Techs, small caps signaling short-term top?
While the intermediate-term trend (measured in weeks/months) continues to remain positive, there are some signs that the market may be about to take a short-term breather (measured in days/weeks):
- Friday’s weak close may lead to some follow-through this coming week
- Short-term “overbought” readings on the DJIA are the highest they’ve been since the mid 1990s on the price oscillator indicator that I follow
- And for the first time since this up move began, the Nasdaq and Russell 2000 are exhibiting short-term negative divergences on their price oscillators (see below), possibly foreshadowing some coming weakness in the overall market:
Another concern is the negative trend picture of the Semiconductor HLDRs ETF – it’s hard to see the broad market continuing to rally strongly without the semiconductor sector participating. The price chart does look potentially vulnerable here:
All that said, my focus remains on the intermediate-term trend picture, and as long as that remains positive I’ll continue to view any pullbacks as welcome put-selling opportunities.
New Positions
No new positions this week, despite some attempts – via limit orders – to sell puts on Briggs & Stratton (BGG), Hershey (HSY), Pfizer (PFE), and Sanderson Farms (SAFM), as well as covered calls against one of my long stock positions (DuPont (DD)).
Watchlists
Given the market’s recent strength, I’m not surprised at the plethora of stocks that popped up in this week’s “upside strength” scans. Some that caught my eye as potentially interesting intermediate-term put-selling candidates on pullbacks include Allstate (ALL), American Electric Power (AEP), Amgen (AMGN), Barnes & Noble (BKS), Bausch & Lomb (BOL), Biomet (BMET), Canadian National Railway (CNI), Chevron (CVX), Companhia Vale do Rio Doce (RIO), Dow Chemical (DOW), Estee Lauder (EL), Gannett (GCI), Hasbro (HAS), Honeywell (HON), Novartis (NVS), Pentair (PNR), Polaris Industries (PII), Siemens AG (SI), Sonic Automotive (SAH), Southern Copper (PCU), WalMart (WMT), and Petrolio Brasileiro S.A. (PBR).
On the other hand, this week’s scans for “oversold” stocks offered pretty slim pickings. However, there were a few candidates of interest, including First Bancorp Puerto Rico (FBP), Newmont Mining (NEM), Popular (BPOP), Sanderson Farms (SAFM), and Walgreen (WAG).
