jump to navigation

Confirmation of a Breakout ? November 26, 2022

Posted by Tom in Thoughts.
add a comment

Nov. 25, 2022 – This was a short week with very light holiday volume, so I’ll get to the point.  Note the chart below of the NASDAQ Composite Index.  I’ve drawn in a linear regression line with a +/- 2 standard deviation channel.  The linear regression line is basically the graphical average between the last peak in mid-August and the last low in early October; half of the “area” (time & price) is above and half is below.  Think of +/- 2 standard deviation channel as an “expected move” within that time frame of “typical”.

The blue ellipse shows a breakout from that “expected move” and thus a possible change in character / trend.  But . . .we haven’t seen that follow through yet.

All eyes will be on economic news in the coming 2 weeks:

12-1:  the PCE report (Personal Consumption & Expenditures)  

12-13:  the CPI report (Consumer Price Index)

12-14:  the FOMC / Fed meeting

For those trying to front run the economy, interest rates and inflation, these are the ones to possibly show a change in behavior.  Until then the strength / weakness in the US Dollar and Treasury Bonds will provide some indications of where the money is wagered.  Nuff said.

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

Price chart by MetaStock. Used with permission.

Watching & Waiting November 20, 2022

Posted by Tom in Thoughts.
Tags: , , , ,
add a comment

Nov. 18,2022 –  A lot of volatility back and forth this past week but not much commitment in either direction.  The number of Put hedges has dropped off significantly and it just “looks” like the markets “want” to go higher but need a good reason to do so.

We remain in a broad trading range that speaks of base building and thus a possible . . . change in trend.  As the 3rd quarter earnings wrap up the stage is set for the holiday season and that may (just may) be a spark.  The next FED meeting is December 14 and there is MUCH anticipation as to the next interest rate announcement (the bet is on ½%).

The Short Term Sector Strength table –

Semiconductors want to be loved along with Biotech but there is more smoke than fire in those sectors.  Next week will be a short trading week, so I’m not anticipating much will be happening.  For those in the US, Happy Thanksgiving.   …………..  Tom  …………..

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

Breakout or Shakeout ? November 12, 2022

Posted by Tom in Thoughts.
Tags: , , ,
add a comment

Nov. 11, 2022 – I’m a little under the weather, so this will be brief:

With the release of the CPI data (Consumer Price Indicator) premarket on Thursday, the market shot up big time.  Instead of coming in at 7.9% annual, it came in at 7.7% and that’s all it took.  The markets are having a hard time dealing with expectations.  Is that the bottom? 

Well no one knows if the buying will continue . . . I doubt it.  Disney had lower revenues, Meta & Twitter are laying off and we’re experiencing “Crypto Collapse”.  Economically, things are slowing down and everyone would like to see the FED slowdown interest rate hikes.  The market anticipates economic events and what we saw could very well be short covering.  I expect a buying surge Monday morning then a modest pullback.  What happens after that will give us a clue at to how strong the market really is.

Short Term Sector table –

Have a good week and be just a little skeptical.       ……….  Tom  ………..

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

The FED Strikes (back) November 5, 2022

Posted by Tom in Thoughts.
Tags: , , , ,
add a comment

November 4, 2022 –  In the week leading up to the Fed announcement last Wednesday the markets we’re thinking (i.e. hoping) for some indications of a slowing interest rate increase.  Maybe ½% or at least some indication that the rates were approaching a peak.  That really didn’t happen.  Just a few “maybe in the future we’ll consider slowing the rate of increases”, then another ¾% increase.  This has been a steepest / fastest increase in FED funds rates ever in our history and it has the markets spooked.  We’ll have to wait until December to see IF there is some moderation.  In the meantime the markets remain concerned about interest rates and their effect on a possible recession.  It’s looking more likely.

Not much is going to happen until after the midterm elections have been called and that may take weeks, if not longer.   I see us in a range bound market between 11230 (top) and 10093 (bottom) on the NASDAQ Composite Index.  Right now it seems that there is more potential to go down than up.  We’re going to need to see some light at the end of the tunnel before prices can break (and stay) higher.

Folks wonder why I nearly always show the Sector Strength table (below).  It’s important in performing a ‘Top Down Market Analysis’.  These are the sectors / industries that are performing best and that’s where we need to consider taking or holding positions.  The idea is to “fish where the fish are” and not to cast a broad net everywhere.  The bottom line is to minimize risk and try to put the “wind to our back”.  It’s a focused part of trend following in an attempt to follow the bigger, long term investors.

