DJIA:  33,414

Sure it’s the end of the world … could it be discounted?  So it might seem to look at the market’s resilience.  It’s not just the Middle East, last week’s numbers weren’t exactly market friendly.  Yet for the most part things have held together pretty well – ignoring bad news being a good sign, if you believe it’s the market that makes the news.  More quantifiable, the A/Ds have been positive 6 of the last 10 days.  And while a bit of a backhanded compliment, there have been no what we call bad up-days.  When the market goes down, bad A/Ds are to be expected, it’s those up-days with poor A/Ds that cause problems.  Meanwhile, since the end of July the market has been in what the textbook would call a correction in an uptrend – a correction that has held the 200-day in terms of the S&P.  What’s needed is a little upside momentum, a push through the 50-day around 4400.

The market may make the news, but the news these days has made for some considerable volatility, and then there’s the bond market, pretty much responsible to the minute for Tuesday’s good start and poor finish.  If war and rates were not bothersome enough, then there’s China.  Markets are always rife with cross currents of sorts, this one perhaps more so than most.  We continue to think Staples are worth a look, oversold doesn’t mean over, but in this case they are historically so.  Aerospace/Defense shares have their obvious appeal, as well as the appeal of good charts.  Oil also seems a hedge of sorts.

Is Gold the new Bitcoin?  And if so, is that a good thing?  Both have seemed a good hedge only against making money.  To be fair Gold has regained a pulse of sorts, but it’s hard not to be skeptical.  We like a market that can ignore the chance to go down, we don’t like that Gold has ignored many chances to go up.  However, it has shown a better than typical response to recent events.  And to look at the usual suspects like the ETFs, GDX (30) and GDXJ (35), they are at least back above their 50-day averages.  Bitcoin has been worse than Gold, though it did come to life on the false rumor that a cash ETF was about to be approved.  There is already an ETF based on futures, and with the backing of Blackrock, a former Bitcoin denier, approval eventually seems likely.  A clear beneficiary here is Grayscale (22).

We place a good deal of emphasis on Advance-Decline numbers, that is, what the average stock is doing.  It’s always relative, of course, relative to what the stock averages are doing. Even daily it’s not good to see the two out of sync.  Down days in the Averages the A/Ds likely will be down as well.  Up-days in the Averages the A/Ds should be positive as well.  When they’re not, when there’s what we call a bad up-day it leads to problems, often sooner than later.  While we argue down days and negative A/Ds happen, there is a caveat.  And it comes about when as this last week you see a couple of outsized negative A/D numbers relative to the Averages.  This leads to divergences that are difficult to correct, and divergences eventually lead to weakness in the Averages. The timing here is unknown, but with fewer stocks participating, it speaks to a difficult market in any event.

Biden warns don’t mess with Israel!  What about messing with Taiwan?  Who was thinking about Gaza a week ago?  We haven’t even mentioned Iran – clearly there’s a lot going on.  Contrary to the norm, this sort of news can make the market – the unknown, unknowns. Little wonder the S&P finds itself backing off of the 50-day and teetering in its recent range.  Then, too, this seems as much about the other war, the bond market war.  The 10-year Treasury Yield is now back above its level on the eve of the Hamas attacks.  What happened to the flight to quality?  The prevailing fear of many, recently articulated by Paul Tudor Jones, is that investors will grow leery of US deficits, and demand higher yields.  That’s called a buyers’ strike, and still higher yields.

Frank D. Gretz

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Market lows … they’re about the sellers not the buyers. Most think lows are made when the buyers step up. To the contrary, it doesn’t take all that much buying when the sellers are out of the way. No selling and prices move up as in a vacuum of sorts. And when are the sellers out of the way? There are a couple of ways to analyze that, and both seemed at play last Friday. Going into Friday the S&P was down only some 8%, while most stocks were down much more. Indeed, by the end of last week stocks above their 200-day had dropped from 38% to 30%, and that included Friday’s upside reversal. For the 200-day, that’s quite a weekly drop, enough to perhaps suggest much of the selling was out-of-the-way. By comparison, the declines in March and again in May saw this number around 36 – 37%. Being down a lot of course doesn’t mean they have to go up. Last October the number was around 17%.

