Red Days Abound as Key Earnings Hit This Week
The Market
That’s another red day for the Equal Weight S&P. It’s also another red day for the Dow, making it red seven of the last eight. As I go through the charts of the Dow stocks, I am struck by how many are at or kissing a new low.
Several will report earnings in the days ahead, so this conversation may be moot by the end of the week, but Home Depot, McDonald’s, Nike, and 3M, just to name a few. Now most of those are consumer-facing, so once again, for those asking why the market doesn’t care about high energy prices, I would say they certainly do. It is right there: consumer-facing stocks are struggling. So, they do care. A lot.
Then there are bonds. I still think TLT can get into that 83.50-84.50 area. I see many starting to fuss over interest rates today (as they should); therefore, I expect if we do get some more downside in TLT (upside in rates) in the coming days, we should see some folks with a change of heart about the market. Certainly, the DSI will show it since it is already 21 for bonds. I would expect another push down would make the DSI a teenager in a hurry.
The indicators did not change much once again. Don’t get me wrong, breadth has been leaky and not keeping up for two weeks now. The new highs are terrible. The new lows are still mostly milling around. The 20-day moving average of stocks making new lows is rising but the raw number has not spiked yet.
The banks act dreadful, as do the industrials, and as noted above, the consumer facing stocks aren’t great. The VIX has finally started to creep up, and I still expect a storm to come from there.
I thought we could have one more rally in the 493 this week but thus far the market has not cooperated.
New Ideas
One group that hasn’t rallied well but is not threatening new lows is the airlines. But I keep seeing these charts of TSA growth and it’s negative year over year. That’s why I am watching United Airlines ($UAL). Not only is it consumer facing, the rise in fuel costs is evident, but the stock doesn’t break down. If it starts to break down, that would be a warning.
Today’s Indicator
The 30-day moving average of the advance/decline line will get overbought late this week/early next week.
Q&A/Reader’s Feedback
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My view on oil, the commodity, has not changed much. There is a measured target around 120, but I am watching the DSI for clues. As of Monday evening, it is 82, which is not into the warning zone. Not yet. Over 85 would get it there. It is just not my type of chart, having liked it back in the fall when it was basing. A break of that 95-ish area would be concerning if you are bullish.
I would have preferred Vanda Pharmaceuticals ($VNDA) filled that gap from February around 6, but that did not happen. Over 7.75 would at least give me some confidence a breakdown is not imminent. If it wasn’t reporting earnings in a couple of days, I’d be more interested in playing on the long side. But playing earnings is gambling in my view.
Cloudflare ($NET) has a nice chart. It is quite different than most of the software names because it didn’t break down the way most of the others did. A move over 230 would be a big positive. But here again, earnings are out later this week, so if I owned it, I would hold it. If I did not own it, then I’d be more apt to stay sidelined just because I don’t play earnings. Insert net here.