The Short Term Sector Strength table is shown below –

The week coming up will be interesting to see just how strong or weak the markets are as the election results and the fallout is relieved to us.  It’s a good time to be heavy in Cash IMHO.  Have a good week (and VOTE !).  …  Tom  …

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

Heads Up: A Change in Character October 29, 2022

Posted by Tom in Thoughts.
add a comment

October 28, 2022 –  Heads Up Folks !  This looks like a “change in character” in this market.  That means either “a low” was put in or “the low” for this market cycle was put in.  In either case it sure looks like at least a “tradeable bottom” so I am starting to phase in some equity positions.  I’ll start with index ETF’s since they will cover a broad area of the market and if I’m wrong (which could be) I can exit back to neutral / cash quickly.

I’d like to see two closes above the resistance level of 11230 (green dashed line) on the NASDAQ Composite Index before I’d feel more comfortable and increase long positions.  That level along with a few more confirming indicators would improve confidence.  But . . . let’s not get ahead of ourselves. 

On Wednesday of next week (11/2) we’ll get the next dose of FED interest rate speak.  This market sure wants to see a more modest increase in interest rates . . . say ½%.  I note that the US Dollar is down and the Treasury Bond rates have recently gone down.  Both events support a rally in US equities.  Earnings and guidance have slowed so perhaps the FED will take a ½ step back from the rapid interest rate increases and give the economy a chance to stabilize.  One can only hope.

The Short Term Sector Strength table –

It’s nice to see something other than defensive and Energy sectors toward the top.  An encouraging sign, let’s hope it continues.  That’s it for now.  I expect a slight pull back early in the week and then a push higher IF the FED shows some encouraging news on Wednesday.  Now is the time to keep your head up and observe.  So far the rallies have just been short term short covering by traders.  The question now is: will investors start to come back into the markets?   Have a good week.    …………  Tom  ……………

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

What Effected The Market This Week October 21, 2022

Posted by Tom in Thoughts.
add a comment

October 21, 2022 –  Many think when they’re trading the stock market, that they are trading stocks.  But this week it was more correct that they were trading Bonds (interest rates), Currencies (Pound & Yen) and Option Hedging (continuing).   These three have a significant effect on what the markets did this week.  We’re right in the middle of earnings season and outside of Energy stocks, things are looking like a slow down or barely OK at best. 

click on chart to enlarge

It sure feels like nearly everyone is waiting for the other shoe to drop and they’re not willing to take any significant positions.  News from the UK disrupted both rates and currencies and the Bank of Japan was trying to prop up the falling Yen by selling US Dollars; it didn’t work.  So it continues to look like the market is trying to stabilize and build a base . . . if the news would just cooperate.

Here’s the Short Term Sector Strength table –

So not much new to discuss this week.  I’m heavy in Cash with a single minor position in Oil Services.   I’m expecting a bounce up next week, but maybe only for a week or so.  I doubt if the market is done with us yet.  Have a good week.           ……….  Tom  ……….

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

Still Within a Down Trend October 15, 2022

Posted by Tom in Thoughts.
Tags: , , , ,
add a comment

October 14, 2022 –  There really isn’t much new to discuss.  Overall, the environment has not changed.  These massive one day moves are generally started with Put options and short covering (up) followed by short term day traders piling on.  After the “evening out” of short positions stops, reality returns and we just come back down.

click on chart to enlarge

The hedging activity remains high, the big intuitions remain concerned about a 10% drop and are not taking chances right now.  What is driving this are rising interest rate fears driven by the FED who is driven by inflation data, and we got two doses of that in the past week.

Ask ourselves:

  • Has inflation shown signs of slowing?
  • Has the FED indicated stable or slower rate increases?
  • Has the market trend changed?

I’m answering ‘No’ to all of these right now.  But all is not gloom & doom.  The number of stocks making new lows is slowing (selling drying up ?).  Retail investors are flooding into Cash; looks like capitulation.  The market (in general) is “oversold”.  But . . . “Selling begets Selling (& Buying begets Buying), so if we see a sustained amount of selling, that could be the final ‘blow off low’.  Right now I’m holding a heavy position in Cash and trying to be patient because the market will turn.  I sure would like to see it put in a base over a month or more before any spring higher happens, but one must stay flexible.

Short Term Sector Strength table –

I note the previous market leaders are at the bottom.  One bright spot is BioTech, but that could be a short term blip; we’ll see. Have a Good Week.        ………..  Tom  ………..

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

Bottoming Or Lower ? October 8, 2022

Posted by Tom in Thoughts.
Tags: , , , ,
add a comment

October 7, 2022 –  Here’s my quick read of this market:  We are either in a broad “Bottoming” / base building process (scenario ‘A’, green lines) or headed lower (scenario ‘B’, blue lines).

click on chart to enlarge

The market rocketed up about 5% early in the week and then gave it all back late in the week.  This is typical of a nervous market where folks are trying to anticipate the next move, which causes ‘Shorts’ / Hedges to cover their positions and buy.   The technical term is a “Short Squeeze”.

