The Stock Market Will Remain Choppy Until These Two Bellwethers Break
There's no follow-through in this market, and traders are growing tired of the chop. When will it end? These two bellwethers will offer clues.
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The Market
You see how the Russell couldn’t manage a third straight day of green? That’s the chop we have: there is just no follow-through.
That doesn’t mean we have follow-through on the bottom, either. Most stocks that have plunged on earnings have milled around for a few days and then started to go up again. Or there is something like Apple AAPL, which we have looked at several times recently.
After last Friday’s reversal, I was inundated with, essentially, ‘Is this important?’ My response was that I thought we should hold 220-230 on this trip down. And so we have (for now), which makes the whole pattern look like a chopfest all week.
Will that spike high be a problem for AAPL on a rally? Sure. But that’s what we have right now.
Then there’s Tesla TSLA. How many do you think had that line as a breakdown at 375? When the break came today, they pounced (I am guessing; I do not know), but at the end of the day, the stock rallied right back to the breakdown. The selling just seems to dry right up.
What makes the change is if TSLA turns south from here, unable to recapture 375, and along with that turn-down, then has follow-through. That’s the ticket: there has been no follow-through up or down.
That’s why I keep saying to watch Microsoft and the SOX. Those are two charts that keep threatening but don’t break. No breaks means we keep the chop alive.
New Ideas
I was asked to follow up on Intercontinental Exchange ICE, a stock I thought could fill that gap down from October when we looked at it a week or two ago. The question is now that it has gapped up, has it filled the gap or has it left an island down below? Great question.
For now I would say since it closed over the prior highs (October) we view it positively with a measured target near 180. But it needs to hold these gains. I don’t want to see it move into a chop fest up here.
I was also asked about the iShares Silver Trust SLV. We looked at it when SLV was 28 and I was lukewarm with a positive bias. I would say if it can get through 29.50 it ought to make a try at that old high. I would rather see it pullback first as I have drawn in blue.
Today’s Indicator
The 21 day moving average of the ISE call/put ratio has come off the boil. It is not down where I would say it is bullish but it really shows the speculation has leaked out since all those speculative groups cooled off.
Q&A/Reader’s Feedback
Boot Barn BOOT has some support here, but it also had a false breakout in late January. That means I don’t trust it on any level. If you look at the way it bounced off the line in late October/early November after that gap down, rallied, and came back down to a higher low, then know that if it mapped out a pattern like that, I’d be keen to take a shot on the long side.
Sprouts Farmers Market SFM has a measured target of around 170, but it hasn’t done a thing wrong yet. A pullback to support (150—ish) would be buyable as long as the uptrend stays intact.
New Fortress Energy NFE should come into support in that 10-11 area. I’d prefer to see it hold over 11 though since a move toward 10 would be a lower low than mid December and higher lows are preferable.
iShares MSCI Emerging Markets ETF EEM has a habit of gapping up and gapping right back down (see October, November and December). If it can get up and over 43.50 without a gap that would be preferable. This is an interesting chart.
