The Market Keeps Getting Saved. Here's Why That's a Bad Thing.
A whoosh lower might be the best thing for this market.
You're reading 0 of 1 free page.
Register to read more or Unlock Pro — 50% Off Ends Soon
The Market
I hate when markets get saved. I hate when they save an index at a well-watched level. I prefer a break. And right now, a break of this well-watched 6800 level on the S&P would be a positive in my view.
It certainly would be a plus for sentiment. I get the sense that folks are getting a bit antsy about the market but mostly about tech. Can you blame them? Software has collapsed and hasn’t even had more than a minor attempt at a rally. But let’s look at the ISE call/put ratio.
I like to use the 21 DMA, and the first thing you can see is that it has come all the way back to where it was at the November low. So in terms of options trading for this cohort, folks are as bearish as they were then, or perhaps I should say cautious.
Let me make one small note here: since mid-2024, this moving average lifted to levels we have rarely seen and mostly stayed up there. So it is possible that what we are witnessing is just a big unwind of all that speculation, and we need to eventually get this longer-term moving average down under 1.0. But that doesn’t change the fact that this cohort is not wildly bullish.
When we use the ISE Equity call/put ratio and put that on a ten-day moving average, we see it is now the lowest since the April lows. Oh, it has quite a bit to fall until it gets there (current reading is 1.8, and the April low was 1.55). But again, you can see that November low on the chart, and this one is lower.
The ten-day moving average of the CBOE put/call ratio is now .93. This too is in the same place it was in November, near the low, although you can see it is nowhere near the panic level we saw last April.
That’s sentiment. Then there are the number of stocks making new lows. Nasdaq had 285 new lows today. On February 6th there were 569.
So the reason I want to break that well-watched level is I’d like to see how the market looks if we see some panic. Those options ratios are so close to showing bearishness, and maybe—a big maybe right now—Nasdaq could have fewer than 569 new lows. Saving the indexes doesn’t help get us to a cleanout; it just keeps the churning alive.
I had a lengthy conversation with Christian Fromhertz today on stocks and the market if you’d like to watch on YouTube. https://www.youtube.com/live/DGwAPJNpz08?si=8qD3PlJDqHSeFRdr
New Ideas
Is Lululemon (LULU) trying to bottom again? If it can stay over 170 it gets the benefit of the doubt. As a reminder, when the stock gapped up to 208 I was asked by several if I thought it would fill the gap below or the gap above first. I honestly did not know. It turns out it filled the below gap, and it did not even matter. But now…maybe….
Today’s Indicator
The McClellan Summation Index is still heading up. It will need a net differential of -500 advancers minus decliners on the NYSE to halt the rise.
Q&A/Reader’s Feedback
Helene welcomes your questions about Top Stocks and her charting strategy and techniques. Please send an email directly to Helene with your questions. However, please remember that TheStreet.com Top Stocks is not intended to provide personalized investment advice. Email Helene here.
Palo Alto Networks (PANW) is trying to hold after the recent collapse. Let me say right now, and this is true of all these software stocks that have collapsed: they should stabilize and rally. If they merely stabilize but do not rally, then I would expect the next trade to be down, not up.
For PANW, even if it can get up over 170 I think 180 is going to be very difficult to get through. So we’re talking about a short-term rally at best. One final note: earnings are out tonight, so be careful.
Fortinet (FTNT) is a terrific chart for instruction. It had the big gap down in August and has spent these last six months trying to steady itself and find its footing. I think if it comes back into that mid-70s area it should hold. If it cannot get all the way back to 77 on this trip down, then it gives it a better chance of breaking out on the upside on the next trip up.
I really thought that IBM (IBM) was going to hold that 290-300 area after having spent so much time digesting the move. But instead, it gave way and has barely managed to hold on. It’s still too early to say it will hold 255-ish but if it can rally from there then I think the best it can do is 270-280.
