Should We Be Concerned?

The Market

If yesterday was the index movers down and the others up, then today was the index movers up and everything else down. The S&P gained 55 while net breadth was -300.

Should we be concerned? Heck, it’s what has been going on for months, so if you weren’t concerned months ago, why are you concerned now?

If you want to be concerned, then be concerned that the number of stocks making new lows on the Nasdaq are starting to climb again, coming in at over 160 today. In fact there were—once again—more new lows than highs on Nasdaq.

If you want to be concerned—and this is truly concerning—then be concerned about the ten-day moving average of the put/call ratio. This moving average now stands at .78 which is the lowest reading since it was .74 in November of 2021.

Am I concerned? I’m always concerned! But I get more concerned when the intermediate-term indicators are overbought (right now only the short term ones are) and rolling over. We don’t have any of them overbought yet, although I can see some of them getting there in early February, about a week from now.

Down below, you will see the McClellan Summation Index is still heading up. It would take a net differential of -1900 advancers minus decliners on the NYSE to halt the rise. We entered this week with that number at -2600 so there has been some shaved off. The chart is shown below.

For now, I think we should see some chop to the downside to work off that short-term overbought reading and then rally again, but I will say that the put/call ratio moving average is on my watch list now. Let’s see if the FOMC meeting tomorrow shakes things up.

New Ideas

We’ll do two follow-ups today.

Zscaler ZS which I warmed up to last week, had a nice day today. I will get concerned if it can’t at least make it to that 210 area.

I cannot recall who asked me about C3ai AI a few weeks ago, but we discussed the chart coming down to test the line, and it has done so. Now, I would use a stop under 30. I would expect it to be slow going on the upside, as it will need to eat through a lot of resistance.

Today’s Indicator

The McClellan Summation Index is still heading up.

Q&A/Reader’s Feedback

We had a great trade in Block, SQ. It reached the measured target and even completed the 90/100 rule. Thus far it hasn’t done anything wrong in its 20% correction over the last two months. As long as it doesn’t break that uptrend line it gets the benefit of the doubt. I would call it a hold. If you want to buy it, the stop is a break of that uptrend line.

Broadcom AVGO has quite a chart. Yesterday’s gap down left an island overhead (bearish). It had also met the measured target when it got to 240. Now either I would buy the gap down below around 180 or sell the gap above around 240.

Medtronic MDT is way over-extended in the near term. I would love to see a pullback toward 88-90 because if we look at the longer term (3 yrs) chart that is one giant base. It ought to (longer term) measure into the 105-110 area.

Lumentum LITE had a terrific base that it broke out of last year and it not only achieved its measured target but it also completed the 90/100 rule (90% of the stocks that make it to 90 will make it to 100). Monday’s whack filled the gap from November but I’d be inclined to sell rallies. Resistance starts at 83-ish and there is the gap fill around 95.

My call on Adobe ADBE late last year was good until it was terrible. Meaning we caught the rally to 540 but I expected a gap fill at 560 and it came a few bucks short of it before it collapsed. On a longer term basis there is so much resistance overhead for the stock to contend with but on a short term basis that possible head and shoulders bottom draw me in. If it can cross that neckline it ought to be able to run toward 480 where resistance starts to weigh on it.