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Continuing to Wait and See May 9, 2021

Posted by Tom in Thoughts.
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May 7, 2021 – This will be a brief post since I’m “on the road” in Atlanta for Mothers Day. And . . . for those . . . Happy Mothers Day !

We’re about half way through first quarters earning season and the news has generally been as expected / good. So why the pause? I think it’s still more “wait & see” thinking. Concern about (possible) interest rates increasing and if corporate taxes might also increase. This market is “hooked” on low rates and low taxes, no doubt about it.

The chart below is of the very broad NASDAQ Composite Index. While large cap indexes like the S&P 500 and Dow Industrials are at /near all time highs I note that many other broad metrics are at a pause. That said I note most of the indicators on the chart are really not very bullish at all. IF weakness appears it typically shows up first in the smaller companies, so we’ll keep an eye out for weakness here.

click on chart to enlarge

I’ve put support at the 13440 level and a close below that would concern me. Resistance is at the 14207 mark. Again I note the rathe low / modest volume; many appear to be waiting.

The short term sector strength is shown below. I note the oil / energy and financials are doing well, technology not so much. Looks like a pause.

I am invested more in “value” securities since “growth” is not moving and could be more vulnerable to a correction IF that were to develop. Have a good week. …………. Tom ………….

Ho – Hum Market April 30, 2021

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April 30, 2021 – As April closes and we’re in the midst of earnings season the market last week didn’t really seemed motivated to move much at all. Over the past 3 weeks not much movement. Some Tech stocks (like Amazon) blew the doors off earnings (not surprisingly) and Financials are doing well, but others were just “good” (i.e. expected in any case). I’m thinking cross currents both positive and negative that basically balancing each other out. Thus not much overall movement.

Many companies see strong earnings and a stronger economy, but they also see higher taxes. Covid seems to be a waning problem in the US, but much of the rest of the world is in turmoil. The Yen & Yang of forces are encouraging a pause. But a pause in not necessarily a bad thing right now.

click to enlarge chart

And so the chart above paints a similar picture. Mildly bearish sentiment, mildly negative Money Flow, barely positive Volume Flow, neutral Price Strength and a price structure at the top of an upward sloping channel; good & bad in check. The price range is tightening and so the foundation is set for a breakout in the future. Right now it looks like a re-accumulation scenario.

A little bit different analysis below. I took the stocks in the S&P 1500 Index and plotted out a pie chart with the 5 day percentage return. I note nearly equal greens, yellow and red shades. Generally indicating a balanced market, but this is over only 5 days.

The Short Term Sector Strength table is shown below.

One curious thing to note is the revival of Oil and Energy stocks. Under valued in the short term but perhaps and “iffy” future. Earnings continue over the next 2 weeks for the bigger companies so the watch continues. Have a good week. ……………… Tom ……………

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

Hot and Bothered Market April 24, 2021

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April 23, 2021 -I sound like a “broken record” but this week showed how vulnerable this market is to even the potential of (select) bad news. Case in point was the drop on Tuesday because Biden might (just might) raise the capital gains tax on those making over $400,000 / year. (yeah, I feel bad for them too)

click on chart to enlarge it

The market valuation and expectations are high. Anything less than blow out great news is met with OMG reactions. Add to that margin debt (i.e. borrowed money to buy stock) is very high, flows into leveraged ETF “bullish” funds are at all time highs and corporate insiders are not participating in the buying. Thus volatility, but I’m more concerned about a chain reaction where stocks go into forced liquidation and the snow ball rolls down the hill (and quickly). The larger question is “when” and not necessarily “if”. The ‘when’ point is unknown and again, my concern is we won’t have much time to protect ourselves. In the mean time, the march higher continues.

Of note is an interesting statistic: Roughly 80% of the stocks in the S&P 500 (large cap) are above their 50 day moving average (i.e. appear to be going higher). Only 40% on the stocks in the Russell 2000 (small cap) are above their 50 day average, and 30% of those in the broad NASDAQ Composite index are above. Perhaps signs of narrowing participation; generally not a positive indicator.

Getting back to the chart above. We see Volume and Money Flow are positive, Price Strength is positive, but Market Sentiment is slightly bearish; it just has not recovered from the previous highs in mid-February. The Price Channel (purple line) is sloping up and we have recovered from the recent dip in prices. I note the significant decrease in over all volume (lower chart). Perhaps a lack of fresh demand. Has everyone that wanted to buy . . . have all ready bought? Without new buyers, who will buy and push prices higher? Something to consider.

