The Market
That was quite the turnaround. What’s more is it didn’t come on any news. By that I mean
there wasn’t an economic indicator, there was not a line from a Fed governor, there wasn’t
even a “trade talks are going well” type of comment (joking, of course).
The rally came out of “nowhere.”
In the olden days, that is exactly how we often rallied from a low. The selling just
exhausted itself and then shorts had to scramble to cover, and up the market went. Today
felt like that to me.
As noted last night, the negativity was high, the market was oversold and it was enough to
spark the rally. To me that was actually the easy part. Now is the hard part.
Can the rally last? Rallies since July and early August have not lasted. So our
inclination is not to trust them. Especially when you see that the line that has kept the
Invesco QQQ (QQQ:Nasdaq) in check since early August is upon us. That line comes in around
$272 (next week it will come in lower). The flat line is right here; I’ll call it $270.
So tomorrow is pretty key for the QQQs as a test: Can they get through?
They are not alone. The iShares Russell 2000 ETF (IWM) – Get iShares Russell 2000 ETF Report, which held the June lows
today (as did the mid-caps) is also right up against a line that has kept every rally in
check for the last two months. Crossing this is the first step and an important test for
markets tomorrow.
As for the statistics today, breadth was actually pretty crummy for such a big up day. On
Oct. 3, the S&P was also up 92 and net breadth was positive 2,200 while today it was
1,350. The good news is that the McClellan Summation Index stopped going down today. It
needs some decent breadth tomorrow and next week to turn up like it means it. Again, the
reasoning why follow through is important.
There was a positive on the breadth front and that is that there were still fewer new lows
than June for both the New York Stock Exchange and Nasdaq today and Nasdaq’s new highs are
now the most since August.
I don’t get the sense that folks are thrilled with the rally (that’s good) but the
put/call ratio was .89, the first reading under .90 since the day after the early October
rally.
The bottom line is the market’s turnaround was very impressive, but there is still a lot
to prove to see if we can extend the rally longer than a day or so.
New Ideas
I want to follow up on Cummins (CMI) – Get Cummins Inc. Report, a stock I was asked about perhaps a week or so
ago. It was a similar price to where it is now, but I wanted to see it do some sideways
work. For the time being I am willing to trust it to see if it can get up to that $230
resistance. In this fragile market everything is a trade.
I might surprise some that I’ve got my eye on Alphabet (GOOGL:Nasdaq), because I had said
it has a target around $90 and it only got to $94 today, but if it can cross that
downtrend line I think it can get to $103-$105.
Today’s Indicator
The 10-day moving average of the put/call ratio is under 1.0 already. Let’s see how fast
it falls.
Q&A/Reader’s Feedback
Bloom Energy (BE) – Get Bloom Energy Corporation Class A Report should bounce from this support. On a longer-term basis, I believe
it will be an uphill climb to eat through all that resistance that has been left overhead.
The first real resistance starts around $20 now. It will take a lot of back and forth and
holding $16 for it to develop into a chart that looks like it can make higher highs.
Clear Point Neuro (CLPT:Nasdaqq has got to hold this $9.50 level. If it can it will still
be an awful lot of work for to make much headway beyond $12 where resistance comes in
strong.
On the chart of Uber (UBER) – Get Uber Technologies Inc. Report there is so much resistance overhead, but it held that
$24 support. For the time being I’d be inclined to be a seller if this can rally to fill
that gap just shy of $28.
Delta Air Lines (DAL) – Get Delta Air Lines Inc. Report has an awful lot of resistance right here. I would give it at
most a week to see if it can cross that line around $34, using a stop under these recent
lows. Crossing that line would be the first step toward improvement.
Baker Hughes (BKR:Nasdaq) has resistance all the way up to $27. But there is an island
down below from late September. Quite frankly my favorite in this group has been
Schlumberger (SLB) – Get Schlumberger N.V. Report, but that runs into trouble when it fills that gap up near
$46-$47, or I should say if. I just struggle with an energy stock that is so far down and
lagging.
Read More: A Rally From Nowhere