When the Mega-Caps Diverge, Pay Attention
Let's look at the Mag 7 names individually for clues. Plus, another market oddity, my 'down and out' radar draws me to one chart, and a couple of stocks I've recommended go vertical.
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The Market
The statistics and indicators did not change. Yet again. But the individual stocks are worth discussing.
First let’s talk about the supposed Mag 7. Do you realize that Microsoft MSFT, Meta META and Amazon AMZN (which broke the uptrend line Tuesday) have all pretty much sat this August/September rally out? Since the low in early August the S&P 500 is +6% and those stocks have not made new highs. So there is even stock picking with the mega-caps. Nvidia NVDA made a barely new high Monday before giving it back Tuesday.
The winners in the mega-caps have obviously been Apple AAPL and Tesla TSLA. Why should we care what these stocks are doing? Because they started to diverge in January as well. You might recall how often I harped about Microsoft.
There is one other oddity that I’m not sure what to do with. The volume in the QQQs has been over 50 million shares the last four trading days. As you can see from the chart below, we rarely get that type of volume when the market is going up, let alone at highs. Is it a rush to get in? It hasn’t gotten extreme yet but I’m going to watch this because it is unusual.
Away from that, my "down and out" radar has me drawn to the chart of the Transports. If they hold this 15,400 area, or I suppose even 15,000 but I would prefer higher, this chart starts to get quite interesting. They had their first consecutive green days in the month of September, which is a change.
New Ideas
Let me begin with two charts I have recommended in the past few months, because they have both gone vertical. Once they do this I can no longer sanction them.
Rigetti Computing RGTI has doubled this month. Maybe it keeps going and lift is terrific, but I think selling a little and using a trailing stop is warranted.
Cipher Mining CIFR is another stock that has doubled in the month of September and has gone vertical. I would recommend the same strategy as with RGTI: take something off and use a trailing stop. When vertical charts turn south they usually do so in a hurry.
Now let’s turn to something so stodgy and old fashioned: food. We discussed the PepsiCo PEP chart the other day (I am a fan) but notice how General Mills GIS is attempting to round under. It’s got a long way to go but this stock — a staple, which has been a terrible group — hasn’t made a lower low since early August. Bottom fishing in this market in anything value hasn’t made us an ounce of money, but like a moth to a flame, this one has my eye as long as it stays over $48-ish.
Finally, I have a lot of charts that have this type of price action from Tuesday: it looks like a reversal. If there is any follow-through some of these recent run-ups are in for a shakeout. For the iShares Russell 2000 ETF IWM it would be back to that line (around $235-240).
Today’s Indicator
The McClellan Summation Index continues to sit there. Like if we poke it, will it move?
Q&A/Reader’s Feedback
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Devon Energy DVN continues to look to me as if it is eating through resistance and building a funny looking base. I would start with that resistance at $37 that will be short-term problematic, but as long as it stays over $32-ish the stock gets the benefit of the doubt.
Halliburton HAL finally moved out of the range it has been sitting in for months. Of course, it ran smack into resistance (blue line) so short term it’s got some trouble, but if you remember that chart of DBC I showed here two weeks ago, these commodity stocks are bottoming. It would be great if HAL could pull back some and then come through $25.
Merck MRK continues to look to me as if it is trying to bottom, but it is early. When we last checked in on it I asked that you cover the left side of the chart and imagine 3-4 months from now how much more this will look like a base, providing it does not break back under $72-ish.
SoundHound AI SOUN is heading into some resistance and it has a short-term measured target around $20-ish. If it can stay over $16-ish to digest the recent move then I would look for it to push upward some more but it is up 50% in a month so it’s hard for me to chase until/unless it digests.
Arista Networks ANET had better hold that $140 area or it is going to look a bit toppy. I don’t like it when a stock gaps up and gives it up too readily, so I’d be careful if it breaks those uptrend lines.