Here’s the Short Term Sector Strength table:

I note Healthcare, BioTech and Real Estate are at the top. These can be considered to be defensive sectors. Something to keep an eye on going forward. (the 5,10, 15 & 21 day price changes support these ranks)

And so I continue to be invested but watchful for a significant change in character. Have a good week & Take Care. … Tom …

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

Market at Resistance Level=Caution April 17, 2021

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April 16, 2021 – This will be a short and to the point post since the current trend continues (i.e. Bullish). But . . . two items to consider: First, we are now at the previous high and so the 14107 level becomes a point of price resistance. If prices move confidently above that level then we’ll have a better feeling that the trend higher continues. Note chart below.

click on chart to enlarge

Second, we are now beginning to hit the major portion of the first quarter earnings. As mentioned before, this market is “priced for perfection” and any significant disappointments in major companies will have an effect on the overall trend. So in both cases it’s a good idea to watch earnings news carefully over the following 2-3 weeks.

I am also concerned (just a little) that volume is lower and the Sentiment indicator (at the top of the chart) is mildly Bearish.

The Short Term Sector Strength table is shown below –

Of note is the recent strength in Healthcare and Utilities. Both could be considered as defensive sectors for mutual funds that are required to be 100% invested. I am 65 to 80% invested and I’m seeing fewer nice “breakout” candidates to spark new investment. Let’s see how the market react next week. Do they blow through resistance or back off? That will give us an idea about overall strength.

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

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

Better, but Still a Volatile Market April 10, 2021

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April 9, 2021 – This was a good week coming off of the Easter holiday, but there remains a few indications that this is (still) a volatile market. Case in point was on Friday; the indexes stayed flat for most of the day before finishing the last 45 minutes with a jump higher. Likely we’ll see more of this . . . in both directions.

click on chart to enlarge

And so the immediate trend is up: channel broken higher, Sentiment moderately Bullish as are the Volume and Money Flow indicators. The next level of resistance is the previous high at 14112 (NASDAQ Composite Index). One point to note is the low volume. The first quarter earnings season begins soon and the stock market is “priced for perfection”, any disappoint(s) could be hard on a Bull run. Let’s not get to euphoric just yet.

What we’re seeing now is strength in Large Cap growth stocks, primarily in Technology, Consumer and Industrial sectors. I’m a big fan of scaling into and out of positions to try and control risk. If next week continues to show strength I’ll add to my current positions but so far, so good.

Short Term Sector Strength –

What is interesting is that while some sectors are stronger than others, the strength in the market is fairly broad based. In order to do better than the Indexes, one has to be a good stock and/or sector picker.

That’s it for now. Have a good week. ………… Tom …………

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

Hopeful Signs April 3, 2021

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April 1, 2021 – First off “Happy Easter” to all that celebrate it. I hope that the bunny is good to you. 🙂

Spring is a season of hope and renewal and that’s what we might (just might) be seeing early signs of in the markets worldwide, but especially in the U.S. Looking at the chart below that are multiple indicators of returning strength of a Bullish trend.

click on chart to enlarge

The Market Sentiment is back to lightly Bullish as is Money and Volume Flow. Price Strength remains neutral but note the price bar color has returned to “green” and is above the near term price channel (purple lines). These are early signs of a return to a positive upward price trend. My only caveat is the low volume (lower bars on the chart), but hey, it was a holiday week so not a a big problem. We do need to see volume next week returning on up bars.

Stocks in the S&P 1500 Index –

The pie chart above shows just how broad the price strength is overall (1500 stocks). Again, early signs of a return to a positive market.

The jobs report was very positive and the vaccine roll out is very positive as well. Hopefully signs of renewal.

The table below shows the short term sector strength. Of note is the “Person Market” column which indicates the momentum of strength relative to the S&P 500 Index. ‘Outperforming’ and ‘Improving’ are early positive signs of strength. Also I note the re-strengthening of Technology sectors. Semiconductors are on fire.

I have started to “nibble” on select stocks and ETF’s and will increase positions next week as strength and volume return. “It” may not be over but “nobody rings a bell at the top” (or the bottom) so we need to be open to changes. My Moto is ‘scale in & scale out’; no need to be a hero. Right now I’m favoring “in”.

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

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

A “Wait & See” Market March 20, 2021

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March 19, 2021 – One could say that this market (depending on which index you benchmark) hasn’t done much over the past week and a half. Heck, you could go back even farther to mid to late February and say the same thing. That’s something that takes some getting used to but it’s not unusual. This past week trading volume was fairly low; that is below average. It just seemed like there is a “wait & see” perspective right now. Concerns about interest rates rising continue and add volatility to the day to day moves, but it’s more of a back and forth movement with a net result of not much overall movement.

click to enlarge chart

The chart above shows Sentiment, Money Flow and Volume Flow to be “Bearish” but just mildly so. Price Strength moderately Bullish. Resistance to any upward movement is around 1360 (green line) and support at 12985 (red line) in the near term. The price channel points downward.

So the end of the first quarter is close by and maybe investors just want to “run out the clock” and wait for something to inspire them one way or the other. We’ve come quite far very quickly since November and a pause is appropriate. The question is this “Re-Accumulation” or something more concerning? Since the bar color remain red I tend to be more cautious, though my major market model is still positive.

