The Most Impressive Thing I Saw in the Market Wednesday
On another positive day for the market, here's what stood out and what was curious. Plus, a check on sentiment, a yellow flag goes up on the VIX, Palo Alto Networks, an interesting ETF and more.
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The Market
The most impressive thing I saw in the market Wednesday?
It was the SOX. It closed flat on the day despite that huge move down in Texas Instruments TXN.
Now, the ratio of the SOX to the Nasdaq did in fact notch lower so that trend is still in place, but that doesn’t stop me from being impressed that the actual index was unable to break.
Breadth was good. Curiously it was better Tuesday (when the S&P 500 was up a mere four points). It did get the McClellan Summation Index to stop going down. Now it needs another up day to get it to turn upwards. I would show you the chart but you can’t even see the action.
The new highs lifted but are still under the peak readings of a few weeks ago. And the Utes had a big reversal. Whereas Tuesday no one even noticed the new high, Wednesday no one noticed the reversal.
Sentiment, which got giddy on July 3 and then backed off as the S&P went nowhere, has returned to bullish. Oddly, the DSI is not as high as it was three weeks ago. Three weeks ago the DSI for the S&P got to 87. Now it stands at 77. I’d love to explain why, but I cannot. It often frustrates me that it doesn’t move up when I think it should but perhaps that is why it works so well: it takes a lot to get it extreme.
The DSI for the VIX is, however, getting extreme as it is now 15. That means the yellow flag is up on the VIX. I’d call it a red flag if it got to single digits. My guess is it does not get to single digits, meaning we will have a day where the VIX rises and the DSI rises with it. Probably before all those big earnings (and the Fed) come next week.
I would end by noting that the Nikkei was up 3.5% Tuesday night and the DSI on the Nikkei is now 86.
New Ideas
I promised to follow up on Palo Alto Networks PANW. The stock has done very little over the last nine months. When we last checked in it was kissing that $205 area and I wanted a whoosh. I got it and a rebound that has been a bit slow. I’d say this time if the stock can get up to that $205 area I think it can breakout.
For those of you asking, I am still waiting for VanEck Oil Services ETF OIH to fill that gap near $260 on the chart. Each time it has gotten up here it has come right back down though.
Today’s Indicator
The Volume Indicator is at 53%, still a lower high.
Q&A/Reader’s Feedback
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Permian Resources (PR) would be more interesting to me down around $12.50 because down there it would have a better risk/reward. That having been said the chart is mostly in a range of $12-15 for the time being.
Coterra Energy CTRA is certainly oversold; it would be more oversold down around $22.50 but somewhere in this area it should bounce. But that’s all I see for now: a bounce.
PKW (Invesco BuyBack Achievers) is an ETF for stocks of companies that buy back shares (there is literally an ETF for everything!). It has a measured target near $140.
This $2,300 area should produce a bounce in MercadoLibre MELI. I should note that lately a lot of these stocks that had big runs and have stalled have not rallied nearly as much as the ones that are down and out. My guess is it has something to do with shorts covering. No shorts means the bounce is smaller than expected.
Since I am (still) of the mind that healthcare/drugs should rally, Regeneron REGN should fill that gap around $600. There is a possibility that it gets over it and makes a stab at $650 but with that gap down from June, I’d start with that.
Every time I am asked about UnitedHealth Group UNH I think I say the same thing: it can bounce/is oversold enough to bounce, but I don’t think it is going anywhere special. In this case I think a rally to that $300-315 area is doable. Give the stock a chance to build a base.