The other part of determining if the selling is out-of-the-way is pretty simple – have they stopped going down and started going up. Here we will make the point we always make about news like Friday’s Jobs number. It’s never about the news, it’s about what the market does with the news. Bad news and the market goes down, that’s what you would expect it to do, you learn nothing. Friday’s news was worse than bad, but after a down opening the market reversed higher. You never know, but you have to say that seemed a market that didn’t want to go down, a market that didn’t in fact go down because the sellers were out of the way? Not only did it not go down, it turned into a decent day to the upside – 3-to-1 up. Monday seemed less dramatic despite the horrible news and its far-reaching market implications, yet the market again managed to reverse higher.

With the market under some pressure recently, you might have expected defensive stocks to come to the fore. That has not been the case, rather just the opposite. To some extent the bond market seems at blame, especially when it comes to the Utilities. Staples have been under pressure as well, even prior to the obesity drug concerns. Meanwhile, the McClellan Summation Index for Staples, a measure of supply and demand, is near the worst levels in history, a level from which it tends to rebound. SentimenTrader.com shows one-year gains of 20% following such extremes. Interesting too, Staples have one of the highest ratios of Put/Call buying in a decade. At the same time corporate insiders have been buying shares and lessening their selling, pushing the Buy/Sell Ratio to one of the highest levels in more than a decade.
The stock market is a place where simple logic doesn’t work – Staples being yet another example. And for all the fuss over earnings, being in the right place always seems more important, though for sure that’s a movable feast. For now, the right place seems Tech generally, but most of FANG+ specifically. They seem and act like the new defensive stocks, giving up little in market weakness. And if higher rates were the problem, it too may now be a tailwind. Defense stocks have had a run, but Cyber stocks have seemed surprisingly dormant for a while. Perhaps no longer to look at names like Palo Alto (261) and CrowdStrike (188). We mentioned United Health (526) last time, noting the appeal of having the group as a whole acting well.

The devil is dancing in the Middle East. The question is how far? Yet the market had seemed to be taking it in stride, along with a less than friendly Jobs number, PPI, CPI and even the auction on Wednesday. This changed with Thursday’s auction when the market abruptly tanked. Are rates still that important, was the auction that much of a surprise? Or could it simply be the market being the market. The low last Friday and subsequent rally, though impressive made a setback likely. We believe they’re going up; we don’t believe straight up. The low last Friday is one thing, a new big uptrend another. The latter takes time, some backing and filling, call it what you like. On a very short-term basis, even when the Averages were up Thursday the A/Ds were negative – always something to note. One day is just that, but consecutive days of 2-to-1 up this week were impressive.

Frank Gretz

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DJIA:  33,119

Rates, rates, rates … we hear they’re going up.  In fact, that’s all you hear.  Having reached the mainstream media, perhaps it will do what talk of $100 Oil did for Oil.  The yield on the 10-year Treasury has reached an extreme, or has it?  In any event, it’s hard to argue this has been anything but bad for stocks and most of the commodities.  We had thought the market could live with higher rates, of course that was when the market was acting like it could live with higher rates.  It has since become less technically healthy and remains so.  You would think those Regional Banks would be a particular concern, given what happened in March when rates were not even this high.  Not surprisingly the charts there are not so wonderful.  It may not be the level, but the abrupt change in rates that causes something to break.  We wonder if rates had anything to do with the hit to Oil recently or look at American Express (147).  It’s not unusual to find out only later who is vulnerable, who was swimming without their suit as Buffet likes to say.