What is causing this nervousness is the very fast rise in interest rates and a large amount of debt / loans that are affected by interest rates.  The market (according to CME interest rates futures) is expecting 80% chance of another .75% interest rate rise come November (Bearish).  Watch for the latest CPI (Consumer Price Index) data that will be coming out on Thursday.  That could be a big mover in either direction, as the FED is keying off of inflation data, and that drives their decision on interest rates.

What will confirm that a move has “legs” will be how the US Dollar and Treasury Bonds react.  A lower US $ and stable or high bond prices (lower rates) would be Bullish and support at least a longer run higher.  Of course the opposite is true too.

The Short Term Sector Strength table is shown below –

I am very heavy in Cash waiting for a sign of at least a ‘tradable bounce’ . . . . in either direction.  I’d like to think that the worst is behind us but proof of that is not easy nor plentiful.  This market is nervous and right now the institutions are staying hedged and away.  Me too.    Have a good week.   ….  Tom  ….

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

Forward Into The Past October 1, 2022

Posted by Tom in Thoughts.
add a comment

September 30, 2022 –  The markets made a new low on Friday, touching the same price level going back to August, 2020.   (yes . . .  2020).  We’ve had one “tradable rally” since the peak in January of this year but I decided to only take a few small positions, then “down the hatch” it went and sold them out.

click on chart to enlarge

Where from here?  The blue lines show my current ‘Plan A’ thinking with a recovery bounce next week followed by a lower low; likely to around the 9663 area.  But . . . there is always a ‘Plan B’ if ‘Plan A’ doesn’t materialize.   Volume this past week is low and traders are not anxious to stick their necks out, nor am I, at least not yet.

Here’s a pie chart of the strength of all of the stocks in the S&P 1500 Index –

The darkness of the color indicates the strength of the price relative to their Bollinger Bands and their direction.  Not much green and a whole lot of red.  The market is “oversold” so a recovery bounce next week is likely.  But until there are some creditable signs that the economy has at least flatten out and interest rates are likely to stop rising we are susceptible to another leg down.  In short, we need to see a few positive signs and we really have not seen a washout of investors throwing in the towel.  That might be coming.

Here’s the Short Term Sector Strength table –

Again, not any positive signs yet.  I’m heavy in Cash waiting and trying to be patient and not anticipate much.  J   Have a good week.         ………..  Tom  ………..

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

FED Freak Out September 24, 2022

Posted by Tom in Thoughts.
Tags: , , , ,
add a comment

September 23, 2022 –  If anyone thought that this market was strong or getting stronger, they had their “head handed to them” after Wednesday afternoon.   Powell reinforced the FED Board’s hawkish stance that was stated earlier at Jackson Hole . . .  fighting inflation and whatever it takes.  Hopes of interest rate increases slowing and then going down in early 2023 were pretty much dashed.  My old adage: “Weak stock markets react badly to bad news, while strong markets sluff it off”.  Folks are nervous about corporate earnings.  The “bottom line” is in fact the bottom line.  Forward earnings guidance is generally not that good in a slow or receding economy.

click on chart to enlarge

This last rally was primarily driven by retail investor with FOMO (Fear Of Missing Out) clearly on their minds.  Rarely do we see a ‘V’ shaped bottom and if we do, we also see big institutional volume coming in.  This time there was only average volume.  Very typically institutions need time to accumulate shares so as to not affect prices and this takes time.  We’re not seeing that accumulation / base building phase yet.

My past anticipated move down to the 9400 level (blue lines) panned out OK, but what next?  I’m of two minds: 

Scenario A is we continue a little lower early next week then rally back up toward resistance at about 10565.  And then begin the process of building a base via the double bottom scenario.

Scenario B is that we bounce around late next week with a minor recovery (a.k.a. head fake) then head steadily lower to 11500 via a selling climax where everyone gives up on heavy selling volume.

A clue as to which one might develop is the US Dollar.  To simplify things, a strong US$ equals a weak stock market (yes, that includes crypto too).  A weaker US$ would support a stronger / basing stock market.  Precious metals, especially silver, will also provide some evidence.

And of course News is going to be a major driver.  Coming up on 9/30 we have the PCE data which is an indirect measure of inflation, then 10/13 the latest CPI data.  These are potential market movers in either direction.

The Short Term Sector table will also provide an idea if money is flowing into or out of growth sectors or defensives sectors (a.k.a. risk on or risk off).

Hope this provides some perspective (at least one guys view; I can be wrong) of the market.  Please feel free to comment.  Have a good week.      ……………  Tom  ……………..

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

%d bloggers like this: