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Markets Stabilizing February 18, 2018

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Feb. 16, 2018 – We now are fairly sure what the cause of the recent market swoon.  An over bought market in the background, many people in the “safe” selling volatility trade (i.e. short the VIX).  Couple this with the end of the month ETF VIX contract “roll forward” and all it took was 3 days of weakness, followed by panic.  It happened quickly with a spike down and will (likely) recover with a “V” shape back up.  (Note chart below)

Since this market was over brought, it will take time to recover back to those levels.  My continued concern is the susptability to “bad news”.  While the Money & Volume Flow indicators are recovering, but not back to positive, my very short term Price Strength indicator is back to a modest plus / long status.  For this reason I’ve removed my hedges and will slowly look for high potential stocks to buy.  I am happy that I never fully exited this market.

We can also see just how well the market has recovered in a week from the pie chart below, which shows the percent of stocks in the S&P 1500 index that have Strong or Weak price structures.

That it for this week.  Be patient for the right stock and the right sector, but it looks like they will be coming to you.  Have a good week.      ……….  Tom  ……….

Selling Begets Selling February 10, 2018

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Feb. 9, 2018 – A week ago Friday was just the beginning, and then came this past week.  That’s when the wheels came off and the computer “algo” selling programs kicked in.  The swiftness of all of this was the surprise, and not that it happened.  This market was well over bought.  Note the chart below that the short term trend channel is standing up compared to the long term channel.  Now we’ve corrected back to the bottom of the long term channel, and that may be a good place to pause and consolidate.

Both price support level were violated as were both the Money Flow and Volume Flow indicators.  I’ve added one additional indicator, that of (short term) Price Strength.  My goal was to provide an early warning indicator.  It oscillates from neutral, moderate, to very strong status.  Something to watch in the future; since this is new, I’ll do some back testing with it.

No surprises about the overall market strength.  The percentage of stocks in the S&P 1500 Index are shown in the pie charts below.

Price Strength –

Accumulation / Distribution –

There’s a lot of red up there, the damage has been done.  I’ll wait for a base to form and then a show of strength before I drop my hedged position (i.e. cash neutral).  I’ve liquidated 90% of my sector rotation positions (only high risk shorts are showing now; I’ll pass).  Truly weak stocks were sold and the remaining positions are hedged out.  Watch out for Monday morning retail selling though.  We need buyer not seller in the coming days, and the pro will lead the way.

I really thing that volatility is back and the time frames are shortened by computer trading.  It’s getting hard to NOT to get caught with your “pants down”, but we try.  Have a good week.        ………..  Tom  ……….

Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

Along The Watch Tower February 3, 2018

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Feb. 2, 2018 – The big question on everyone’s mind this weekend is whether or not “this” is the beginning of the long awaited correction.  I’ll cut to the bottom line:  Yes, it certainly could be.  First let’s look at how weak this market is:

SP 1500 Price Strength

The pie chart above shows the percent of stocks within the broad S&P 1500 Index (1500 of them) that are in a short term (20 day) trend.  Obviously, more than half are “weak” with only a small amount that are considered “strong” (i.e. green).

The chart of the NASDAQ Composite Index (another broad index) is shown below:

NSADAQ

I note that the first level of price support at 7332 has been broken and the next level is 7111.  The significance of these price levels is derived from what Wyckoff called “significant weekly bars”.  That is the low price of the week where significant buying came into the market.  The other way to look at it is this is where money started to flow into the market, thus it’s low price is important.  Also in the chart above are the Money and Volume Flow indicators, which confirm price and volume “outflows”.  Sentiment is neutral.

OK, back to the correction question.  Is this the start?  We’ll know more early next week.  Will buyers come in and “buy the dip” or will additional selling happen?  Right now, no one knows.  But we do know that investors cash levels are at an all time low; and who will be the next incremental buyer to push prices higher?  The market has been over extended by being at the upper trend channel, so a pause / minor correction is not unusual.  Time to shake the market out?  Looks like it.

What is “the cause”?  Fear of higher interest rates?  Problems at the Trump Whitehouse?  Does it really matter?  Since the volume on Friday was only slightly higher, it really looks like “lack of buyers” and “extra sellers”.  That is a position of caution, thus not to get overly concerned about it just yet.

Overall, the S&P 1500 stocks look more like this:

SP 1500 A-D

With those in Accumulation and Distribution about equal (though this indicator is a slow to react one).

Let’s watch both the price and volume action on Monday and perhaps on Tuesday for indications about the seriousness of this (so far) 3 day event.  Corrections are OK, as long as we don’t get whip sawed by them.  I lighted up on just about everything on Friday afternoon, but if it gets ugly, I’ll buy a Bear Fund to hedge positions.  That gives me time to make an orderly withdrawal should that become necessary.

