The market appears to be in a rolling correction. This occurs when one group or sector fades and another begins a rally. This bull market has gone to an historic split between the tech leaders and the rest of the market.
This tech correction is likely not completed. There are two reasons for this point of view:
· The open interest put/call ratio remains over two and near its highs. This tells us that traders remain bullish despite the decline. More downside is necessary to turn them to the bearish side of the ledger.
· The down moves in both the S&P and the NASDAQ do not appear to be complete.
However, the bull market remains intact. The market data for Thursday, a big down day, reveals an excess of new highs over new lows. This has been a consistent theme. It reinforces the notion that funds are flowing from the big-cap sector to areas that had not participated.
The Cycles Research screen for the DJIA shows that MMM and Goldman Sachs are rated number one and number two. One Dow stock that traced out a firm base is MMM. The stock surprised on the earnings announcement on Friday. A great deal of buying power is required to lift a large-cap stock like this by 20% in a single day. This move broke the stock out, so there is further price appreciation to come. Below, we see a relative strength base forming in the daily strip. In the weekly strip, there is a classic buy signal. A three-year downtrend has been reversed to the upside while a rising series of higher momentum lows has formed. The monthly strip indicates that this is one of the few large-cap stocks that had not moved up in this bull market.
MMM- Daily, Weekly, Monthly
The stock bottomed on cue with the low in the monthly cycle. The $165-$180 area is a yearend target.
MMM
Goldman Sachs is also projected to be a leader into yearend. There are higher lows in weekly momentum. The monthly momentum is not overbought, one of the few big cap stocks that is not in that condition. Since 2021, monthly relative strength has been rising. The monthly cycle projects a rise into November closer to $500 a share.
Goldman Sachs Daily, Weekly, Monthly
Goldman Sachs Monthly Cycle
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