We had looked at this weakness as your garden-variety correction, a correction in an uptrend.  After all, on the whole this year has shown some impressive momentum, the kind that doesn’t turn easily or quickly.  In terms of the Averages, it still falls in that category.  However, the intensity of the selling, if that’s the term for it, makes it look possibly different.  In terms of the A/Ds the market fell for nine consecutive days through September 27, and likely 4 of 6 through Thursday.  Two of this week’s down days were 5.6-to-1 and 4.6-to-1, not exactly garden-variety selling.  Mercifully, the A/Ds were respectable in Wednesday’s rally.  These numbers are a bit worse than those in the March weakness, then too it may be too soon to say.  At issue here is a garden-variety decline versus something more severe.  The former is a gradual move to a sold-out turn, the latter a more violent one.  More days like Wednesday would argue for the former.

For all of the market’s problems, there are a few stocks/areas that are interesting.  In corrections, the good guys stand out, if only because they either stop going down or never went down.  The most obvious here is Nvidia (447), interesting in the sense it arguably got the correction going.  You might recall – good news and the stock reversed lower back at the end of August.  That it has been holding the last couple of weeks, against a weak market for Tech, seems interesting.  It’s toying with the 50-day, while a move above it would be positive for it and the market.  A kindred spirit here is Super Micro (288), which is already above its 50-day, at least for now.  Then there’s Tesla (260) which failed a couple weeks ago, after we praised the pattern, now again above the 50-day.  And finally, there’s United Health (516), which because of some violent moves always seems difficult.  It’s back to recent highs and with the group seemingly behind it, impressive in this market.      

IBD will tell you as much as 75% of the movement of any stock is a function of the market’s overall trend. We couldn’t agree more, and that’s why we got into this business. We noticed our wonderful stock picks somehow did better in good markets.  They seemed to go up and down with the market, which made us think this market thing might be worth looking into.  To get to some point here, given the recent A/Ds, 75% might be a little light.  This tide has sunk most ships.  To us the market is about the A/D numbers.  Easy to be a good trader on those 5-to-1 up days versus those 5-to-1 down days.  We’re happy with 2-to-1 up days.  Easy to be a good trader when 70% of stocks are above their 200-day, that is, in uptrends versus 30% now.  As per the above, there are some things to look at here, but it’s best to have that market wind at your back.

If we had a brother at the Labor Department, and knew ahead of time the Jobs number, we pretty much wouldn’t care, especially this month.  After all, in this environment what is a good number?  A bad number, that is one good for the market, means the Fed can stop raising because the world is coming to an end.  A bad number, the economy is still humming along, but the Fed will keep tightening.  Then too, thinking what we’ve already been through, a little more selling could put in a low.  Keep in mind, it’s selling not buying that makes lows. When the selling this out-of-the-way, you don’t need much buying to lift prices.  We’re not predicting the number and we’re not predicting the outcome. The real point is it’s not about the news.  It’s about the market’s reaction to the news. The best outcome might be a number the market shouldn’t like, but it rallies anyway.

Frank D. Gretz

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DJIA:  33,666

When the market creates divergences, those divergences cause problems.  The timing, of course, can be elusive, but the longer they persist typically the greater the problem.  The most typical of these divergences is between the stock Averages and what we call the average stock. The S&P, for example, even now is a few percent above its 200-day average, while fewer than 40% of its component stocks are above their own 200-day.  Semis recently hit a two-month low for the first time in a year, while the NASDAQ’s rally was accompanied by a doubling in 12-month lows.  Getting out of this correction will take a change in this pattern to one with better overall A/Ds and improvement in stocks above their 200-day.  And it will take time.  The A/Ds were up all day Thursday.  It’s just a start, but a start.

Uranium prices hit a 12 year high recently, offering hope to the nuclear hopeful.  In part you can blame or thank Russia – gas prices spiked and Uranium prices followed after the Ukraine invasion.  Fukushima, of course, had brought a halt to many projects, leaving the Uranium market over-supplied for more than a decade, according to the Financial Times.  Now there is an effort by some countries to extend the life of existing reactors as they contemplate new ones.  All these factors are at play in the recent price rise.  Like most things these days, there is an ETF for Uranium (URA-28), Cameco (41) is 26%.

