no man’s land. Rally to 190 to fill that gap, and I’m a seller. Fall down near 140 to test that spike low, and I’m a buyer.
We have looked at Antero Resources AR before with the same black line. Longer term there is a measured target near 45. Was that move in January enough? Quite frankly, it looks vulnerable right now, but if it can go sideways to digest that move up to 41 for a while, I might like it again. Otherwise it’s another stock in a range.
It’s hard to get excited over Etsy ETSY with that recent gap down under the uptrend line. It’s got a ton of support down here, but that’s the best I can say. If you are looking for a basing retailer, have you thought about Dollar General DG? Yes, I know they are different types of retailers, but DG has a base it is working on.
Far too many got far too excited when Bristol Myers BMY got to 60 in January. It has acted terribly since. It still does. Hope is a terrible word in markets, but I am hopeful that this entire period from November turns out to be base building over the next few months because I have had a long-term target in the upper 60s that I continue to hope it gets to. Under 52 and I would have to reassess my view.
