I have a pet peeve. It's about charts. I cringe when I see someone show us a chart of a stock that has doubled or tripled already and is trading near the highs and they say something like, "what a beautiful chart."
What is so beautiful about it? It's up already. Are you going to buy it up there? If not, what's so great? Think about a chart like Square (SQ) . It has been awesome. It has tripled off the lows. But is it a beautiful chart up here? Not to me.
To me it was a beauty when it was nearing $80, or better down near $60, as it was digesting the move off the low, going sideways, getting ready to go up again. To me, that is when the chart looks pretty, enticing, worth looking at.
You can anticipate crossing that red line, the breakout. You might even call the chart a beauty after the breakout and run to $90 and then you get that pullback to the line in the mid-$80s. That too was lovely. But now up here? What is so great about it?
Take a look at a chart like the Bank Index. To me, that is a beauty. If this chart, which did not break down, can get some traction and get going on the upside, it would be pretty. And it is hated. No one loves the banks. Oh, maybe they like JPMorgan (JPM) , but as a group, nope, everyone you see has a laundry list of reasons why you can't own them. Yet look at that chart.
Or what about gold (GLD) ? Wasn't the time to love GLD when it was down and out? Or heck, even recently I thought after it broke out of that small base in mid-June it would be better, if we bought the dip to $165 to test the line. But up here at $173? No thank you. Especially when that target I calculated recently is around $175-$176. Oh, and the Daily Sentiment Index (DSI) for Gold is $86, so the runway is short.
Silver (SLV) has soared, as well. I can't chase it up here, but at least the breakout was only two weeks ago. There is a target in the $23-$25 area, but the DSI is $93. So a few days of rest or pullback should rectify that.
In any event, breadth was better for the market on Tuesday. Even Nasdaq had better breadth, despite being down on the day. That's what happens when stocks outside of the mega cap tech names are allowed to join the party.
For example, the number of stocks making new highs on the New York Stock Exchange increased. It's still far below the January peak, but unlike Nasdaq, it is still increasing.
The biggest challenge remains the sentiment. I simply think it is far too complacent and each day it gets more complacent. The put/call ratio for exchange-traded funds has been below 1.0 for five of the last six trading days. The 21-day moving average hasn't moved to an extreme yet but it's heading there.