Frank D. Gretz

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DJIA:  34,070

Higher for longer … probably not a reference to stock prices.  Did we miss something Wednesday, did the Fed actually raise rates?  Were Powell’s comments really new or that much of a surprise?  It’s tempting to say the market overreacted, but so it goes in weak markets.  If not bad the news is taken as such. While it has been a bit higher and a bit lower, the S&P is where it was in June, what we call a trading range.  And the Index has held 5% or more above its 200-day for several months.  S&P components, however, have been telling a different story with fewer than 60% above their own 200-day.  By way of perspective, when the S&P is 5% above its 200-day a median of 80% of components are above their own 200-day, according to SentimenTrader.com.  For all NYSE stocks, fewer than 50% are above their 200-day.  These are not bell-ringing negatives, and typically drag on for a time.  All of these divergences, however, leave the market vulnerable.

Meanwhile, the NASDAQ has had its own technical issues.  Over the last few weeks, the NAZ 100 had moved higher, while the percentage of stocks within that index at a 12-month low more than doubled.  Of late the large caps have masked much of the weakness, and this seems particularly true of the Semis.  While the focus has been on Nvidia (410) and a few others, and while the Semiconductor Index has held together, much like the NDX weakness among the rank and file has been rather pervasive.  Look at Taiwan Semi (85), which started the recent weakness.  The much-vaunted Arm (52) IPO struck us as a real bell ringing event.  Already down more than 20% from its high a few days ago, the company does more business in China than Apple (174).

We know Tech stocks don’t like rising rates, but it looks like the regional banks may be getting jammed again as well.  Regionals are 20% or so of the Russell 2000, and that’s now below its 200-day.  Hardly the same picture but the Econ-sensitive stocks like Parker Hanafin (382) have begun to roll over. Then there’s the weakness in retail and the credit card lenders.  It’s enough to make you think what soft landing?  The FANG and FANG+ stocks haven’t exactly been immune to the weakness but have held together reasonably well – sort of in their own world when the world isn’t such a happy place.  Impressive amidst Wednesday’s mess was the breakout in IBM (147).  Oil and oil stocks have gotten out of sync recently, with the latter the weaker – not usually a good sign.  That said, something seems good for refiners like Valero (146).

Are the Utilities so bad they’re good?  The XLU (63) is down about 12% over the last year, out of favor along with other safe stocks like food and beverage shares.  Higher rates also have made utility dividends less relatively attractive.  A recent Barron’s article also pointed out the companies are adding clean energy plants faster than they’re retiring the old ones, allowing them to grow their rate base and, hence, their profits. Unimpressed by the positives, 90% of the components of the XLU reached a 12-month low recently.  This backdrop has led to higher prices for XLU over the next 6 to 12 months, according to SentimenTrader.com.  It also seems interesting and surprising that there has been a spike in Put buying here.

The Fed’s “hawkish pause” no doubt was intended to curb the market’s enthusiasm.  Something was different this time, however, at least for now it seems to have worked.   Powell often talks hawkish, but the market typically sees through him, betting he will buckle at the first sign of trouble.  Looking at the Fed funds futures, the Fed market as it were, the possibility of another hike this year isn’t taken seriously.  The reason stocks may have

taken Powell more seriously this time is that the market is in a relatively weaker technical position.  Remember, too, at play here are the debt ceiling and the auto strike.  Selling on the Fed news may be an excuse to get out ahead of these other problems.  In any event, what’s needed is better numbers from the average stock, those A/Ds and those stocks above their 200-day.

