{"id":69819,"date":"2024-07-28T00:19:22","date_gmt":"2024-07-28T07:19:22","guid":{"rendered":"https:\/\/drduru.com\/onetwentytwo\/?p=69819"},"modified":"2024-07-28T12:11:28","modified_gmt":"2024-07-28T19:11:28","slug":"market-rotations-are-wearing-down-overbought-resistance-the-market-breadth","status":"publish","type":"post","link":"https:\/\/drduru.com\/onetwentytwo\/2024\/07\/28\/market-rotations-are-wearing-down-overbought-resistance-the-market-breadth\/","title":{"rendered":"Market Rotations Are Wearing Down Overbought Resistance &#8211; The Market Breadth"},"content":{"rendered":"\n<h2 class=\"wp-block-heading\"><strong>Stock Market Commentary<\/strong><\/h2>\n\n\n\n<p><a href=\"https:\/\/drduru.com\/onetwentytwo\/2024\/07\/22\/bears-signal-readiness-to-bow-out-the-market-breadth\/\">Bears still look ready to bow out<\/a>, but they still have their paws firmly planted on high-tech stocks, especially semiconductors. The market rotations out of tech are nudging enough stocks higher, especially small caps, to rechallenge the threshold defining overbought conditions for market breadth. The stark divergence in stocks greatly reduces the usefulness of broad characterizations of the stock market; the current stock market is both bearish and bullish at the same time. For example, last week&#8217;s <a href=\"https:\/\/www.marketplace.org\/2024\/07\/25\/gdp-growth-consumers-spending-economy-sentiment-pandemic\/\">strong reading on the economy<\/a> sent the S&amp;P 500 and the NASDAQ deeper into breakdowns while small caps found fresh motivation. In other words, market rotations form the start of understanding the market&#8217;s current dynamics&#8230;and presents the latest challenge to <a href=\"https:\/\/drduru.com\/onetwentytwo\/t2108-resource-page\/\">the AT50 trading rules<\/a> on market breadth.<\/p>\n\n\n\n<br><script async=\"\" src=\"https:\/\/pagead2.googlesyndication.com\/pagead\/js\/adsbygoogle.js\"><\/script>\n<ins class=\"adsbygoogle\" style=\"display:block; text-align:center;\" data-ad-layout=\"in-article\" data-ad-format=\"fluid\" data-ad-client=\"ca-pub-1196033822186410\" data-ad-slot=\"3478942445\"><\/ins>\n<script>\n     (adsbygoogle = window.adsbygoogle || []).push({});\n<\/script><br>\n\n\n\n<h2 class=\"wp-block-heading\"><strong>The Stock Market Indices<\/strong><\/h2>\n\n\n\n<p>The S&amp;P 500 (SPY) failed to hold support at its 20-day moving average (DMA) (the dotted line below) after falling 2.3% on Wednesday. The index closed right on top of 50DMA support (the red line below) and ended what CNBC reported as the longest streak of trading days without a 2% or worse loss since before the Great Financial Crisis (GFC). Ironically, that very record motivated me to take profits on my SPY put options once the decline reached 1.5%; I figured that was about as far as sellers could go. The S&amp;P 500 returned to bear-fighting form by rebounding on Friday from a 50DMA breakdown. The index has now closed below its 20DMA for 4 out of the last 6 days. This count is notable. Prior to this episode, the index only closed below its 20DMA THREE times after the November breakout, excluding the April sell-off.<\/p>\n\n\n<div class=\"wp-block-image is-style-default\">\n<figure class=\"aligncenter size-full is-resized\"><a href=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-SP-500-SPY.png\"><img loading=\"lazy\" decoding=\"async\" width=\"1611\" height=\"795\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-SP-500-SPY.png\" alt=\"The S&amp;P 500 (SPY) failed to confirm its 50DMA breakdown, as it dipped out of it within one day.\" class=\"wp-image-69801\" style=\"aspect-ratio:2.0047732696897373;width:812px;height:auto\" title=\"S&amp;P 500 (SPY)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-SP-500-SPY.png 1611w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-SP-500-SPY-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-SP-500-SPY-1536x758.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-SP-500-SPY-1320x651.png 1320w\" sizes=\"auto, (max-width: 1611px) 100vw, 1611px\" \/><\/a><figcaption class=\"wp-element-caption\"><strong><em>The S&amp;P 500 (SPY) failed to confirm its 50DMA breakdown, as it hopped out of it within one day.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<div class=\"wp-block-buttons is-content-justification-center is-layout-flex wp-container-core-buttons-is-layout-5e6b19ed wp-block-buttons-is-layout-flex\">\n<div class=\"wp-block-button\"><a class=\"wp-block-button__link wp-element-button\" href=\"https:\/\/drduru.com\/onetwentytwo\/subscribe-free\/\" target=\"_blank\" rel=\"noreferrer noopener\"><mark style=\"background-color:#0693e3\" class=\"has-inline-color has-white-color\">Join the One-Twenty Two Mailing List for Free<\/mark><\/a><\/div>\n<\/div>\n\n\n\n<p><\/p>\n\n\n\n<p>The bears are keeping their paws planted on the NASDAQ (COMPQ). Thursday&#8217;s loss confirmed a 50DMA breakdown that started with what CNBC described as the tech laden index&#8217;s worst one-day loss since October, 2022. Yet, I did not chase the bears downward. At the same time, the volatility index spiked above its highest close of the year which in turn made me inclined to look for buying opportunities. Friday&#8217;s 11% plunge in the VIX validated my doubts about the staying power of market fears. Still, the NASDAQ looks topped out and broken down, so going long QQQ feels like a stretch!<\/p>\n\n\n<div class=\"wp-block-image is-style-default\">\n<figure class=\"aligncenter size-full is-resized\"><a href=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-NASDAQ-COMPQ.png\"><img loading=\"lazy\" decoding=\"async\" width=\"1609\" height=\"793\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-NASDAQ-COMPQ.png\" alt=\"The NASDAQ (COMPQ) decline confirmed its 50DMA breakdown but ended the week fighting back with a 1.0% gain.\" class=\"wp-image-69802\" style=\"aspect-ratio:2;width:836px;height:auto\" title=\"NASDAQ (COMPQ)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-NASDAQ-COMPQ.png 1609w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-NASDAQ-COMPQ-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-NASDAQ-COMPQ-1536x757.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-NASDAQ-COMPQ-1320x651.png 1320w\" sizes=\"auto, (max-width: 1609px) 100vw, 1609px\" \/><\/a><figcaption class=\"wp-element-caption\"><strong><em>The NASDAQ (COMPQ) decline confirmed its 50DMA breakdown but ended the week fighting back with a 1.0% gain.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>The iShares Russell 2000 ETF (IWM) fell with the other indices on Wednesday. Unlike the other indices, the ETF of small caps did not break down. Instead, IWM held its current trading range of churn. IWM proceeded to outperform on Thursday by gaining 1.3% despite a fade from the top of the trading range. Friday&#8217;s 1.7% gain took IWM right to the edge of its high of the year. IWM looks ready to break out to resume a bullish journey fueled by market rotations. I complemented my IWM call options with shares.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><a href=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-iShares-Russell-2000-ETF-IWM.png\"><img loading=\"lazy\" decoding=\"async\" width=\"1610\" height=\"794\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-iShares-Russell-2000-ETF-IWM.png\" alt=\"The iShares Russell 2000 ETF (IWM) jumped back to its 2-year high as small caps continued to benefit from market rotations.\" class=\"wp-image-69803\" style=\"aspect-ratio:1.995249406175772;width:840px;height:auto\" title=\"iShares Russell 2000 ETF (IWM)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-iShares-Russell-2000-ETF-IWM.png 1610w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-iShares-Russell-2000-ETF-IWM-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-iShares-Russell-2000-ETF-IWM-1536x758.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-iShares-Russell-2000-ETF-IWM-1320x651.png 1320w\" sizes=\"auto, (max-width: 1610px) 100vw, 1610px\" \/><\/a><figcaption class=\"wp-element-caption\"><strong><em>The iShares Russell 2000 ETF (IWM) jumped back to its 2-year high as small caps continued to benefit from market rotations.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<h2 class=\"wp-block-heading\"><strong>The Short-Term Trading Call With Market Rotations<\/strong><\/h2>\n\n\n\n<ul class=\"wp-block-list\">\n<li><strong>AT50<\/strong> (MMFI) = 69.4% of stocks are trading above their respective 50-day moving averages<\/li>\n\n\n\n<li><strong>AT200<\/strong> (MMTH) = 66.4% of stocks are trading above their respective 200-day moving averages<\/li>\n\n\n\n<li><strong>Short-term Trading Call<\/strong>: neutral<\/li>\n<\/ul>\n\n\n\n<p>AT50 (MMFI), the percentage of stocks trading above their respective 50DMAs, ended the week right below the 70% threshold for overbought conditions. Market breadth is benefiting from the market rotations given the sheer number of smaller stocks left behind by the herd piling money into big cap tech for so long: it only takes a fractional diversion of these flows to push the laggards a lot higher.