Have a good week.       ………..  Tom  …………

Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

In a Continuation Pattern January 28, 2018

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Jan. 26, 2018 – This will be short because not a whole lot has changed.  The international markets continue to be in an economic recovery mode and the US markets continue to be quite pleased with the tax cuts (about 1/3 off corporate and nearly half off repatriated cash).  With all of that financial tail wind behind them nearly all worldwide stock markets are headed higher.

The chart above shows all bullish signs.  I’ve moved the first level of price support up to 7332 and the next (lower) level to 7111.  A pause or a minor pull back would be normal here, but that would likely draw in more “buying of the dips”.

I do like international stocks in here.  Latin America, Emerging Markets and China are strong.  Consumer Services, Internet and Biotech US sectors are also doing well.  The NASDAQ 100 Index appears to be the strongest followed by the Dow Jones Industrials.  The only “wild card” out there is the Trump Russia Investigation.  I think there are many who will jump ship to lock in these profits IF they perceive bad news on the horizon.  Until then, we ride the wave.

Have a good week.  ……… Tom ……..

Price chart by MetaStock. Used with permission.

But Wait . . There’s More ! (?) January 20, 2018

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Jan. 19, 2018 – To borrow a phrase from American TV commercials (“But Wait, There’s More!).  A classical “come on” to grab your attention and lead up to a “call to action” (i.e. buying).  This market shows no signs of letting up, but we should keep an eye open for sector rotation.  Even though the indexes keep moving higher; is every sector participating?  And, for good measure, are international stocks doing even better? Ahh Ha, good questions.

Sentiment, Money Flow and Volume Flow all bullish; check.  Prices above the trend channel and above key support levels; check.  And so the trend continues . . .until it stops.  And there in lies the key.

The US markets are giddy about lower taxes and the re-patriotization of offshore funds.  OK, that will last until earnings don’t also increase.  The rest of the world is also recovering from a general world wide recession.  And that recovery may, just may be more stable and less driven by news.  Cases in point are Latin American countries (Brazil & Mexico) and Emerging Market countries in general (notably China).  Japan & Korea doing all right as well.

In the US the oil trade may be slowing, so I’m careful there.  Industrial and Consumer Services stocks along with select Tech stocks are strong.  So, it makes sense (to me) to be diversified among the strongest world sectors and keep an eye open for how the (US) markets react to “bad news”.  Whether it be a government shut down or new special council actions.  This market wants to go higher, but it does not want to lose much money.  I’d call it “impatient”.   If things don’t go well (go up), there will come a time to sell.

I’m “long” but careful to see how this market reacts to news since the economics are a tail wind for the time being.  News is important right now.  Have a good week.  ….  Tom  ….

Price chart by MetaStock. Used with permission.

 

Roll’in . . Roll’in . . . Roll’in January 12, 2018

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Jan 12, 2018 – This market just keeps “Roll’in (Down The River”; pardon to CCR).  But, this too will end.  Why am I so dog gone concerned?  Here’s a chart of longest periods without at least a 5% correction.  We’re waaay up there as the third longest period.

OK, that doesn’t “prove” anything but it does show that this move, for this long, IS unusual.  And that is one of the big reasons why I keep a close eye for a possible correction.  Maybe not a bear market, but at least a meaningful correction.  With extra “income” coming to corporations in the form for lower taxes, this market is in love with stocks.  And that could continue for a while.

Is this market over bought and over optimistic?  The price chart below shows the number of stocks in the S&P 1500 index that have strong, neutral or weak near term price action.

What I think is more typical “healthy” is an even split between strong, neutral and weak.  That shows balance and not euphoria.  Waaay to much “green” up there for my liking of a stable market.  Next are the number of stocks in Accumulation (buying), Neutral and Distribution (selling).

The same thing goes here though not quite the unbalance as was in the price strength.  In short, the market is getting ahead of itself and pricing in all of that good news.  We’re in the earnings reporting season and all eyes (ears) will be on forward guidance.  Expectations and fear drive a market and right now they are excepting a lot of good news.

For now I have moved the initial support level up to 7111 on the NASDAQ Composite Index.  All primary indicators are positive / Bullish but the price is above the upper channel line; again, over bought.

This can go on for quite awhile, so I remain invested and in this market.  Strength is in the Oil and Emerging Market sectors, followed by Industrials and Basic Materials.  Take Care and have a good week.        …………….. Tom  …………..

Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

New Year – New High January 7, 2018

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Jan. 5, 2018 –  Happy New to all.  Well we didn’t have to wait very long in the new year to see if tax selling at a lower rate would influence the market.  It didn’t.  The broad NASDAQ Composite Index (below) just kept on moving higher, and is now in a rather “over bought” condition (that being above the upper price channel).

I’ve raised the support levels to 6924 and 6668 based on the lows of significant weekly bars.  This is where buying come in and thus a violation of the lows of those strong bars could be a sign of a change of character.  So far the sellers are holding and everyone else is buying.  So be it.  The Money Flow indicator has kicked up after registering the low holiday volume and reverting toward a neutral (zero) reading.  Volume flow and Market Sentiment remain positive.

Not much more to say except the Up Thrust that I was concerned about does not appear to be forming; I’ll likely drop the tentative label next week.  This is looking more like continuation.  Other than that, here is a list of short term sector strength.

This is generally where I like to position my stock holding.  I remain fully invested for the time being.  Have a good week.   ……..  Tom  …….

Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

No “Santa Clause Rally” December 30, 2017

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Dec. 29, 2017 – Well it’s been an interesting year.  Sure this market has been very “kind & understanding”, but what drives prices higher is earnings (or at least the hope for future earnings).  The U.S. tax plan has past and it remains to be seen exactly what companies will do with that extra money.  With unemployment in the U.S. are near all time lows, I doubt if much added hiring will occur.  The last time this type of tax abatement happened corporations bought back their own stock or issued special one time dividends.  Either of those should drive prices higher.  We’ll see.

In the mean time prices continue to remain within the upward sloping price channel.  But as I note in the headline, index prices have really not done much in December.  While Sentiment and Volume Flow remain Bullish, the Money Flow indicator has dropped to a negative reading.  Now volume is typically light during the holiday period, but this is something to be aware of.  Also, I show you the chart below (the last 6 days; 10 minute bars) of the significant selling that came in during the last 20 minutes of 2017 on Friday.

Look at that volume spike.  I’m considering this to be an Up Thrust in the immediate term.  We’ll see if that selling continues after Jan.1, 2018.  This market is due for a correction from an historical perspective.  In the mean time I’ll show the pie charts of the stocks in the S&P 1500 Index.

# of Stocks in Accumulation / Distribution –

# of Stocks with Strong / Weak Price Strength –

So far, a fairly even split in healthy to unhealthy stocks, and that supports a continuation of the current trend (higher).  But let’s watch to see if tax selling comes in during January.

Oil & Oil Equipment, Latin America, Precious Metals and Basic Material sectors are in the lead for short term performance  The entire Tech sector is struggling right now.

That’s it for this year.  I wish you & your family a very Happy & Prosperous New Year !   ………  Tom  ……..

Charts by MetaStock & Worden bros. / TC200, pie charts by http://www.HighGrowthStock.com. All used with permission.

Holiday Continuation – Ho Humm December 25, 2017

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Dec. 22, 2017 – Not much to say because most folks were not doing much in the markets; though I do note Asian market are getting stronger.  We remain in both the short term channel and longer term price channel, both of which are pointing up.  Not much to determine in the volume figures as they have steadily dropped off.  (Which explains the drop in “Money Flow” in this market.)

What will be of interest is IF we see selling AFTER the first of the year when tax rates in the US are lower for the high income folks.  No need to lock in profits now . . . save a few percent and wait a few days.  That level of activity will give us a feeling for the first half of next year I’m thinking.  Until then, the moving sectors are Oil & Oil Services, Telecom, Consumer Services, Banks and Consumer Goods.

Enjoy the holidays !      ………  Tom  ………..

A Taxing Situation December 16, 2017

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12-15-2017 –  No doubt about it . . . the stock market likes money and when they’re pretty sure that more is coming their way . . they get happy and drive prices higher.  Volume was dropping off (until Friday’s options expiration), so we’ll have to wait until next week to see the tax approval drama prove out and see if the market reacts with higher prices on higher volume.

I do want to see volume confirm price (ease of movement= price and effort = volume) in order not to get concerned about a possible Up Thrust After Distribution structure.  Likely, that won’t happen, at least not yet anyway.

The 6668 level remains my support level.  One thing concerns me is the Money Flow indicator; it’s falling.  Other than that, all “systems” remain bullish and I remain (nearly) fully invested.  Volume will typically drop off between Christmas and New Years and attentions divert to the holidays.  We may have to wait until the new year (and new tax basis ?) to see just how strong the underlying market really is.  But for the time being . . . “no worries”.

Here’s a table of short term sector strength –

Wishing you & your family a very Merry Christmas.    ………… Tom  ……….

Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

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