Stocks Are Oversold. In the Short-Term, That Is.
Several of my indicators are in agreement. The medium-term indicators, however, are not there yet.
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The Market
Here we are at the end of the week and Nasdaq has finally dipped a toe into short-term oversold territory. We see it in my own Overbought/Oversold Oscilaltor.
But we also see it in the calculation of what it will take to halt the decline in the Nasdaq McClellan Summation Index. For this indicator I use volume not breadth and right now Nasdaq needs net +11 billion shares (up minus down volume) to halt the slide. In the past this 10-12 billion range has meant short-term oversold.
Then there is the Nasdaq Momentum Indicator. You might recall we used this indicator for the Russell a few weeks ago when I said it had gotten overbought. What I do here is a plug in lower closes for Nasdaq for the next week or two, and I see when the indicator stops going down and turns up. That happens sometime between Tuesday and Thursday next week. As a reminder, this is not meant to find the exact day but rather the general time frame of when we should start looking for an oversold rally.
I would note that in terms of sentiment no one was talking about buying IGV today. No one was quoting the RSI as they were a few days ago. So that’s a plus. Statistically there is not much to hang our hat on though. The ISE equity call/put ratio was under 2.0 again which makes it three consecutive days. We last saw that in mid-November but we had to see it twice before it meant anything, because the moving average has to come down and it is not down enough yet.
The VIX, at least, is finally starting to push out of its range which means it ought to be on its way toward jumpy.
Let me finish this off by noting the intermediate-term indicators are not oversold, not even close to it, so I really am talking about a short-term bounce, likely next week. And I’d look for that bounce in software.
New Ideas
I have had a lot of questions about Alphabet (GOOGL) , so let me address the chart here. It tried to break down today, but couldn’t. I would say that it’s not a terrible spot to take some profits in it. If it turns down from here and finds it cannot get up and over 330 then I would say it’s starting to roll over.
Today’s Indicator
The ten-day moving average of the put/call ratio is starting to rise.
Q&A/Reader’s Feedback
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I don’t feel as though the basing that Motorola Solutions (MSI) has done is enough work to overcome all the resistance but I do think it gives a try to get into that 420-430 gap. If the stock pulled back to that uptrend line I would take another look at it. Up here it feels a bit late on a short-term basis.
The best thing I can say about United Health (UNH) is that it is filling the gap left from last August. If the market was intermediate-term oversold and sentiment (overall) was bearish I would think it’s worth a try down here but with sentiment still too high for me, I’d say let a pattern play out before bottom fishing.
I had been warming up to Indian stocks for a few months now but they have not warmed up to me. India Fund (IFN) still looks to me as if it is trying to bottom but is it going anywhere? AS long as that 13.50 area holds I think it’s trying to bottom but your patience may wear thin.
Cracker Barrel (CBRL) is tying to make a bottom but it is too soon to say how successful it will be. I would be inclined to wait for it to cross over that downtrend line and then buy on a pullback that retests it. Right now it feels precarious to guess.
Amplify Enhanced Dividend Income Fund (IDVO) hasn’t done anything wrong but it is quite stretched. As long as it doesn’t break that uptrend line I would call it a hold.
Applovin (APP) is into the top of its first support area. And so yes it ought to bounce next week. The top it broke down from measures to 325-ish. So at 360 it is in the middle of nowhere solid.
Blackstone (BX) is heading toward the April lows where I’d have to say there is support but for now I’d be a seller on a rally back into that 135-140 area.
Enphase (ENPH) has a lot of gaps, both up and down and there never seems to be follow through on those gaps. So if it falls back to that 42 area it’s buyable otherwise the measured target is around 57-ish.
