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Mixed Signals September 18, 2021

Posted by Tom in Thoughts.
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Sept. 17, 2021 – Just a quick comment: You can get a notice when postings have changed by clicking on the “follow” button (I believe that’s what it’s labeled is). I update some time over the weekend, so it could be any time from Friday evening through Sunday night.

So it looks like we’ve got a bunch of mixed signals and sentiment. Unrest in China, inflation fears, economy slowing, Covid continuation, concerns about higher corporate taxes (please !), domestic politics and lingering “funk” about Afghanistan. So lets try to break some of this down via the chart below.

click on chart to enlarge

A top to bottom view: Market Sentiment actually improved a little this week and remains positive overall. Money Flow is negative (not much buying on Up bars) and Volume Flow is pretty much neutral. Price Action is negative, just because we’ve had a bunch of down days the last (near) 2 weeks, but nothing terrible (yet). Prices remain in that upward sloping channel and above the 14896 support level. The volume spike on Friday was the predictable surge due to options expiring on the 3rd Friday of every month (plus futures too).

Now that options expiration is behind us, let’s see if we get some renewed buying interest next week . . . “Buy The Dips” as they have for years now. OK, the Covid scare was the exception, but that was not a surprise either. Over all the stocks in the broad S&P 1500 Index as shown below –

A split / “mixed” of Weak (50% to Strong & Neutral (50%), not really a surprise given the price action lately. The table below shows Short Term Sector Strength –

Technology and Financial sectors are about at the middle of the pack, hence a mixed view of what sector leadership is saying. I’m finding it hard to believe that oil & gas will remain dominate for very long and that’s propping up the US $ also. So it looks like the seasonal weak month of September is living up to its reputation. The good news is October is just a week + away. I’ve done little trading of late, my holdings are doing OK, at least for now. No need to get whipsawed until there is a better definition of a trend change. Staying steady for now.

Have a good week. ……….. Tom ……….

Mixed Signals = Volatility September 12, 2021

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Sept 10, 2021 – I’m seeing some mixed signals so I’m thinking ‘volatility ahead’. Up until Friday, we had strong price action and improving market breath. All good signs. But we can get too much of a good thing too. Actually the market breath improved so much that one could call it a ‘thrust upward’. Those typically occur at market tops and not in a well developed bull market. Nothing “magical” about a thrust and I think it is more an indication of a “FOMO” (Fear Of Missing Out). Nobody wants to be left behind especially as the 3rd quarter end is only a few weeks away.

click on chart to enlarge

I note Sentiment remains positive, Money Flow negative, Volume Flow slightly positive and Price Strength neutral. Since we hit all time highs this week there are not resistance levels as such; the support level is 14896 on the NASDAQ Composite Index. Friday was weak and volume increased. We’ll need to wait on Monday / Tuesday to see if that weakness (i.e. volatility) follows through. One of my “early warning” signals fired on Friday, so that’s got my attention . . . a “yellow flag”. But we’re still within the up sloping channel, so let’s not over react and get whip sawed here.

Technology sectors have eased off a bit and Bonds have shown some strength. China and Japan are kicking up their heels too. The Short Term Sector table is shown below:

That’s about it for now. Markets rarely go in a straight line so an orderly ease back would be “normal”.. Have a good week. …. Tom ….

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

“Steady As She Goes” September 4, 2021

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Sept. 3, 2021 – First off ‘Happy Labor Day’ (for those in the USA). The US markets will be closed on Monday but keep in mind the rest of the world exchanges will be open. Note: I like to peek at the Asian market before I turn in for the night and the European as I get up, they give me an idea of the overall feelings before the US opens . . . not to mention the near 24/6 trading of S&P 500 futures.

The chart below shows a steady rising market. “What’s there not to like?”

click on chart to enlarge

We saw again that this market is nearly addicted to low interest rates. Jay Powell indicated that the FED will not be aggressively tapering soon, hence interest rates will remain fairly low for awhile at least. The market loved it ! And so it goes. Here’s the recovery of the stocks in the S&P 1500 Index as they relate to the 20 day Bollinger Bands:

Fairly steady and benign, but positive. The short term sector table below shows Tech (which makes up a BIG part of the S&P 500 and NASDAQ 100 Indexes) is back in the lead. Note the sudden strength of Japan though. Let’s see just how long that lasts. Also Real Estate.