<\/p>\n\n\n\n<p>This fascinating divergence in turn forces me to diverge from my AT50 trading rules by changing the trading call from cautiously bearish to neutral. The rules tell me to stay bearish and hope for another rejection from the overbought threshold to further confirm bearish trading conditions. However, the VIX&#8217;s violent shift from over-extended at the year&#8217;s closing high and shift into a sharp pullback is bullish trading action. In other words, the market rotations are making trading rules clash! (I will have to study the rare times the VIX surged going into overbought conditions &#8211; VIX surges should happen closer to oversold levels).<\/p>\n\n\n\n<p>To accommodate the 2-speed market, I need the flexibility of being bullish small caps while remaining skeptical of big cap tech. The neutral short-term trading call is best suited for the duality that comes from these market rotations. If market breadth flips overbought with this week&#8217;s Federal Reserve meeting, I fully anticipate an extended overbought rally&#8230;at least for small caps.<\/p>\n\n\n\n<p>Audio streaming platform Spotify Technology S.A. (SPOT) provides a small example of how earnings can instantly flip a technical outlook. Going into earnings, SPOT looked topped out. A slow and grinding recovery from a post-earnings loss in April ran out of gas in the two weeks going into earnings. A 50DMA breakdown seemed to confirm bearish technicals. Buyers came back with a vengeance with a 12.0% post-earnings surge.<\/p>\n\n\n\n<p>SPOT closed the week below its previous all-time high set in June. Now a fresh test of 50DMA support looks imminent. On the second post-earnings day, <a href=\"https:\/\/seekingalpha.com\/news\/4127646-spotifys-solid-earnings-story-is-music-to-goldmans-ears-ups-rating-to-buy\">Goldman Sachs (GS) upgraded the stock from neutral to buy with a $425 price target<\/a>. I am surprised traders and investors responded by selling the stock.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1611\" height=\"793\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Spotify-Technology-SA-SPOT.png\" alt=\"Spotify Technology SA (SPOT) set a 3 year high and tapered off afterwards, approaching the 50DMA.\" class=\"wp-image-69804\" style=\"width:840px;height:auto\" title=\"Spotify Technology SA (SPOT)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Spotify-Technology-SA-SPOT.png 1611w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Spotify-Technology-SA-SPOT-768x378.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Spotify-Technology-SA-SPOT-1536x756.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Spotify-Technology-SA-SPOT-1320x650.png 1320w\" sizes=\"auto, (max-width: 1611px) 100vw, 1611px\" \/><figcaption class=\"wp-element-caption\"><strong><em>Spotify Technology SA (SPOT) set a 3 year high post-earnings and tapered off afterwards, approaching the 50DMA.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>Talk about bullish surprises&#8230;on-line learning platform Coursera, Inc (COUR) ran up as much as 58.4% before settling into a 44.7% post-earnings gain. Earlier this year I finally gave up on the on-line learning space and sold almost all of my holdings, including COUR. While I am maintaining a skeptical eye, this price action in COUR motivated me to run back into Chegg, Inc (CHGG) which is in the middle of a 50DMA breakout. <\/p>\n\n\n\n<p>The big news for COUR almost qualifies it for the generative AI basket. From <a href=\"https:\/\/seekingalpha.com\/article\/4706974-coursera-inc-cour-q2-2024-earnings-call-transcript\">the Seeking Alpha transcript of the earnings conference call<\/a>:<\/p>\n\n\n\n<blockquote class=\"wp-block-quote is-layout-flow wp-block-quote-is-layout-flow\">\n<p>&#8220;Consumer revenue was $97.3 million, up 12% from the prior year on growth in Coursera Plus, driven by ongoing demand for entry-level Professional Certificates and generative AI courses and credentials&#8230;<\/p>\n\n\n\n<p>Generative AI can act as both a disruptor and an enabler. Whether it widens or narrows the opportunity gap depends on our ability to make education and skilling equally accessible on a global scale. Leading partners like Microsoft who are creating the next generation of technology, tools, and services that will fundamentally reshape work and the labor market more broadly are embracing their collective responsibility to harness the potential of generative AI, turning it into an engine of opportunity for everyone. We are proud of Coursera\u2019s role and especially our partners who we work with in recognizing the importance of turning this threat into an opportunity through education.