Short Term Sector Strength:

The only areas that did well last week were shorting Treasury Bonds (rates higher) and Japan. The “go-go” tech sectors were well off the high end on the strength table. And so, we join the “wait & see” crowd. Waiting for some sector to breakout and either break new ground or resume a previous move higher. And no one knows how soon that will happen or what will occur in the mean time. Right now I’m “lightly Bullish” but Cautious. Nuff said.

Have a good week and Stay Safe. …………. Tom ………….

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

Better, But Not an “All Clear” Just Yet March 13, 2021

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March 12, 2021 – A good week for the markets (both foreign & domestic) but I hesitate to call an all clear. I just don’t want to let my guard down and relax just yet. Let’s look at ‘why’ on the chart below.

click to enlarge chart

You’ll note that the Money Flow and Volume Flow indicators are better, but remain “bearish”. Sentiment and Price Strength are “Neutral”; plus the price bars are red. I’ll feel much better when the close is above the 13601 level on the NASDAQ Composite Index, and the channel lines flip. What is also telling is the low volume last week. OK, but folks are not rushing back into this market either. Let’s look at some of the major market indexes and see what we can learn.

There has been a lot of talk that investors are shying away from growth and moving into value stocks. The chart below is a ‘relative strength’ chart of the indexes over the past 90 days. All start from the same 0% point and the scale to the right is percent change

click to enlarge

Obviously Small Cap (small sized companies) were the place to be. Small caps are generally considered to be more speculative, but also an area to find growth. The NASDAQ 100 is a subset of the NASDAQ Composite of the largest 100 stocks. These generally are considered to be growth and typically technology based. The Dow Jones (30) Industries are a cross section of large, established American companies. And the S&P 500 is a set of the 500 largest companies; generally big cap and established.

The chart below is of the same indexes, but covers the last 27 days shown in the bracketed area on the chart above; i.e. that area “blown up”. It covers the time frame from the previous market peak to now.

So . . a little different story. Small Cap is holding it’s own but the stodgy Dow is doing much better and the NASDAQ 100 is now the lagger. This is a mixed bag. Speculative Small Cap is OK, low growth Dow has picked up and the “go-go” Nasdaq 100 is behind. I’m thinking that the market just has not yet determined what the next trend will be. True, the Dow could be effected more by the recent strength in the Oil sector and the concern over interest rates rising is spooking growth investors. Again, we’ll need to remain cautious over the next couple of weeks and watch for a “head fake”.

The table below shows the short term strength of the major sectors .

I have started to slowly return capital to the market but some Cash remains outstanding. I’ll wait for additional signs of strength. Have a good week. ………… Tom …………

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

Close Call March 6, 2021

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March 5, 2021 – Wow, that was a close call ! I put out a rare “heads up” post about “Getting Concerned” and suggested to wait for a close below the low of the Thursday bar that closed below the 12985 level (in red below). The volume level on Thursday was high and that was another clue that traders were anxious. On Friday (the last bar) the open was higher but quickly dropped; in the afternoon it came back near the open and above the low of the previous bar (12553). Thus, a close call . . . . at least for now.

click on chart to enlarge

The bar on Friday many would cal a “High Close Doji” which is a short term reversal pattern via Japanese candlestick jargon. In term of Wyckoff analysis it was a “test” of demand, which was found. Those red arrows draw my attention to pay attention in these situations. Even with Market Sentiment weak and Volume Flow bearish Money Flow remained strong. The number of 52 week New Lows increased but not to the point of raising any flags. For now I am suggesting that this is a mild correction, driven by a reaction to news (the FED) but continue to watch extra carefully next week. I also expect a lot of this stimulus money will find it’s way into the markets and that will help buoy prices.

Looking at the stocks in the very broad S&P 1500 Index we see that this has not hurt prices very much overall. The theory is that “growth” stocks got hit much more than the “value” stocks; this pie chart tends to confirm that.

Another possible explanation is the rotation out of the “growth / high flyers” as opposed to a significant correction where nearly everything gets sold off. The table below shows the short term sector strength. Note the confirmation of Treasury Bonds taking a hit (last on the list) while Energy and Financials rose toward the top. Technology dropped down significantly.

That’s about it for now. I’m watching the market overall closely, but also for signs that money is just flowing into different sectors too. Mostly invested with about 20% of my “powder dry” for opportunities. Have a good week. …. Tom ….

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

Getting Concerned March 4, 2021

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March 4, 2021 – * * * Mid-Week Commentary * * *

OK, with the price weakness and increasing volume . . . now I’m getting concerned. IF the NASDAQ Composite or Russell 2000 Indexes close below the low of today (3/4/21), or appear very weak near the close (i.e. the last 1/2 hour), I will either hedge or liquidate to save capital and wait this out.

This is not advice, just a Heads Up that thing are beginning to look weak. More this weekend. Be Careful. ……. Tom …….

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