Things Will Change Once the Fence Sitters Turn Into Bulls
Until then, expect the choppiness to continue.
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The Market
I do my charts by hand using a pencil. For the last few months, I have been going through lead (graphite) like crazy. Today, I barely had to sharpen the pencil; that’s how much churn there was.
For now, the chop is what I expect. Typically, we get the rally off Panic, then we get some churn as folks think ‘should I or shouldn’t I?’ and that period can last weeks, sometimes even months. At some point, we should have another attempt at a rally, and typically, that rally is what changes the fence sitters to bulls. I think we are in that choppy period.
Once we convert the fence sitters to bulls, we are likely to head back down again. I do not believe we are set up to head right back down right now. It simply feels too soon.
Can I be wrong? Of course. Can I also be wrong that we don’t head back down? Sure. But typically, with all that resistance overhead, there is just more work to be done.
For now, I think we are working off the overbought condition. We should also take a look at the US Dollar. It has still not gotten back over 100 and was down pretty hard today, although I guess since stocks churned, there wasn’t much concern about the buck.
I do think spike lows tend to hold on the first trip down, so I do not think that 98 level breaks, or if it does, it won’t be by much. The DSI is already 30. In other words, the buck looks bad, but I think the bulk of the selling is done for the time being.
I will be chatting with the folks at Ninja Trader tomorrow morning at 8:25 am EST if you want to tune in. Here’s the link: https://www.youtube.com/live/IARlNi6ypuU
New Ideas
I was asked for a target now that our friend Nutrien NTR finally broke out. There is one target around the old high at 57-58 and another one near 60.
Today’s Indicator
The 30-day moving average of the advance/decline line is currently in a chop-fest, but it is not yet overbought. It will get overbought in mid to late May.
Q&A/Reader’s Feedback
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Those lines on the chart of Adobe ADBE represent the layers of resistance just to get the stock to 440. That tells me there is a lot of work to be done if ADBE is ever going to build a base again to launch a proper rally. In the short term, I’d say resistance in the 380-400 area is where I would expect it to stop if it gets up there.
AbbVie ABBV will run smack into resistance if/when it gets to 200. However, the resistance is not terribly heavy, so I’d like to see how it handles that resistance (i.e., how much does it pull back from resistance). After all, if it gets to 200-ish, it will have rallied more than 30% from the April low. It ought to need a digestion.
Newmont NEM had a measured target in the 58-60 area coming off that last (lower line), and it has essentially achieved it. There may be another rally (should be), but I would guess that area is going to stall the chart out.
If Coinbase COIN can pull back from here, it would form a head and shoulders bottom that would be a positive pattern. It needn’t come all the way down to 180, but some chop/pullback that doesn’t break 180 would be bullish.