&#8221;<\/p>\n<\/blockquote>\n\n\n\n<p><\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1607\" height=\"793\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Coursera-Inc-COUR.png\" alt=\"Coursera Inc (COUR) took a 44% increase post earnings, after steady declines throughout the year.\" class=\"wp-image-69805\" style=\"width:840px;height:auto\" title=\"Coursera Inc (COUR)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Coursera-Inc-COUR.png 1607w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Coursera-Inc-COUR-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Coursera-Inc-COUR-1536x758.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Coursera-Inc-COUR-1320x651.png 1320w\" sizes=\"auto, (max-width: 1607px) 100vw, 1607px\" \/><figcaption class=\"wp-element-caption\"><strong><em>Coursera Inc (COUR) took a 44% increase post earnings, after steady declines throughout the year.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>The bears have a firm grip on United Parcel Service, Inc (UPS). UPS fell 12.1% post-earnings and dropped to a new 4-year low. Given the retail push into e-commerce, UPS&#8217;s woes should be a tell for trouble with consumers. Yet, UPS has been in a choppy downtrend since its all-time high in February, 2022. In fact, a multi-year look at UPS reveals an underperforming stock that had a brief revival in the wake of the pandemic. Prior to the pandemic, UPS went absolutely nowhere for 6+ years. In other words, UPS is returning to its norm with last week&#8217;s overdue close below its pre-pandemic all-time high. I am wondering how I failed to see this reversion until now.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1611\" height=\"797\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-United-Parcel-Service-Inc-UPS.png\" alt=\"United Parcel Service, Inc (UPS) crashed down below the 50DMA to a 4-year low, falling by 12% post-earnings.\" class=\"wp-image-69806\" title=\"United Parcel Service, Inc (UPS)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-United-Parcel-Service-Inc-UPS.png 1611w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-United-Parcel-Service-Inc-UPS-768x380.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-United-Parcel-Service-Inc-UPS-1536x760.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-United-Parcel-Service-Inc-UPS-1320x653.png 1320w\" sizes=\"auto, (max-width: 1611px) 100vw, 1611px\" \/><figcaption class=\"wp-element-caption\"><strong><em>United Parcel Service, Inc (UPS) crashed down below the 50DMA to a 4-year low, falling by 12% post-earnings.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>The shine is wearing off Ulta Beauty, Inc (ULTA). ULTA dropped 5.1% on the heels of an analyst downgrade to neutral. The 2-year low further confirms a double-top with peaks in 2023 and 2024. The loss also brought a promising 50DMA breakout to an abrupt end.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1611\" height=\"794\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Ulta-Beauty-Inc-ULTA.png\" alt=\"Ulta Beauty Inc (ULTA) broke down below the 50DMA, setting a 2 year low before jumping back up.\" class=\"wp-image-69807\" style=\"width:840px;height:auto\" title=\"Ulta Beauty Inc (ULTA)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Ulta-Beauty-Inc-ULTA.png 1611w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Ulta-Beauty-Inc-ULTA-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Ulta-Beauty-Inc-ULTA-1536x757.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Ulta-Beauty-Inc-ULTA-1320x651.png 1320w\" sizes=\"auto, (max-width: 1611px) 100vw, 1611px\" \/><figcaption class=\"wp-element-caption\"><strong><em>Ulta Beauty Inc (ULTA) broke down below the 50DMA, setting a 2 year low before jumping back up.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p><a href=\"https:\/\/en.wikipedia.org\/wiki\/Athleisure\">Athleisure<\/a> retail company lululemon athletica Inc (LULU) is also losing its shine. The expensive retail stock made a marginal all-time high in late 2023 to early 2024 and has slipped downhill ever since. Another big post-earnings loss took LULU to a 4-year low. The stock now looks like it is in danger of breaking below what is now effectively a wide 4-year trading range.