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Market Meets Resistance May 19, 2018

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May 18, 2018 – The market (as measured by the broad NASDAQ Composite Index) met resistance near the 7421 level (blue line).  All week long it hovered around that level and just couldn’t break through it decisively. Remember that this level is determined as a (Wyckoff) “Significant Bar” on a weekly scale; that’s the weekly high where selling last appeared.  Since the market “balked” the last time it was there it is significant to note and monitor.

This is not a bad omen, it just means that in an average market one would expect the price action to slow before breaking one way or the other.  The short term indicators remain positive from Market Sentiment to the Money & Volume Flows.  In order for the market to move higher we’d like to see a Sign of Strength (SOS) which would be a daily bar with a wide range, closing near the top on increasing volume.  That would indicate buyers stepping in.  Attention is given to the fact that as we approach summer it is a typical slow / weak season.  I don’t subscribe to the phrase “Sell in May and Go Away”, but summer is usually slow.  We could just bounce around in this range for a few months; that would not be surprising.

Looking at the market health from a different perspective, we note the number (i.e. percent of) stocks in the S&P 1500 Index that have strong price action and those in an Accumulation, Distribution or just Neutral phase.

Price Strength –In Accumulation / Distribution –Sectors that are doing well include Energy (Oil & Services), US Small Cap Index, China, Internet and Basic Materials.  Latin America is one of the weakest areas,  That’s about it for now.  Have a good week.          …………  Tom  ……….

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

Breakout Up, but One More Hurtle May 13, 2018

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May 11, 2018 – A quick look at the chart below confirms an upward breakout.  Sentiment, Money Flow, Volume Flow and Price Strength are all positive.  But more important are the closes above previous Support levels.  But . . one more hoop to jump through is the 7405 level, just above Fridays bar (light green line).

The 7405 level was the last level were Buying Stopped on a weekly basis.  That level was generated back in late March.  With that small caveat I’m “comfortably long”; that’s “invested but not aggressively so”.  The thing I’m looking for is where the market leadership is located.  During the post election run upwards Technology, Semiconductors and Consumer Goods were the darlings.  Tech and Oil have returned to leadership but I sense some hesitation.  Banks, Financials and Small Cap stocks in general are showing signs of strength and that would help maintain confidence in any continued upward movement.

Earnings have been good, but with the massive corporate tax cut they should be.  For now the market is looking way past this reporting period.  A run in Basic Materials would signal a longer term bullish look for the world economies.  For now here’s how sectors are looking in the short term:

Looking for leaders in the “green sectors” at the moment.  Also of note is the recent strength in China stocks.  Have a good week.  ….  Tom  ….

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

Looking for Market Follow Through Next May 5, 2018

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May 4, 2018 – The markets were generally lower this week until Friday; that’s when the jobs report came out.  Everyone found what they wanted in it.  Unemployment dropped to 3.9% (low) and wage growth was minimal (low inflation pressures).  So Friday was a recovery day.

I had a small hedge in place to protect our portfolios in this environment, but took them off (according to plan) on Friday.  That market model is now in 100% cash waiting for confirmation of a trend . . . in either direction.  I’ve placed Wyckoff key bar labels on the chart to signify a possible structure scenario.  Of note is the low on Thursday as a potential LPS (last point of supply).  Such a structure is Bullish and (theoretically) the market should take off higher very soon.  What does concern me is the rather low volume on Friday, indicating a lack of sellers and mostly low volume buyers that pushed prices.  Covering shorts it appears to me.

Of note also is the close very near the 7205 level (red line).  That was our resistance level short term.  I need to see a break above 7332 to feel more comfortable though.  Sentiment is positive but Money and Volume Flows are pretty neutral right now.  Price Strength is neutral to bearish as well.  Let’s see how the stocks in the broad S&P 1500 Index are fairing:

% of Stocks, Price Strength –

% of Stocks in Accumulation / Distribution –

Both pie charts are fairly even and that’s usually a healthy sign.  I’m still looking at more defensive sectors like Rising Dollar, Japan, Oil and Utilities now, but that could change quickly next week IF the market goes higher.  That’s it for this week.  The coming week should provide us some clues for the next move,  but uncertainty remains with earnings and geo-political issues in play.     ………..  Tom  ………..

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

Low Volume – Dull Market April 29, 2018

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April 27, 2018 – There is an old saying, “Never Short a Dull Market” and that’s what may be happening.  Next week is another round of earnings reports from the first quarter and this market just wants to wait and see what they are.  Granted that the earnings have been very good (generally), but the guidance going forward has been “luke warm”.  The tax benefits have long since been anticipated and reflected in prices.  It’s the future that concerns Wall Street right now.

I’ve placed some Wyckoff labels on the chart above and the notable one is a possible “LPS ?” in red.  That is the “Last Point of Support” where this market would break upwards IF a major Sign of Strength bar develops.  Low volume, so not much Supply; what we would need is increased demand.  That demand (SOS bar) would be a high volume bar with a wide daily range and a Close near the top.  In short, a break out bar.