I have continued to make some minor changes in my holdings, obviously favoring the strong sectors. As stocks or ETF’s fail to keep up with the others in the group they will be sold and replaced. I’m close to being fully invested, but not quite yet.

Have a great week & Take Care. …………. Tom …………….

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

Getting By With A Little Help From The FED August 28, 2021

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Aug 27, 2021

With apologies to the (old) Beatles song, this market is getting by with help from the FED. The tone from the Jackson Hole annual FED forum was “dovish”, i.e continued accommodation. No doubt that the markets are addicted to low interest rates; that’s very clear. And so it appears that the positive environment continues for a while.

click to enlarge chart

Now then . . the market breath remains narrow, meaning there are fewer stocks that lead the indexes higher, not a good sign. But other indicators like up/down volume and new highs / lows remain more positive. We’ll take it. Looking at the short term sector strength table below we see the narrow focus is accentually on the Technology based sectors. That’s kind of OK, but it sure would be better to see Financials, Industrials and Consumer Discretionary improve as well. Since the US economy is consumer driven, that strength will be important if we are to move forward for any length of time. Also note below that Defensive sectors are toward the bottom of the list; that’s positive.

That’s about the long & short of it for now. I haven’t left the market, but I do have some Cash to deploy next week if things continue to improve. Take Care and have a good week. ……….. Tom …………

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

A “Line in the Sand” August 21, 2021

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Aug. 20, 2021 – I feel that the markets are near / at an important support level, a “line in the sand” so to speak. This week price came down to the first support level at 14584 and closed just below it on Wednesday. That close below triggered a yellow flag for me to pay particular attention to the following bars (days). Thursday also closed just barely below, but the close was near the high of the day (possible strength, so no hedging / selling was justified). Friday was a strong up day, back above the support level.

click on chart to enlarge

Now next week will be important. Does the “buy the dips” folks come back or does the “sell the strength” folks come into play. The market “breath” (advance decline ratios) has been looking very weak for over a month; less and less stocks were holding the market indexes up. When I look further at other Breath indicators (Up/Down Volume, New Hi’s/Lo’s) I see a potential that this would be more of a Re-Accumulation structure rather than Distribution. In either case I think that we’re at or near an important price level that will confirm or reject one structure or the other. With the FED Jackson Hole meeting next week that may be a news catalyst in either direction. (You can almost taste the hesitancy in this market; no one wants to miss the next move for sure.) And of course the continuing saga of Covid is yet another wild card. So far the market has discounted much of the virus since the economy and earnings are doing pretty well, at least for now. One last observation: Volume last week on those red bars was at best average. There doesn’t appear to be a rush to the exit right now.

Looking at all of the stocks in the very broad S&P 1500 Index we see that most are Weak or Neutral right now. If this market deteriorates the price erosion will be reflected here very quickly. For now it looks like a typical mild correction.

The Technology sectors are what made a big come back late Thursday and Friday. Those sectors will be important IF a market rebound will continue. I’ll be watching for signs of weakness and increasing volume here as a major trouble sign.

Short Term Sector Strength

I’ve got some Cash to invest but I’ll wait for a confirmation before nobbling; not hedging at this point though. Current holdings (most tech based) are holding up in the mean time. An interesting market that right now is indecisive. Have a good week. …. Tom ….

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

Summer Doldrums: Rev. 2.0 August 14, 2021

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Aug. 13, 2021 -Just as a reminder . . I update this blog every weekend. That might be Friday evening up to Sunday evening, it all depends on what’s happening “in house”. 🙂

A quick look at the chart below shows not a bunch of stuff happening. Conditions have improve just a little over the week and I’ve updated the Support & Resistance levels to reflect that, but really not much.

click on chart to enlarge

With that I’ll say that I’m “invested” but not enthusiastic about it; it’s been a slow period in here, hence “summer doldrums” . . . not much wind to our back. Let’s look at where the stocks are in the S&P 1500 Index.