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1612\" height=\"794\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Lululemon-Athletica-Inc-LULU.png\" alt=\"Lululemon Athletica Inc (LULU) continued to decline, setting a 4 year low before a tepid 2.5% gain.\" class=\"wp-image-69808\" style=\"width:840px;height:auto\" title=\"Lululemon Athletica Inc (LULU)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Lululemon-Athletica-Inc-LULU.png 1612w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Lululemon-Athletica-Inc-LULU-768x378.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Lululemon-Athletica-Inc-LULU-1536x757.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Lululemon-Athletica-Inc-LULU-1320x650.png 1320w\" sizes=\"auto, (max-width: 1612px) 100vw, 1612px\" \/><figcaption class=\"wp-element-caption\"><strong><em>Lululemon Athletica Inc (LULU) continued to decline, setting a 4 year low before a tepid 2.5% gain.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>DexCom, Inc (DXCM) was the shocker of the week. The maker of continuous glucose monitoring (CGM) systems seemed doomed with the rising popularity of <a href=\"https:\/\/www.mayoclinic.org\/diseases-conditions\/type-2-diabetes\/expert-answers\/byetta\/faq-20057955\">GLP-1 drugs<\/a> that are miraculously curing people of obesity. Yet, the stock obliviously motored along. While it seems <a href=\"https:\/\/seekingalpha.com\/news\/4129136-dexcom-stock-falls-downgrades-guidance-cut\">the prospects of fewer customers was not the cause of this abrupt collapse<\/a>, I do not see a buying opportunity here except as the most speculative of trades.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1611\" height=\"795\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-DexCom-Inc-DXCM.png\" alt=\"DexCom Inc (DXCM) hit a 4 year low after crashing 40% post-earnings.\" class=\"wp-image-69809\" title=\"DexCom Inc (DXCM)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-DexCom-Inc-DXCM.png 1611w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-DexCom-Inc-DXCM-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-DexCom-Inc-DXCM-1536x758.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-DexCom-Inc-DXCM-1320x651.png 1320w\" sizes=\"auto, (max-width: 1611px) 100vw, 1611px\" \/><figcaption class=\"wp-element-caption\"><strong><em>DexCom Inc (DXCM) hit a 4 year low after crashing 40% post-earnings.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>I recently took profits in General Motors Company (GM). I bought the stock as a contrarian play against the market&#8217;s focus on big cap tech and doubts that GM could succeed in EVs. Last week, the momentum turned downward with a 6.4% post-earnings loss followed by a confirmed 50DMA breakdown. A close below the May lows would confirm a bearish turn for the worse.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1611\" height=\"795\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-General-Motors-Co-GM.png\" alt=\"General Motors Co (GM) broke down below the 50DMA after a post earnings decline.\" class=\"wp-image-69810\" style=\"width:840px;height:auto\" title=\"General Motors Co (GM)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-General-Motors-Co-GM.png 1611w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-General-Motors-Co-GM-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-General-Motors-Co-GM-1536x758.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-General-Motors-Co-GM-1320x651.png 1320w\" sizes=\"auto, (max-width: 1611px) 100vw, 1611px\" \/><figcaption class=\"wp-element-caption\"><strong><em>General Motors Co (GM) broke down below the 50DMA after a post earnings decline.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>With rate cuts imminent from the Federal Reserve, I expected commodities to rally. Instead, China&#8217;s economic troubles seem to loom larger over the sector. Diversified commodities giant and iron ore producer BHP Group Limited (BHP) last week dropped to an 8-month low before Friday&#8217;s small rebound. I went ahead and bought August call options assuming there is a sufficient chance that BHP will continue to bounce toward the top of its recent trading range if not higher.