This Is the Kind of Bull Market That's Led by Metals and Mining
The question is, what kind of market is that?
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As we head into the end of the quarter, I look back and see that it was not a quarter of Mag 7 outperformance; it was what I have categorized as one giant group rotation. Even the semis spent the better part of the quarter digesting.
What has not digested once since April is the XME. Commodities have been quite strong. Oh, not the usual suspects like grains, copper, aluminum, and energy, but uranium, coal, palladium (!!), lithium, and the precious metals. As I have said, I am unsure what type of bull market it is when it is led by metals and mining.
While many of those groups (see gold and silver) are over-extended and in need of a rest or correction, there are no tops there. But when we look at the original Mag 7, we see that four of the seven essentially made their highs at the beginning of the quarter.
Two of them (Amazon and Meta) are under their 50-day moving average lines (Meta, just barely). Consider that fifty trading days ago was mid-July, which means the moving average lines are now rolling over or at least flattening out. So for the first time in a long time, it’s not been about large cap vs small cap, it’s been about group rotation and stock picking.
To me, that is why we can’t seem to get sentiment to a state of giddiness. Folks get bullish, they get complacent, but they do not get giddy. Folks get giddy when the fan favorites are rocking, and they have not been rocking on this last run-up.
There was not much new to report from Friday’s rally because the indicators did not change. As we head into the week, with a possible shutdown of the government, I think TLT is getting oversold enough to have a bounce, but I still don’t think they are getting over resistance (92-ish). Maybe we get a gap fill around 90.
There is one chart I must share with you because Insiders seem to be selling into this rally, or at least relative to their buying, they are, since the Insider Transactions Ratio has soared and is now higher than it was in January.
New Ideas
I am going to do a few follow-ups because I was asked about them.
I recommended Ford (F) back in late June because it was breaking out of that base. It had a nice pop and then retested the breakout. The target is first a gap fill around 12.50 on that chart, which is if we take dividends into account. If we don’t, then the target is closer to 13.25-13.50. Back under 11.25 and I won’t like it anymore.
I have liked Nutrien (NTR) because of its base for about a year now. It continues to look like a base to me. The near term is murky when it comes to these big bases on a weekly chart (this is a 3-year weekly chart), but this continues to shape up. Maybe data centers need fertilizer!
Today’s Indicator
The Hi-Lo Indicator has been heading down for just over two weeks now.
Q&A/Reader’s Feedback
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Coterra Energy (CTRA) is trying to form a base, but it’s early. And if it doesn’t get going soon, then will it be subject to tax loss selling? For the time being, I’m willing to give it a chance to cross that line overhead (call it 25 because that clears the line and the September highs), but mostly it looks like it needs more work to me.
ConocoPhillips (COP) is an interesting chart. Because the refiners (VLO and DINO, both of which I have liked for months) are at new highs, while this is well below its highs. Short term, there is resistance at 100-102. I’d like to see it pull back and test 95-ish in a manner as I have drawn in blue. A good test would help the chart.
We looked at (PPLT) , an ETF to be long Platinum, about a month ago, and I believe I drew in a version of the flag you see. That flag measures into the 145-ish area, and that is definitely over-extended now. So while it has done nothing wrong, I cannot chase it and would even sanction taking something off the table. It is going to need another pattern to shape up before I want to buy it again.
That big flag in (GLD) measured to 340, and that’s essentially the area we are now. I think GLD got ‘this close’ to giddy in terms of the DSI (88), but never crossed the 90 level, so it needs a correction before I can like it again. I would point out that all of a sudden, it seems like there is a lot of chatter about it, which to me makes it vulnerable to a correction.
(URA) has a measured target in this mid-40s area. Again, it hasn’t done anything wrong yet, but it needs a pattern to set up for me to like it again. A pullback to 42-43 over time would make it more interesting to me.
Crowdstrike (CRWD) is a decent chart. I would prefer if it would fill that gap just under 460, but that’s the worst I can say about it. Would I buy it on this pullback? It’s not my style, but let me just say that if it does rally again and cannot get through 500, I would get concerned. You see, here is another tech stock that made its high right at the beginning of the quarter.
Palo Alto Networks (PANW) is a lesson in how much I screwed up trading this one. Back in July, when it was getting close to 200, I recommended it, believing it was going to finally break out. Then you see that big reversal? That came on an announcement they were interested in buying CYBR. After that gap down, I decided to stay away, believing that it looked like a breakdown. Another misstep by me.
Now we find ourselves right back at 200, and my inclination is to fade the move again. I give you all of this as background in case you’d like to fade me since I have handled the stock so poorly in the last three months!
I think it tries to rally again, but I’m just not sure it is set up for a big breakout.
The Chinese tech stocks have had quite a run (and as I have noted, are in need of a correction/rest), but what about JD.com (JD) , which I liked earlier in the month and has barely rallied? I still think it is trying to bottom here. I’d like to see it spurt over the blue line just to get a little excitement in it. It’s still quite early in the process, though. It doesn’t have the same base Alibaba or Baidu did before their recent runs. That would take more time to get there.
