The Kind of Choppy Market Where Folks Even Sell on Up Days
We should get some relief from the chop soon. But will we rally or decline? Let's look at the indicators.
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The Market
The chop is now even coming at us on an intraday basis. We basically gapped up and then sat in a ten-point range the remainder of the day. But I would say the good news is that, prior to today, I did not see a lot of chatter about the chop. Today it was as if everyone discovered that the market hasn’t gone anywhere. They were all talking chop!
That usually means we should get a move out of the chop any day now. I can make the case for both sides though! So allow me.
For six of the last ten trading days, breadth has been negative (there’s your chop) which means the market is a tiny bit oversold. Another point would be that the McClellan Summation Index is still rising. Then if we were just looking at the S&P and searching for a pattern, we might even say there is a cup and handle developing. That’s my big positive list. I know it’s not much but that’s what I’ve got.
On the negative side, the intermediate-term oscillator got overbought last week and while it has backed off (thus allowing for a day or two of rallying), it’s still overbought. The chart is shown below.
Another reason is that Nasdaq volume is back, and that means all that speculation we wrung out in the last month has come roaring back. The put/call ratio spent most of the day in the low 70s and while it ended the day at .78 that too tells me the speculation is alive and kicking in the market.
Then there is the VIX, which once again starts to look like it is bottoming.
Finally, there is the fact that on an up day, the number of stocks making new lows has climbed. Recall last week, I said I wanted to see how this indicator acted on an up day. Now we have our answer: folks were selling.
The chop may very well continue, but it now bothers me that I have so much company. I just couldn’t pick a side we would break out from with any confidence.
New Ideas
We had a good trade in Coinbase COIN in January but the stock has come off that high around 300. But it is feeling tired of going down so I’d buy for another trade.
Just a reminder that Quidel Ortho QDEL has pulled back to the line that has held for a few months now and the chart has a base. That makes the risk/reward decent again.
Oh, final word on the banks. Last Thursday, I thought Citigroup should come down and tag that 73-ish area, so naturally, the stock rallies nicely. Now it comes right back down. If I say I still think it should come down and fill that gap, will it rally tomorrow?!
Today’s Indicator
The 30-day moving average of the advance/decline line is discussed above.
Q&A/Reader’s Feedback
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Cheniere Energy LNG is a stock in an uptrend so as long as it doesn’t break 210 (the uptrend line) you buy dips near the trend line with a stop under it.
Robinhood HOOD is over-extended, but that’s the worst thing I can say about it. It would have to make a lower high and a lower low to do anything wrong.
I have liked Boeing BA for a few months now as a bottom fish in a stock everyone hated. I think it should struggle up here at resistance but ultimately ought to break out over 190. The support is all the way back at 165, which feels too far away to use as a stop right now. It would be great if the stock just meandered around 180 for a while because that would give it some oomph to rally again.
I would love to see the pattern in Innodata INOD map out something akin to the way I have drawn in blue. Pay more attention to the pattern than the exact price.
Alkermes ALKS has gone nowhere for years, so a move up and over this 32 area would be great and positive for the stock. It would be even better if it could do it without trading back under 30.
