We’re No Longer Oversold, but Was the Buying Real or Just Short Covering?
The Market
We got a Nasdaq rally from the oversold condition, but that oversold condition has been worked off. I don’t think Nasdaq is yet overbought but no longer oversold. With the earnings news out after the bell tonight, perhaps we get a test in the market.
What test is that? A test to see if this was real buying that took Nasdaq up these last three days or was it short covering? How can we tell? How fast do folks look to buy the potential dip (should we get a dip)?
But let’s talk about sentiment yet again because there has been an ever-so-slight shift. We’ll begin with the put/call ratio’s ten-day moving average. It has inched up and now resides at .88. So, if we get some put buying from the earnings out tonight, we might finally see this move upward into that mid-90s area.
The Investors Intelligence bulls are now down to 45%. They were last there in late May. I know in late May the market was quite different than it is now, but consider that the bulls didn’t pull in their horns this much into the late July rout.
The minor issue with this is that the bears haven’t budged one iota. They continue to reside at 16%. It seems all the bulls flocked to the correction camp. The corrections are now at 38%, which is quite high. Typically, the correction-minded folks only get this high when the market is declining, not when it is chopping about. The other instances have seen the correction-minded folks to be correct when they get this high, and the market hasn’t yet had a big decline.
But what if the market does pull back and the correction-minded folks move to the bear camp? Then I could say sentiment has improved for the bulls, can’t I? I would be able to say they are no longer complacent.
The DSI for the VIX is back at 17. Here again, if the VIX rallies and –heaven forbid!!!—gets jumpy, that too would tell me there has been a change in sentiment, wouldn’t it?
New Ideas
I want to follow up on Valero ($VLO), which I recommended selling earlier in the week. It’s got some support in this 360-380 area. I suspect it has a crummy rally from there, but a rally all the same.
We got a nice pop in Goldman Sachs ($GS) these last few days, and it has some trouble here (or ought to) from that post-earnings spike high. My initial target is 940-960 for the stock.
Today’s Indicator
The Volume Indicator hasn’t budged in days. It remains at 47%
Q&A/Reader’s Feedback
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Chemours ($CC) is yet another stock that has been steadily down for months. It is oversold. The time of the year is right for it to enjoy an oversold rally. I would say 14.50-15 is where it runs smack into trouble
That is an island up there in $EWZ, an ETF to be long Brazilian stocks. The good news is the spike low bounced off the line. As someone who thinks spike lows tend to hold on the first trip down, I would say that within the next few days I would expect this to bounce again. But that is the most I expect right now.
Kyndryl Holding ($KD) is one of those ‘others’ charts that had a great run, but as soon as the Mags and SOX rallied, it died. If it can hold this 13-14, after it ought to rally again. It is a nice base.
