Two Up Days in a Row!
We're still oversold, but can the market continue to rally?
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The Market
Yes, I know the bears will focus on the late-day sell-off, and the bulls will focus on how good breadth was. And both will be correct.
We remain short-term oversold. That doesn’t mean we have to go up every day. But these were the first consecutive green days in a month. That is a change. I’ll even add to that: three of the last four days, the market has been green. For the Russell, it is four of the last five days.
There is another change: the McClellan Summation Index stopped going down. If we have positive breadth tomorrow, it ought to turn upward.
Then there is sentiment. There will be those who turn bullish immediately. For example, the ISE equity call/put ratio hasn’t been over 2.0 since March 5th, and since February 24th, it has only been over 2.0 two times. But today, it jumped up to 2.71. I take that as a sign folks are eager to start buying calls again.
The flip side of that is the CBOE’s put/call ratio, where, for the eighth straight day, the reading has been over .90. That’s probably those who don’t trust the rally!
If the market can tack on one more day with decent breadth, we’ll probably go into a bit more of a chop mode again after that. Indexes and stocks will start to hit resistance, and the Oscillator ought to be over the zero line by Friday.
New Ideas
Nutrien NTR has been on my positive list for months now (and all it has done is go sideways), but I noticed another fertilizer stock that is down and out. As long as CF (CF) holds 75, it ought to start doing some base building now that it has tagged support.
Today’s Indicator
The 30-day moving average of the advance/decline line looks oversold, but my notes (and the math behind it) say it’s more likely choppy than oversold at this point. I’d look for one more day upward before it struggles again.
Q&A/Reader’s Feedback
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I have not written much about TLT lately because after turning positive on it in January, it reached my target (92), and it’s gone into a neutral mode for me now. I see the head and shoulders bottom (potential) with the left shoulder in November, the head in January, and this being the right shoulder forming now. I still think this pattern is likely, but I suspect it is not imminent. TLT might just trade between 88-92 for a while now.
HYG, which I referenced last week when I noted folks had finally sold it came down to the uptrend line and bounced. I am inclined to think as long as it stays over 78.50 it’s okay to hold but I’m not sure it is going anywhere special on the upside.
MicroStrategy MSTR looks like it’s due more of a bounce to me. It has a little W bottom from late February/early March. I’d start with a move toward that downtrend line around 350.
If Corvus Pharmaceuticals CRVS is going to map out a bottom, it ought to do it as I have drawn in blue. That ought to take months to play out if it does. 5.50 is going to be tough.
Viking Therapeutics VKTX has tried to bottom before, only to suck everyone in and spit them out (in October). The first way it would start that process again would be something akin to what I have drawn in blue. Remember, it’s the pattern to watch for, not the price level (although the resistance at 35 is quite obvious).