Overall they look to be in good shape with the “green” are covering nearly half of the pie chart and the “weak” area about a third. Fairly typical of a steady market. (BTW, the colors refer to where the stock price is in relation to their Bollinger Band “buckets”; +/- 2 standard deviations from the stocks 20 day moving average.) Next let’s take a longer term look at the major indexes of stocks in the USA:

chart courtesy of Stock Charts.com Click to enlarge

This chart is the indexes year to date. Early in the year I note that Small Cap stocks were outperforming. Lately the Large Cap S&P 500 Index has been out performing, and to take it a step further, the NASDAQ 100 stocks are out performing the broad NASDAQ Composite Index. Once again it sure appears that big cap Technology stocks are back in the lead. Small Cap strength is consider to be “risk on” indicator, so it looks like money is moving to the more “well healed” Big Cap stocks. More typical of a maturing market.

Lastly, the Short Term Sector Strength table below:

I note some Financials in the lead group, but the broad Technology sectors seem to be the place for the time being. The lack of movement has me wishing for Labor Day, when the Wall Street traders (of size) return. Have a good week. ….. Tom …..

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

“Not a Whole Lot-a” August 7, 2021

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Aug. 6, 2021 – When I’d ask my daughter “What’s new?” she would (sometimes) respond: “Not a Whole Lot-a”, and it looks like the Summer slow down is in force. Without new news or astonishing corporate earnings surprises it appears that both positive and negative force are neutralizing price movement in the markets. COVID Delta on the negative side and good earnings and a rebounding economy on the positive side. Couple that with many traders being on vacation and we see a pretty much range bound market.

I’ve changed the typical chart by drawing in a “box” that encapsulates the range. It’s somewhat inspired by Nickolas Daris and referred to as a “Darvis Box”. Yes, there is a slight slope upwards, but the point is things have slowed down considerably. And, I’m thinking, because of counteracting forces. Investors don’t want to commit any more, at least for the time being.

click on chart to enlarge

Money Flow has turned down and Volume Flow is lethargic at best. We do see prices moving higher in the short term, hence Price Strength is positive. I remain “moderately invested” for the time being. The strongest sectors are positive, but not by much, thus I don’t see the “risk / reward” as being compelling to be there 100% for the time being. (I guess I’m like many others then too.) 🙂

The Short Term Sector Strength table is shown below.

We see a fair amount of Technology sectors in the lead . . . again. and that’s positive. It would be nice to see some Financials and Consumer sectors moving higher though. All in all things are “OK” some we keep tabs on things and try to enjoy the rest of the Summer. It seems like Wall Street is on vacation too.

Have a good week and please stay safe. ……….. Tom ………..

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

A “Dull” Summer Market July 31, 2021

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July 30, 2021 – Not a whole lot of movement this week. Yes, there was some anxious moments on Friday as Amazon dropped, but it’s not unusual for these growth type stocks to fall back to around their 50 day moving average. That’s (recently) been a reasonable place to buy into them. Well see early next week if that holds true. It would be an indication of the overall strength of this market.

click to enlarge chart

Looking at the indicators above the price chart they are pretty neutral, and the trend channel is nearly horizontal as well. I’ve made some minor changes to the Support and Resistance level but the trend is fairly steady and straight across. Note that the trading volume (Below the price chart) is very low and drops off late in the week; a sign of summer vacations perhaps. 🙂 The short term sector table is shown below.

The Technology sectors are showing good strength and that’s a positive sign. The new comer is Basic Materials, particularly Steel & Copper. Signs of an improving economy.

The concerns about the Covid Delta virus remain an uncertainty and (again) the markets are richly valued so the “risk off” mentality is in control now. But there is plenty of liquidity thanks to the FED and low interest rates and for the time being there are not to many other places to place assets. I remain extra cautious, but also 75% invested for the time being.

Take Care & have a good week. ……… Tom ……….

