The Market Climbs a Wall of Worry, but Here are Several Things to Fret Over
There's just no consensus among traders right now. We know what the market should do, but determining what it will do requires a close look at the indicators.
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The Market
I honestly can’t tell where sentiment is right now.
Oh, sure, I know the put/call ratios are too low, and they never got that high. And I know that the Investors Intelligence bulls only ticked up two (bears down 2) after last week, so they have not jumped back in.
Tomorrow, we’ll get the AAII, so it will be interesting to see what they show, as will the NAAIM exposure. But what I am talking about is the general feeling you get from those around you, from those folks on television, from reports I read on the market.
It doesn’t feel as though there is a consensus to me. In early December—or really right around Thanksgiving—I sensed consensus that markets would continue upward forever and a day. The sentiment surveys said it, the options ratios said it, and the anecdotal chatter said it.
Then, as we got closer to last week’s low, we started to see bearish chatter and then the bearish surveys. But after last week’s rally, I get the sense some are still bearish, and some are keen to go all in once again. I do hear the words ‘animal spirits’ being thrown about but it’s more mixed as best I can tell.
That’s a long preamble because, as noted above, the Investors Intelligence survey barely budged this week and I see many citing the put/call ratios as being bearish. They are bearish, that hasn’t changed. They have been bearish. For months.
Take a look at the ISE call/put ratio. That has come down quite a bit. Not enough for me to call it bullish but it has come off the boil in a decent manner.
If you want to fret over something, then fret that the Utes, which, after I lauded them yesterday, gave it all up and more today. If you want to fret over something, then fret that the Bank Index, for all the hoopla, hasn’t made a higher high. If you want to fret over something, then fret that breadth was pretty poor today, with the S&P closing near the low of the day. Or heck, if you want to fret, you can fret that the VIX is quite low again.
I am of the mind that we should see a pullback and then rally again. And since I think we’re in a trading market, we ought to see the sentiment shift (more than it has) and see the indicators roll over when they get overbought again.
New Ideas
I am going to do some follow ups today.
GE Aerospace GE has had a terrific run since I first recommended it, having crossed that line. My target has been to fill that gap. We are into the gap now. It fills a few bucks higher so we’re getting close.
United Parcel UPS did well more than I thought it would since it did cross the line. It is into some resistance but I would say that 130-ish area ought to be support on a pullback. Under that line and I am wrong.
I believe I was asked about Zscaler ZS a few weeks ago and I cannot recall my view but I have had it on my radar ever since and I want to note how it held 180 support and if we step back it looks like it is trying to build a base. At the very least as long as it holds 180 it ought to make its way toward that resistance around 210.
Today’s Indicator
The Volume Indicator is now at 49%. It will get overbought again in the mid 50s.
Q&A/Reader’s Feedback
I want to like Occidental Petroleum OXY but it has sucked me in too many times in the last year. My guess is it bounces from this current pullback, but unless/until it clears last week’s high and that downtrend line it’s still just a trading vehicle. If it crosses the downtrend line it should run into trouble at 54-56 but at least then we’d be looking at something akin to an early base.
Amazon AMZN is a stock I have liked for quite some time. There is an unfulfilled measured target around 240-245. It’s a bit over-extended in the short term but that target has been out there for months now.
Salesforce.com CRM had a measured target around 370-380 so now it will have to form a new pattern before I can measure a new one. Near term resistance is 340-50. If it can map out as I have drawn in blue over the next few months then I’d be able to measure a next target near 400-ish.
Dell DELL is trying to bottom with the operative word trying. The best news I can offer is that trading down in the 110 area for a week with gaps on either side leaves that as an island down below. If it can manage NOT to fill that gap (from this morning) I would consider that a positive.
Advanced Micro Devices AMD has got to get up and over 130 because that clears the downtrend line and the resistance that has been keeping a lid on the stock for a month now. Only if it does that can we even consider that it has a chance at forming a base. The stock hasn’t made a higher high in almost a year, so that needs to change.
I am inclined to think it tries to get to 130. I am just not sure it gets over it cleanly.
