Microsoft and Meta Will Rally Thursday. But How the Others React Is Key.
These two stocks are expected to be up big. The question is how the rest of the market will react.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
The Market
For the last few days, I have been highlighting the volume over on Nasdaq. To review, I noted that while last week NYSE volume trickled down to its lowest levels in nearly two months, Nasdaq volume had soared thanks to all those penny stocks.
Today, the penny players took a holiday because Nasdaq total volume fell just under 10 billion shares for the first time in eight trading days. But you see, we’ve also seen net volume (up minus down volume) negative now for three straight days. That is the first time since late February we’ve gotten three straight days of negative volume for Nasdaq.
I didn’t think we were seeing that much selling, and it was probably just a matter of the penny stocks moving around, or some small-cap stocks with a lot of volume. The Nasdaq McClellan Summation Index using volume turned down. But it has turned down from a very high level, and not by much.
But to show you the impact of three negative days of volume, it will now take a net differential of +11 billion—yes that is billion with a b—shares to halt the decline in the Summation Index. If that sounds like a lot it is.
Those two peaks you see earlier this year came on March 3rd, when this indicator needed +12 billion shares to halt the slide. And on April 8th when it needed +15 billion shares.
Has there really been that much selling under the hood or is it just the math? I honestly don’t know. But this says, if it hasn’t been that distorted by all those penny stocks, that a lot of stocks are oversold short term. I’m a bit skeptical.
It is obvious that Microsoft and Meta will rally tomorrow and drag the indexes up with them. I would consider it quite bearish if they rally and breadth is negative because that would imply an incredibly narrow rally. It would also be quite negative if they do what so many stocks have done which is give up the early rally.
New Ideas
I have said that if GLD breaks 300 we’d be looking at a top and not a consolidation. It hovers right there now. I think it is getting quite oversold so even if it breaks 300 in the next day or so I would look for a rally first. If that rally fails under 310 I would look for GLD to break down on the next trip down. I’ve tried to draw in blue how it might play out.
Today’s Indicator
The Volume Indicator is still at 52% which means it’s still overbought.
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.
Charles River Labs CRL had a nice gap up last week but it still hasn’t cleared resistance. I consider it another bite into that overhead supply. I’d think a pullback into the 160-170 area should lead to another rally.
Dannaher DHR has resistance overhead but it has been working on a base since February so if it can go sideways between 200 and 210 for a while it ought to gather the energy to get over that 210 area.
The next few stocks are energy names and you will see a common pattern: lower highs since June. You will also notice there is a triangle pattern (higher lows and lower highs). My view is that as long as those lows hold we ought to see Devon Energy DVN cross the top of the range. If it breaks 32 then I’m wrong.
Occidental Petroleum OXY has the same pattern as DVN (above). You do not want it to break under 40. But notice it is trying to chew through all that resistance.
PBF Energy PBF is eating through resistance. I think it takes a while to do this. I would like to see it stay over 21.
Service Now NOW has done nothing since the April lift. Quite frankly I am surprised. My inclination is that as long as it stays over 950 it gets the benefit of the doubt but I really thought by now it would have filled that January gap and it hasn’t so I’d keep a tight leash on it.
TKO TKO should get oversold if/when it tags that line around 160. Otherwise the chart looks mostly sideways this year to me.
I’d be careful with Agilent A unless it can recapture that line and get back over 125.