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1610\" height=\"791\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-BHP-Group-Ltd-BHP.png\" alt=\"BHP Group Ltd (BHP) hit an 8-month low before rebounding 2.2% to close the week.\" class=\"wp-image-69811\" style=\"width:840px;height:auto\" title=\"BHP Group Ltd (BHP)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-BHP-Group-Ltd-BHP.png 1610w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-BHP-Group-Ltd-BHP-768x377.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-BHP-Group-Ltd-BHP-1536x755.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-BHP-Group-Ltd-BHP-1320x649.png 1320w\" sizes=\"auto, (max-width: 1610px) 100vw, 1610px\" \/><figcaption class=\"wp-element-caption\"><strong><em>BHP Group Ltd (BHP) hit an 8-month low before rebounding 2.2% to close the week.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>Caterpillar, Inc (CAT) looked ready for a 50DMA breakdown on Wednesday. I promptly bought a put spread only to get caught by a sharp rebound. <\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1612\" height=\"796\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Caterpillar-Inc-CAT.png\" alt=\"Caterpillar Inc (CAT) confirmed 50DMA support as it rebounded towards July's high.\" class=\"wp-image-69812\" title=\"Caterpillar Inc (CAT)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Caterpillar-Inc-CAT.png 1612w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Caterpillar-Inc-CAT-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Caterpillar-Inc-CAT-1536x758.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Caterpillar-Inc-CAT-1320x652.png 1320w\" sizes=\"auto, (max-width: 1612px) 100vw, 1612px\" \/><figcaption class=\"wp-element-caption\"><strong><em>Caterpillar Inc (CAT) confirmed 50DMA support as it rebounded towards July&#8217;s high.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>3M Company (MMM) delivered a pleasant surprise. I bought MMM as a contrarian &#8220;value&#8221; play. Yet, MMM surprisingly continued to sink like a tech stock from the 2021 peak to last year&#8217;s bottom. MMM was not contrarian and the value reached bargain basement levels.. So I was quiet relieved and pleased to see MMM soar 22% post-earnings and print a 2-year high. This move is extreme (largest one-day gain ever for MMM!), so I fully expect some cooling and retracement before the stock moves higher again. MMM is looking good with a new CEO who seems ready to <a href=\"https:\/\/seekingalpha.com\/news\/4129148-3m-soars-in-stocks-best-day-ever-as-upbeat-outlook-points-to-fresh-start\">actively manage street expectations with under-promising and over-delivering<\/a>.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1613\" height=\"795\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-3M-Co-MMM.png\" alt=\"3M Co (MMM) soared 22% post-earnings off 20DMA support and set a 2-year high.\" class=\"wp-image-69813\" style=\"width:840px;height:auto\" title=\"3M Co (MMM)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-3M-Co-MMM.png 1613w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-3M-Co-MMM-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-3M-Co-MMM-1536x757.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-3M-Co-MMM-1320x651.png 1320w\" sizes=\"auto, (max-width: 1613px) 100vw, 1613px\" \/><figcaption class=\"wp-element-caption\"><strong><em>3M Co (MMM) soared 22% post-earnings off 20DMA support and set a 2-year high.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>Mr. Cooper Group Inc (COOP) is a non-bank servicer of residential mortgage loans. You might think that the housing market is in a major bull market looking at the stock trend higher all year. COOP hit a fresh all-time high after last week&#8217;s earnings. The stock looks like a buy on the dips until proven otherwise.<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><img loading=\"lazy\" decoding=\"async\" width=\"1612\" height=\"797\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Mr-Cooper-Group-Inc-COOP.png\" alt=\"Mr Cooper Group Inc (COOP) followed up a 50DMA breakout with a 6% post-earnings gain and all-time high.\" class=\"wp-image-69814\" style=\"width:840px;height:auto\" title=\"Mr Cooper Group Inc (COOP)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Mr-Cooper-Group-Inc-COOP.png 1612w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Mr-Cooper-Group-Inc-COOP-768x380.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Mr-Cooper-Group-Inc-COOP-1536x759.