Frank D. Gretz

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DJIA:  34,907

Stuck inside of Mobile… with the Memphis blues again.  While that Dylan lyric would seem to have little to do with the stock market, that word “stuck” brought it to mind.  It pretty much says it all when it comes to our view of the market these days.  The major averages are on or just above their 50-day averages.  Our preferred look at the market, stocks above the 200-day average, has hovered around 50% since the start of August.  Granted 70% or more here is a good figure, but 50% or less means half of all stocks on the NYSE are in downtrends.  Meanwhile, the Russell is below its 50-day and teetering on its 200-day.  Regional banks, 20% of that Index, are well below the 200 and look about to break again, leaving you to wonder if there’s a message there.  The momentum measures we follow had turned marginally positive in late August, but since have rolled over again.  They don’t usually change so quickly, but you know what Keynes used to say.

In Isaacson’s biography of Elon Musk, he recounts a meeting between Musk and Bill Gates.  Musk’s first question to Gates was whether he was still short Tesla (276).  He was and apparently went on to explain why, but our point is there are different opinions about Tesla, even among reasonable and smart people.  For our part, we’re just here to talk about a chart pattern we like, and for now that happens to be Tesla’s.  Price gaps are one of our favorite technical patterns, yes they are technical patterns, and yes Tesla has one.  They happen when the low price of one day is enough above the high price of the previous day, that on a bar chart a gap appears.  Technical analysis is an analysis of supply and demand, and what could be more indicative of demand than enough buying to cause a price gap?  In the case of Tesla’s gap Monday, it also took the stock back above is 50-day average.  Some consolidation would not be unusual, and the stock now needs to hold above the gap and the 50-day.

To continue this impromptu tutorial on price gaps, how about that Oracle (114) – a good chart until Tuesday’s downside gap of more than 10%.  Yet another reason this isn’t coming to you from the Côte d’Azur.  Prices usually follow in the direction of price gaps, whether they be up or down.  The exception is when the gap does not change the overall trend.  In the case of Oracle, it pretty much continues in an overall trading range going back to mid-June, and the stock remains above its 200-day average.  Oracle was among those stocks we mentioned last time, calling them the “retro Techs.”  To Dell (71), IBM (147) and Cisco (56) we might have added Intel (39).  While everyone frets over Nvidia (456), ironically it’s Intel, and even Micron (72) that have performed the best. When it comes to Nvidia, the chart it’s still fine, but like the market stalled.  We wonder too, if the Arm offering may have siphoned off a little Semi money.

A new concern this week was the poor action in what we have called Econ-sensitive stocks like Parker Hanafin (395) and Eaton (222) – the latter having dropped 20 points in two days.  It is the largest holding in PAVE which now has taken out a couple of support levels and the 50-day.  We have used these stocks as an argument against a recession, and if that’s changing so too would our recession opinion.  Meanwhile, the case for recession has always seemed to lie in the consumer, based on the action in retail and lenders like Capital One (102).  A couple of bad days doesn’t mean it’s time to panic, but it’s certainly time to pay attention.  In another somewhat retro move, some of the FANG+ names are back on track.  Most of these, Tesla being a prime example, seem in their own world rather than market sensitive, perhaps the perfect thing for a stuck market.

After last week’s spate of selling, this week’s CPI and PPI could have been taken as good or bad.  If the market makes the news, the market’s lack of reaction offered little insight.  And after a worrisome Wednesday, Thursday’s strength was a welcome relief, not so much for the strength of the Averages as the 3-to-1 A/Ds.  One day is just that – what’s needed is more evidence upside momentum has been regained, that is, more days like Thursday.   It’s an interesting overall backdrop.  Despite the inverted yield curve, a contraction in money supply and declines in leading economic indicators, most have turned optimistic – soft landing, and so forth. Goethe said the intelligent man finds everything ridiculous, or is the market just doing it’s discounting thing.

