Was Monday's Rally Short Covering?

NYSE Trader

The Market

The question of the day (to me at least!) was if the VIX got jumpy enough. It did.

But was there panic selling? I saw very little of it. Last Monday, we saw 91% of the volume on the downside. Today, at the worst level we saw was in the mid-60s. Does that sound like panic selling to you? It seems to me the panic might have been overnight.

But once again, take a look at Nasdaq’s new lows. There were still far fewer stocks making new lows than we had back in early February. And that is a sign that the selling has or is drying up in those tech stocks.

Look at the Nasdaq McClellan Summation Index. It turned up just over a week ago, and despite the selling in the last week, it has refused to turn back down. We looked at the NYSE Summation Index (where the 493 tend to live) yesterday and saw that looking like the inverse of Nasdaq’s.

Did you notice how there was little or no selling in software stocks today, and yet when the market reversed, those stocks were bystanders. I would say that’s because the rally came from the stocks that had been down; it’s likely it was all short covering.

I don’t think we stand in a different place than we did heading into today, or where we have been for a week or more now. Tech got oversold and too much bearishness, so it was its turn to rally. The 493 might rally some more, but I still favor tech/growth for the time being.

And I do not like energy. I said it yesterday, but I want to reiterate it today. OIH has been red an awful lot, so it is oversold enough to rally, but I am a seller of energy stocks for now.

New Ideas

A few months ago, I recommended MP Materials (MP) . It rallied and then died, but I was asked if I thought it was still okay since it is not far from where I recommended it. It’s not a bad chart, and it would be even better if it can push itself up over 65. It will be dicey should it break 55. But yes, I still lean toward the positive side of the ledger on it.

Today’s Indicator

The 30-day moving average of the advance/decline line is no longer overbought. It looks like it is oversold, but the math behind it says it is not. In the next four weeks, there are only five red numbers to drop, and none are consecutive.

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When International Paper (IP) was 40, I thought for sure the stock would pull back into that mid-40s area and hold and rally again. I was so wrong. But I guess this is part of the exodus out of the 493. The stock has good support in this 37 area, so I would expect it to bounce from here.

Hubbell (HUBB) broke that uptrend line, so I expect a rally back to it will be resistance. The good news is that there really is not a top in place, but a lower high would have me watching for the possibility there is a top building. For now, I’d look for resistance on a rally back to the line.

For now, I would call Thermo Fisher (TMO) a stock trapped between support at 490 and resistance at 550. A break of either and I’d have to re-assess.

Chevron (CVX) has met its upside measured target, and as I discussed yesterday, I do not like the energy stocks up here. It is possible they pull back, and I will warm up to them again, but when the OIH is underperforming like this, XLE and the stocks that make it up (CVX is in it) are vulnerable.

To me, Apple (AAPL) has been one of the sorts of charts that goes to sleep for long periods of time and then awaken and pushes upward for a while, then it rests and so on. Right now, it looks like a rest period. The fact that it hasn’t even visited the January low is a positive. So, unless it cracks under 245 in a big way, the stock is fine.