Stocks Jumped the Gun
It's a trading market. Let's take a look at the sentiment and breadth measures before we dive into your questions.
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The Market
Yes, the market jumped the gun, but I want to point out that last Wednesday morning, we saw the Investor’s Intelligence bulls fall to 42%, the lowest reading since the fall of 2023. The bears jumped 13 to 32%.
Then, on Thursday, we saw the AAII bulls fall to 25% and the bears jump to 40%.
Finally, last week, we also saw the Consensus Inc. Bulls come down to 58%. That is nowhere near the low of 2023 (30%), but that is a big change from the 75% we saw in December.
Did the options ratios change? No, they did not. Does that still bother me? Sure it does. But the other indicators did move, and they moved a lot. If they fly back to bullishness (likely), I’ll start complaining again!
But we were set up for an intermediate-term oversold condition and a short-term oversold condition, and we got that along with poor sentiment.
Now, using my Oscillator, we are not short-term overbought yet. Could we use a down day? Yes, we could. And the ‘what if’ for the McClellan Summation Index is now at -4000 which is quite extreme. Remember this is how many advancers minus decliners on the NYSE we would need to turn the Summation Index from the current up to down. The Summation Index is shown below.
Breadth has been good, which is why the Summation Index is now heading upward and bonds finally found a friend or two! But it is the Utes that have been the extreme movers. The XLU is into resistance now but that is a major move for the Utes.
As for TLT, I’d love to see it form a small right shoulder (drawn in blue).
I would like to tell you I have a strong view on the day to day but I do not. I do think that we should let the oversold (intermediate term) condition play out and watch for a return to too bullish sentiment but until then I suspect dips get bought.
I still think, overall this is a trading market.
New Ideas
XME has had a nice run in my absence. The first target is around 62. I am inclined to buy dips for now (59-60).
Pulte PHM got right to that 120 target/resistance and backed off. I don’t have a strong view on it now (except if you played it take some profits) but I will watch it to see if it can settle down again and provide another trading opportunity.
McDonald’s MCD filled that gap (from August) while I was gone and should now try to get back over 285. It runs into resistance around 290.
Today’s Indicator
The McClellan Summation Index is discussed above.
Q&A/Reader’s Feedback
I believe that every time I have been asked about Microsoft MSFT in the last few months, I have been neutral on it. It continues to feel that way. However I am inclined to think if it dips back toward the 415 area it is buyable because the risk/reward would be good. A break of that area and you know that 385 comes into play (so you’re wrong).
Alphabet GOOGL has a measured target that has not yet been filled in the 220 area. I tend to shy away from stocks up at the top like this, especially heading into earnings but that’s what I see.
American Express AXP hasn’t done anything wrong but I cannot chase this stock up here. I would just use a trailing stop, under 290-ish.
I was quite keen on Oracle ORCL last summer when it was building a base. Now it has so many gaps up and down it’s hard to make heads or tails of it. I would sell the top gap fill if it occurs and buy the lower one if it occurs. One thing that would be very bearish is if it gaps down under 145 since that would leave the entire action since September as an island.
Qualcomm QCOM is trying to build a base. It has been down and out and in a range since August of last year so for now we play the range but the longer the range goes on, the more it looks like a basing chart, not one in a range.
