Market
The market has always reacted to the latest news, and this time is no different. Keep an eye on Thursday afternoon. The market seemed eager for some positive news and responded, albeit mostly based on speculation that there could be a resolution to the ongoing conflict.
Honestly, I doubt anything major will shift this week. Right now, the market feels a bit oversold and is primed for a rebound, especially if there’s any hint of clarity regarding the war.
Some might argue otherwise, but last week’s underperformance wasn’t solely because it was oversold. That said, I did notice that banks saw some gains this week. It might not have been obvious at first glance, but it was there. The Semiconductor Index ticked up as well, though I know NVDA didn’t share that fate.
Oh, and let’s not forget about transportation. It’s puzzling since oil prices are rising, which usually puts pressure on them. How can transportation perform well in such conditions?
Honestly, I’m not great at weaving narratives, so I can’t explain it fully. But it did seem like there was a brief pause in selling across various sectors last week. Maybe we’ll see something similar in the coming days.
In the short term, the sentiment seems bearish, but it’s not at a crisis level. You might recall my take on extreme sentiment metrics; the DSI for the S&P is at 22, and the Nasdaq’s is at 25. This is the lowest we’ve seen since last April, when numbers were even lower. Some might view this as extreme, but I wouldn’t go that far.
If other indicators suggest we could be hitting an extreme soon, I might consider it. Typically, I view DSI readings under 15 as cautionary signs, and in the single digits, it’s often a buy signal. However, it’s generally harder to move from 20 to 9 than from 40 to 20. That last stretch is trickier.
Don’t overlook the 200-day moving average, which is currently underperforming stock prices across most major indexes. This isn’t typically a favorable scenario. The moving average peaked in early June, indicating it’s still on the rise. It’s easier to climb back to a rising average than to reverse a declining one. Unless the index dips below that 200-day average, it will likely continue to trend upward.
Also, keep an eye on the S&P as it nears support at $6,500, a level it hasn’t broken since last fall. With things feeling a bit oversold in the short term, a bounce back seems likely. If we can’t quickly regain 6,620, which is around the 200-day moving average, there’s a chance we might dip below 6,500 on the next downturn. That could create extreme conditions and an oversold scenario in the medium-term.
New Ideas
Last week, I expressed my dislike for Caterpillar (CAT). It broke through a key level, but there hasn’t been much movement since. Nevertheless, it remains above the low of 680 from a couple of weeks back. I believe it could potentially push past 680 in the near future, especially with any oversold rallies.
I’m a bit unsure about Workday (WDAY). The stock’s price fluctuations may be linked to quarterly rebalancing. However, as long as it stays above 130, I think a rally could occur this week.
Today’s Indicator
The Nasdaq Hi-Lo indicator currently measures .21, suggesting it is nearing an oversold state. On the other hand, the NYSE indicator stands at .34, indicating it has more room to fall.
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On Lumen (LITE), I was initially quite optimistic due to its strong base visible on the weekly chart. However, after hitting 150—more than doubling my earlier recommendation—I felt it was time to exit. Now, it’s at a crossroads with resistance at 800 and support around 575. I wouldn’t be surprised if it revisits that support level, and if it breaks below, that would raise concerns.
As for Carvana (CVNA), it’s struggling. There’s a possibility it’s a bit oversold right now, but without a quick rebound to $295, I expect the stock will continue to decline in the upcoming months. Of course, if the overall market gets oversold and very bearish, that might change things.
Williams (WMB) appears shaky at around 72. If it forms another pattern in the mid-60s area, it could catch my interest again, but for now, I’m taking profits, especially if it dips below 72.
I’ve had my doubts about American Tower (AMT) as it seems to have given back a lot of its February gains. It looks like it’s trying to establish a base. If it drops to that line and fluctuates for a few months, it might evolve into something worth watching. It’s still early days, though.
S.H.L.D. is an ETF focused on defense stocks, and despite the ongoing conflict, they haven’t performed well lately. To me, it seems like it’s peaking. There might be a bounce from the 70-71 range (February lows), but I’d advise staying away for now unless the market is set for a larger upswing.
I was previously confident about E.O.G. (EOG), but at this point, I’m hesitant to recommend a purchase. A dip into the low $130s might make me reconsider it.
On Almonti (ALM), while it hasn’t broken crucial support yet, there is concern if any bounce becomes weak, particularly if it fails to reclaim levels above 17.
Lastly, regarding PALL, which is an ETF focusing on palladium. With recent breaks making it look oversold in the short term, I would consider selling if it recovers into the $135-$145 range.
