Group Rotation Returns After a 2-Day Breather
The 493 rallied while the megacaps stalled and fell. Did anything truly change?
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The Market
And so the group rotation is back. It took a two-day respite but it has returned.
The 493 rallied while the megacaps stalled and fell. But did anything change?!
Well, the Russell 2000 did make a new high. So if we wanted to say there are divergences, we can since the number of stocks making new highs is pathetic and breadth was good but not great. The McClellan Summation Index is still heading down.
But to me the market just continues to push stocks down, and as soon as they are threatening to break, it saves them. We saw that in the restaurant stocks. Now we’re seeing it in the banks. We saw it (at least for today) in the Homies. We saw it in the drugs a few weeks ago. And so on.
So the real question is whether some of the megacaps will get saved. I don’t know. History would say yes but we have yet to see any of these stocks have meaningful situations where they have needed to get saved.
For example, I thought Meta’s (META) plunge a week or so ago and subsequent reversal off support was important enough to buy. But while the stock is off the low, it hasn't really rebounded much, has it? And if it breaks down from here, it will leave behind a nearly four-month top.
Meantime, we need to talk about the Utes. I was a buyer of them into that early September plunge (again, when they correct they have given us opportunities because they have not broken). They have just breached the upper line. If we see the Utes fall back under 1140, I would get concerned about them.
I would finish by noting that both the S&P and Nasdaq came down into the vicinity of last Friday’s low, and we did not see the number of stocks making new lows increase. I always prefer when they break it, but so far when given the chance to do so, we have another save on our hands.
New Ideas
In late September I was asked about Valero (VLO) and I said it had reached its measured target and needed a correction. It has since corrected. My guess is that in the next few weeks we see it tag that uptrend line, so this is a heads up that somewhere in that 155-160 area it should look better again.
Today’s Indicator
The McClellan Summation Index is still heading down. It needs a net differential of +700 advancers minus decliners on the NYSE to halt the decline.
Q&A/Reader’s Feedback
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There are no measured targets left on IREN (IREN) and the stock hasn’t done anything wrong except go parabolic. The only thing I can say is: Use a trailing stop, starting with a break of that very steep uptrend line. That would be an early warning.
Core Natural Resources (CNR) has just broken out of a nice base. It’s hard for me to chase but I would love to see a dip to buy some. There is some light resistance in this 105 area. If the stock can go sideways a bit under here, I think it can eat through that resistance.
Generac Holdings (GNRC) I think is one of those stocks that has a good seasonality at this time of the year (hurricane season). I like the chart for a run to resistance at 190-200, but then I’d like to take another look because it has been stopped up there several times. I have a measured target in the 220ish area, so unless it turns south and heads back under 160 I think it’s okay. Should the stock get over 200, I would lift that stop.
The question is whether I still like Amgen (AMGN) . The answer is yes. It feels like it is forming a flag from that big drug runup a few weeks ago. It really needs a push over 300 and then 305.