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-Mr-Cooper-Group-Inc-COOP-1320x653.png 1320w\" sizes=\"auto, (max-width: 1612px) 100vw, 1612px\" \/><figcaption class=\"wp-element-caption\"><strong><em>Mr Cooper Group Inc (COOP) followed up a 50DMA breakout with a 6% post-earnings gain and all-time high.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>International Business Machines Corporation (IBM) has had one seesaw journey so far this year. Post-earnings excitement in January retreated into post-earnings blues in April. A grinding recovery culminated in last week&#8217;s 4.3% post-earnings gain and a close near the highs of the year.<\/p>\n\n\n\n<p>I do not know what to make of this old school tech stock. IBM sits in its own category since it is not part of the growth big cap tech stocks that have vacuumed up so much money. Yet, IBM is also not a small cap stock that was previously left for dead. IBM is somewhere in the middle: a stock that still needs to prove itself with a breakout to a new high for 2024. Note that the current high stopped just short of the all-time high set way back in 2013&#8230;<\/p>\n\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full\"><img loading=\"lazy\" decoding=\"async\" width=\"1608\" height=\"794\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-IBM-Common-Stock-IBM.png\" alt=\"International Business Machines, Inc (IBM) rose by 5% post-earnings and stretched toward its high of the year.\" class=\"wp-image-69815\" title=\"IBM Common Stock (IBM)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-IBM-Common-Stock-IBM.png 1608w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-IBM-Common-Stock-IBM-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-IBM-Common-Stock-IBM-1536x758.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-IBM-Common-Stock-IBM-1320x652.png 1320w\" sizes=\"auto, (max-width: 1608px) 100vw, 1608px\" \/><figcaption class=\"wp-element-caption\"><strong><em>International Business Machines, Inc (IBM) rose by 5% post-earnings and stretched toward its high of the year.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><a href=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT50-MMFI.png\"><img loading=\"lazy\" decoding=\"async\" width=\"1609\" height=\"795\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT50-MMFI.png\" alt=\"AT50 (MMFI), tested the overbought threshold twice this week. Market rotations are wearing down overbought resistance.\" class=\"wp-image-69816\" style=\"aspect-ratio:1.9858156028368794;width:840px;height:auto\" title=\"AT50 (MMFI)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT50-MMFI.png 1609w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT50-MMFI-768x379.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT50-MMFI-1536x759.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT50-MMFI-1320x652.png 1320w\" sizes=\"auto, (max-width: 1609px) 100vw, 1609px\" \/><\/a><figcaption class=\"wp-element-caption\"><strong><em>AT50 (MMFI), tested the overbought threshold twice this week. Market rotations are wearing down overbought resistance.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n<div class=\"wp-block-image\">\n<figure class=\"aligncenter size-full is-resized\"><a href=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT200-MMTH.png\"><img loading=\"lazy\" decoding=\"async\" width=\"1613\" height=\"793\" src=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT200-MMTH.png\" alt=\"AT200 (MMTH) faded away from July's high and began to churn afterwards.\" class=\"wp-image-69817\" style=\"width:840px;height:auto\" title=\"AT200 (MMTH)\" srcset=\"https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT200-MMTH.png 1613w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT200-MMTH-768x378.png 768w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT200-MMTH-1536x755.png 1536w, https:\/\/drduru.com\/onetwentytwo\/wp-content\/uploads\/2023\/07\/072624-AT200-MMTH-1320x649.png 1320w\" sizes=\"auto, (max-width: 1613px) 100vw, 1613px\" \/><\/a><figcaption class=\"wp-element-caption\"><strong><em>AT200 (MMTH) faded away from July&#8217;s high and began to churn afterwards.<\/em><\/strong><\/figcaption><\/figure>\n<\/div>\n\n\n<p>Be careful out there!<\/p>\n\n\n\n<h2 class=\"wp-block-heading\" id=\"footnotes\"><strong>Footnotes<\/strong><\/h2>\n\n\n\n<p><a href=\"https:\/\/drduru.com\/onetwentytwo\/subscribe-free\/\" target=\"_blank\" rel=\"noreferrer noopener\">Subscribe for free<\/a> to get email notifications of future posts!