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

Back Again July 24, 2021

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July 23, 2021 – What a week. Last week Thursday and Friday were major down days (especially Friday). Monday opened a big price gap lower then recovered over the rest of this week. So, we’re basically back to where we were a week + ago.

click on chart to enlarge

I note that prices gapped right through the 14371 (gray line) level on Monday then bottomed out very near the 14196 level (red) before recovering to close just above the 14804 level. All pretty much holding the previously drawn support and resistance levels.

The Money & Volume Flow indicators are now positive, but the dip on Friday of the Market Sentiment indicator could be a concern IF it continues to show weakness. Also note the very low trading volume (lower chart pane), volume tapered off as the week progressed. This does not show a commitment by traders or investors to this market rally. More of a skeptical “wait and see” approach I’m thinking.

I did close out the Bullish Market Index portion of my portfolios as a precaution on Monday Morning, didn’t go short, but I’m not quite ready to re-enter that portion just yet. Most of my positions in sectors and stocks have held, so not much of a change there. Let’s look at sector strength.

The positive news is that our “old friends” the Technology sectors (less semiconductors) are in the lead and that’s encouraging. But recall that the overall market is narrowing leadership to those specific sectors (not so positive) and it sure would be nice to see Financials and / or Industrials joining in. We’re early in the second quarter earnings reporting cycle and so far things are looking good. But (again) ‘good’ to ‘very good’ is expected. This market does NOT want to be disappointed by earnings or news, and Covid is still in the mix. The next 2-3 week will be important and possibly set the stage for the Fall.

That’s it for now. Continue to be cautious but realistic about this market environment. Have a good week. … Tom …

A Skittish Market Remains Vulnerable July 18, 2021

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July 16, 2021 – I know that (by now) I sound like a “broken record” repeating the same thing. The markets have internal weakness. We’re seeing glimpses of that with headline news stories. Whether it be concerns about inflation, Covid resurgence or political issues they all have some effect on the market. But for now, minor and short term; folks are nervous. The latest are fears of a second outbreak of Covid. To be super sure, that could be a very real and significant issue and have a major effect on the overall economy. It brings to mind a saying that I’m particularly fond of: “It’s not what happens, it’s what you do about it.” I don’t wish to be a victim of a complacent market.

So, is this market trying to tell us something? We’ve been on a very long run; to be sure, a recovery run. But are we getting ahead of ourselves and expecting too much for the current and near term conditions? The market is rich and priced for an economic come back. Here’s a chart from “Advisor Perspectives” and an old aquaintcy, Doug Short.

Now this chart goes back a waaay long time (1870) but it’s a reminder that “trees don’t grow all of the way to the sky . . . just toward it”. The red line is the normalize regression line (i.e. “average”) and the lower histogram shows the deviation from that line. You may have heard the term “regression to the mean”, well the “mean” is that red line. It’s like a rubber band that snaps back to it’s relaxed state. Anyway . . . . in historical terms, we’re extended.

As J.P. Morgan once said: “The markets can stay irrational longer than I can stay liquid.” (or something to that effect). Meaning that this can go on farther than anyone expects. But as mentioned previously, the leadership (the # of stocks) that are propelling the indexes higher are getting smaller and smaller. It looks like an “All Amazon & Apple, all of the time” type of market. (not that these are bad companies)

The chart below does start to show some areas of weakness:

click to enlarge chart

From top to bottom- Sentiment: beginning to weaken, Money Flow: Bearish, Volume Flow: close to a crossover, Price Strength: lightly Bearish, Trend Channel: Price breaking below, Trading Volume: light. I’m keeping an eye on the first 14371 level (NASDAQ Composite Index) for an indication to “lighten up”. IF we continue to correct, I’ll lighten up some more. This is the summer and things tend to slow down (volume wise), so a knee jerk reaction to news could send things down in short order. For now, I’m following the trend, but cautious about where we are in the typical cycle. Just a reminder, we are beginning the reporting cycle of second quarter earnings and much is expected.

Have a good week. ………. Tom ……… Price chart by MetaStock, used with permission.

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