Frank D. Gretz

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DJIA:  34,500

So far September is living up to its reputation – it’s the year’s worst month.  A bit of a surprise given last week’s positive action, and this September actually has a couple positive aspects.  A down August is often followed by a good September and pre-election years also favors more positive outcomes.  Try though you might, it’s hard not to think it’s Tech’s world.  Everyone couldn’t wait for the pullback in Nvidia (462), and now what?  Apple (178) is “own it don’t trade it” until China bans the iPhone.  The market is in another little correction phase, and as always and forever – news follows price.   Need now is for the market to start ignoring some bad news, like Apple’s and rates, and to get back to a pattern of positive A/Ds.  Meanwhile, Tech is just fine when it comes to what we call “retro Tech” like IBM (148), Oracle (125), Cisco (57), and best of all recently, Dell (69).

Frank D. Gretz

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DJIA:  34,721

It’s about stocks … more than the stock averages.  While the focus is always on the market averages, typically it’s the average stock that tells the story.  When they began to diverge even a bit back in July, it set the stage for the recent little correction.  It has been easy to call the recent weakness a bull market correction, but you never know.  When the S&P has spent close to 100 days above its 50-day average, the first break is just that – a bull market correction and only about 6%.  When last week’s numbers saw close to 50% of stocks at a 30-day low but only 4% at a 12-month low, that says correction in an uptrend.  Relatively muted selling is one thing, needed is a revival in buying, making this past week a good one.

Beginning in the second week of July the market hit a real dry spell – eight consecutive days of negative A/Ds, 10 of 11 in all.  Downtrends happen, the real damage technically was when three of those days saw the market averages higher. This sort of divergent action can go on, but it never ends well.  This pattern changed last week when finally there was a buying interest, a day with almost 4-to-1 up.  One up day will never make a difference and, indeed, some of the best up days have occurred in bear markets.  That day, however, was followed by a couple of days with 3-to-1 up and Tuesdays surprising 5-to-1 up day.  This makes the correction likely over, though the usual caveats apply.

We have suggested Nvidia’s (494) “sell on the news day” was not a complete surprise, though you never like to see the market ignore good news.  In this case it seemed not that expectations were too high, rather enthusiasm was too high.  It was the euphoria that needed to be corrected, and the surprise weakness seems to have done so.  Now that the dust has settled, what remains is a technically good pattern, and Tech generally has improved.  What have been good charts all along, however, have been those stocks like Quanta (210), Roper (499) and Ingersoll Rand (70), among others.  The group with the greatest number of stocks above their 200-day is Oil, though no one seems to care.  And when was the last time you thought about Uranium (24)?  Meanwhile, Retail is weak to the point of being worrisome.  Banks are another problem, but one that’s known.

Too big to fail, but too big to be saved.  That’s how the Chinese real estate market has been described.  Then, too, there isn’t much anywhere about China that can be construed as positive.  According to the Bloomberg database of news articles, there has never been a week with more negative articles dating back a decade.  Not surprisingly the Shanghai Composite hit new lows recently, accompanied by extreme oversold readings.  Oversold doesn’t mean over, but similar past readings have resulted in a rebound.  China always seems able to stimulate its way out of these problems, though doing so always becomes more difficult. We’re not fans here, but we would point out that the charts of individual charts are not as bad as you might think – they’re trading ranges.  Like it or not China matters, problems in China rarely stay in China.

Not long ago we wrote the odds of getting a good Tech report was slim to none.  Now that seems to have changed, not just with Nvidia but even this week with the DJ component Salesforce (221), OKTA (84) and CrowdStrike (163).  The favorable responses here could be about the reports per se, but we tend to think it’s about the market – in this case it’s the market that made the news.  At the very least, the market isn’t ignoring good news, another sign the correction is likely over.  This and the change in the A/Ds argue for higher prices.  It is a seasonally weak period, but something you hear almost too often.  Moreover, it’s not such a big deal in pre-election years.  It may not be straight up, but up provided we stay away from those bad up days – up in the Averages but with poor A/Ds.