<\/p>\n\n\n\n<p>&#8220;Above the 50&#8221; (AT50) uses the percentage of stocks trading above their respective 50-day moving averages (DMAs) to measure breadth in the stock market. Breadth defines the distribution of participation in a rally or sell-off. As a result, AT50 identifies extremes in market sentiment that are likely to reverse. Above the 50 is my alternative name for &#8220;MMFI&#8221; which is a symbol TradingView.com and other chart vendors use for this breadth indicator. Learn more about AT50 on my <a href=\"https:\/\/drduru.com\/onetwentytwo\/about\/t2108-resource-page\/\">Market Breadth Resource Page<\/a>. AT200, or MMTH, measures the percentage of stocks trading above their respective 200DMAs.<\/p>\n\n\n\n<p><strong>Active AT50 (MMFI) periods<\/strong>: Day #169 over 20%, Day #68 over 30%, Day #15 over 40%, Day #12 over 50%, Day #11 over 60% (overperiod), Day #7 under 70% (underperiod)<\/p>\n\n\n\n<p>Source for charts unless otherwise noted: <a href=\"https:\/\/www.tradingview.com\/\" target=\"_blank\" rel=\"noreferrer noopener\"><strong>TradingView.com<\/strong><\/a><\/p>\n\n\n\n<p><strong>Full disclosure:<\/strong> long SPY put spread and shares, long QQQ calendar call spread, long MMM, long SVXY calls, long CAT put spread, long BHP calls, long CHGG; long IWM call spread, calls, and shares<\/p>\n\n\n\n<p><strong>FOLLOW Dr. Duru&#8217;s commentary on financial markets via <a href=\"https:\/\/stocktwits.com\/DrDuru\" target=\"_blank\" rel=\"noreferrer noopener\">StockTwits<\/a>, <a href=\"https:\/\/x.com\/DrDuru\" target=\"_blank\" rel=\"noreferrer noopener\">Twitter<\/a>, and even <a href=\"https:\/\/www.instagram.com\/drduru_market_breadth\/\" target=\"_blank\" rel=\"noreferrer noopener\">Instagram<\/a>!<\/strong><\/p>\n\n\n\n<p>*Charting notes: Stock prices are not adjusted for dividends. Candlestick charts use hollow bodies: open candles indicate a close higher than the open, filled candles indicate an open higher than the close.<\/p>\n","protected":false},"excerpt":{"rendered":"<p>Stock Market Commentary Bears still look ready to bow out, but they still have their paws firmly planted on high-tech stocks, especially semiconductors. The market rotations out of tech are nudging enough stocks higher, especially small caps, to rechallenge the threshold defining overbought conditions for market breadth. The stark divergence in stocks greatly reduces the &#8230; <a title=\"Market Rotations Are Wearing Down Overbought Resistance &#8211; The Market Breadth\" class=\"read-more\" href=\"https:\/\/drduru.com\/onetwentytwo\/2024\/07\/28\/market-rotations-are-wearing-down-overbought-resistance-the-market-breadth\/\">Read more<\/a><\/p>\n","protected":false},"author":1,"featured_media":69848,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"_monsterinsights_skip_tracking":false,"_monsterinsights_sitenote_active":false,"_monsterinsights_sitenote_note":"","_monsterinsights_sitenote_category":0,"footnotes":""},"categories":[3252,368,483,482,199,2926,548,300,219,35,43,1312,512,338,1311,511,62,982,518,920],"tags":[2898,1820,2832,631,2397,64,63,2201,3371,3537,3538,1941,1942,2498,1342,399,400,2218,909,1780,2512,391,3373,413,65,2120,2390,362,2303,1781,1947,2448,2019],"class_list":["post-69819","post","type-post","status-publish","format-standard","has-post-thumbnail","hentry","category-artificial-intelligence","category-automotive","category-breakdown","category-breakout","category-commodities","category-education","category-financials","category-health-care","category-high-tech","category-housing","category-industrial-sector","category-manufacturing-2","category-resistance","category-retail","category-software","category-support","category-technical-analysis","category-trading-range","category-transportation","category-uptrend","tag-3m-company","tag-at200","tag-at50","tag-bhp","tag-bhp-group-limited","tag-cat","tag-caterpillar-inc","tag-compq","tag-coop","tag-cour","tag-coursera-inc","tag-dexcom","tag-dxcm","tag-general-motors","tag-gm","tag-ibm","tag-international-business-machines-corporation","tag-ishares-russell-2000-etf","tag-iwm","tag-lulu","tag-lululemon-athletica","tag-mmm","tag-mr-cooper-group-inc","tag-nasdaq","tag-sp-500","tag-spot","tag-spotify-technology","tag-spy","tag-trading-call-change","tag-ulta","tag-ulta-beauty","tag-united-parcel-service","tag-ups"],"yoast_head":"<!-- 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