I am still watching coals like WLT for potential short squeezes higher on the back of a prospective GOP Senate win.
Other than that, this market action is quite grinding today. The SPY and other indices may very well be printing bearish tri-star candlestick reversal patterns on their daily charts, which I will try to cover in today’s video.
What are you trading out there?
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The New York Stock Exchange Advance / Decline Line, or NYAD, diverged from the Nasdaq and S&P 500 on those two indices’ recent push to fresh higher.
For reference, the NYAD captures the net difference between advancing and declining issues, or a type of breadth measure. It is usually compared to a major index, where a divergence from that average would be an early indication of a possible trend reversal.
As you can see, below, on the cumulative line, NYAD made a lower high of late. Also note the potential for a head and shoulders top formation.
While it’s true that bears need downside follow-through to confirm this divergences, as usual, it is also true that market participation has been weak underneath the surface.
In particular, the leading issues continue to lag–Usually a sign to adhere to caution.
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Courtesy of The PPT algorithm, here are the most current top five readings from my “12631 RELATIVE STRENGTH” custom-made screen, identifying which stocks are exuding some of the best performances to the market at-large at any given moment.
I look for stocks whose Daily PPT Hybrid Score surges, while the Weekly Hybrid has been negative over the past week. This can often yield stocks which are emerging from consolidations.
Members can click here to view and save the screen.
Sorted for at least 500,000 shares of daily average volume to ensure liquidity.
Please click on image to enlarge.
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To put the PCLN weakness in perspective, consider the monthly timeframe, below.
Despite being down big today after earnings, the stock is struggling to hold onto the 20-period monthly moving average (orange line).
If it loses that reference point, I expect much more downside in the coming months, perhaps below $900.
Either way, this is an example of another market leader in shambles and categorically not confirming the recent highs in the Nasdaq.
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Bear Bryant Locker Room Speech to Incoming Freshmen
The indices are drifting, if not chopping, this morning.
Energy stocks are following-through lower in the XLE ETF, with ERY still being the bear ETF of interest there.
I am seeing some reversals lower in the semis, financials, and even momentum names like GPRO. If the reversals stick, I am not looking for new longs today. Otherwise, coal stocks may very well see a post-election bid.
I have a short biotech position on and will consider adding if the selling picks up today.
What are you trading this morning?
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With a prospective political win coming today, coal may very well stage a snapback rally, now that everyone has assumed the industry is finally dead.
Walter Energy, not related to the above-pictured Walter Payton (“Sweetness), is as viable as any of them for a squeeze higher from beaten-down conditions.
I am stalking it on any further strength as a long.
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