Frank D. Gretz

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DJIA:  34,099

If it’s a low … is it an uptrend?  They may seem the same, but they are not always so.  By historical standards a low should be close – bull market corrections typically fall in the 6% range.  The S&P has taken out its 50-day, as have most of the Averages, but this says little more than we are in a correction phase.  What does seem consequential is that the S&P had remained above its 50-day for close to 100 days. This sort of trend doesn’t happen in bear markets.  When the trend does end, on average the correction again tends to be about 6%.  We don’t really like data like this because often there’s “always something.”  Suffice it to say for now the weakness seems normal, if there is such a thing.  The rub comes in the new uptrend.  After breaking the 50-day sorting things out typically takes a month or so, new highs usually come a couple months later.  Even market lows can be a process.  

Banking may be a fine profession, it’s the bankers that give us trouble.  If not lending to Third World countries, or to see-through office buildings, they’re trying to rig LIBOR.  For now it’s the Regionals that are between a rock and a hard place.  They’re caught in the equivalent strategy of buying High, selling Low, and making it up on volume – a strategy we’ve tried with stocks from time to time.  Of course it’s not like rising rates were a big secret, and isn’t rate stuff what banks do?  What is done is done but not without some implications for the overall market.  There are a lot of banks and that has implications for market breadth, that is, the A/D Index.  It also helps explain why the Russell 2000, what we call love among the rejects, acts as badly as it does.  It’s 20% Regionals.

One non-reject in the Russell happens to be its largest holding, Super Micro Computer (263).  By our calculation, back in early August SMCI had outperformed Nvidia (472) year-to-date, then came the collapse – a 50-point downside gap, followed by an additional 50-point decline.  In Tech land, things sometimes change fast.  And things seem to be changing yet again. You can argue the overall uptrend was never threatened, and it was a much-needed correction, as they like to say.  What seems important in the here and now is the stock has re-taken the 50-day.  Buying stocks in overall or long-term uptrends is best.  When they correct, however, you never know.  Best to buy some if you must, and the rest when they retake the 50-day.

Tech gets all the attention, rightly so since they are what got us here, bull market-wise.  It is a bit ironic, however, that with the exception of Nvidia few Techs have been above their 50-day recently.  Meanwhile, the seemingly forgotten Oil shares have cycled from fewer than 15% above their 200-day to more than 90%.  This kind of momentum change has resulted in higher prices more than 80% of the time.  Then there are the unscathed, the stocks which have come through the correction with little or no damage.  Everyone likes to buy bargains, but often the stocks that give up little are those that lead in the next phase of rally.  We’re thinking here of stocks like Quanta (201), Eaton (221), Ingersoll (68) and Roper (489).  In Tech, Arista (179) has a pattern we particularly like – gap up and a high-level consolidation.

That Thursday was a “sell on the news day” was not completely surprising.  If more than just that it would be surprising, and not good.  We’ve been waiting for the market to ignore bad news, and there have been hopeful signs.  For sure, good markets don’t ignore good news.  Wednesday’s 3-to-1 up day, the first in more than a month, also was encouraging.  However, one day is just that, what is needed is a pattern of better A/Ds, especially on those days when the Averages are up.  Stocks aren’t cheap, rates are rising and Powell’s speech at this time last year took the market down some 19%.  A recovery is not guaranteed, but despite Thursday seems likely.  The S&P’s duration above the 50-day suggests this remains a bull market correction.

Frank D. Gretz

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DJIA:  34,413

The correction has been more than expected – or perhaps just different than expected.  While just a few percent in the S&P, it has hit the seemingly unstoppable Tech the hardest.  Best to be wary when they start giving things a name – one-decision stocks, dot-com’s, Magnificent Seven.  What’s done is done – now a couple things need to change.  Good markets ignore bad news, this market has ignored some market friendly news – the Jobs number, and more recently the CPI.  The market has to start ignoring bad news.  More importantly, the spate of recent days with the Dow up and the A/D’s flat or down needs to not only change, it needs to reverse.  More than any level in the Averages, what’s needed is a sign of a buying interest, a couple of days with 3-to-1 up.

Frank D. Gretz

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