Interesting to also note was how the NASDAQ Composite Index stopped right at the previous Support level of 7205 on Friday morning then headed down.  A significant break above 7205 on high volume would lend validity to a SOS bar, but for now that’s just a scenario.  Breaking above 7332 would be a big confirmation.

The table below shows what sectors are currently doing well –

Interesting to see Technology and Emerging Markets still in the basement along with Banks and Finance.  We’ll need to see some leadership in major sectors such as these for any sustained rally.  That’s about all for now.  Have a good week.    ………..  Tom  ………

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

At a Make or Break Point April 22, 2018

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April 20, 2018 – This market appears to be at a “Make or Break” point, in that it stopped at a resistance point (near 7332; NASDAQ Composite Index) and my Wyckoff “bar strength” indicator has (finally) given a strong bullish reading.  The resistance point goes back to early February where we had a “significant weekly bar” which is where buying last came into this market (blue line).

While Volume & Money Flow indicators are now looking more bullish but I think we need a confirmation before we get too optimistic.  A close comfortably above 7332, especially on increased volume, would help.  While I’m cautiously invested now, I still have cash to deploy and I’m thinking that we’re close to putting both feet back into the water.

This is a big week for earnings announcements so that will have a large bearing on how the market moves from here.  I am “in” Oil & Oil Services and well as Precious & Basic Metals.  Both Japan and European sectors merit attention.  While the US Technology sectors have improved, there still remains concerns especially in the Semiconductor sector.

So this week should provide us with a sign of breaking out above this resistance or a failure which would usher in concerns and lower prices.  We shall see.  Have a good week.  ………….  Tom  ………….

chart by MetaStock; used with permission

April 14, 2018

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April 13, 2018 – It was Friday the Thirteenth and just about everything was happening.  Political issues, trade issues and international saber rattling.  It will be interesting to see how the markets react on Monday (hint: watch the Asian markets on Sunday night).  But I really don’t think this market cares much about them right now, for next week the focus will be on earnings.  Yes, earnings are expected to be very good (how could they not with a big gift of a tax cut); but the interest will be on “forward guidance”.  The corporate equivalent of predicting what earnings will be next quarter.

So far we’ve hit the “spring” level and bounced off; just as a spring action should show.  We need to have a Show of Strength (SOW) with a nice wide boded bar on high volume closing above 7205, or better yet, above 7332 on the NASDAQ.  Indicators are mixed, but what concerns me is the low volume of last week.  This looks like a cautious wait and see stance.  It shouldn’t last very long though.

While “Price Strength” is modestly bullish, I’m working on a refinement of that indicator.  While not ready for “prime time”, it does indicate a bullish environment, but not that last final trigger.  That trigger is based off of “Volume Spread Analysis” (for those of you who are interested).  I’m kind of excited about it since it appears to be robust and fast reacting to market changes.

Here’s what’s happening on the sector front in the short term:

I’ve taken modest positions in Energy, Precious Metals and European sectors.  I will add to these next week IF the market shows some follow through.  I’ve also taken off my bear fund, which I held as a hedge.  Right now cash looks OK to me as I can go either way as needed.  There’s still a lot of unknown and volatility out there.

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

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

At the “Spring Level”, due for a Bounce (up) April 7, 2018

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April 6, 2018 –  OK, I’m going way out on a limb and predicting (oh, I hate that word) that this market will react higher next week.  Why? Because we’re at an important price level that Richard Wyckoff would call a “spring”.  And the other reason is that I’m seeing early signs of volume coming back into the market on “up bars”.  Now, that is by no means a guarantee, and a true Wyckoffian would wait for a “Sign of Strength” (SOS).  That SOS would be a wide range bar, with a close near the top of the range, on above average volume.  That SOS bar may take a few days to develop, but that’s what I’m watching for.  It’s kind of my “clear” to start selective buying; but not yet.

The chart above shows Sentiment, Volume & Money Flows negative, but the glimmer of hope is that the Price Strength has moved out of the Bearish range into Neutral.  That’s NOT an “all clear”, just the possible beginning of one.

This market is weak.  Just look how it is reacting to any news item.  It doesn’t take much to push it in any direction.  And as such, my idea of a possible recovery could easily get blown out or only short lived.  Earnings for the first quarter are just around the corner so there is plenty of opportunities for market moving news, let alone what comes out of the White House.  This is not an easy market to trade and make money in unless you’re very short term focused.

The pie chart below shows the current damage with a fair amount of red.

S&P 1500 stocks; Price Strength:

S&P 1500 stocks in Accumulation / Distribution:

Here are the strong sectors (in the short term):

No surprises since most are defensive in nature.  Let’s carefully watch for our SOS confirmation next week before we take any significant positions or take off a hedge.  Have a good week.       ……………  Tom  ………….

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

Volitility Returns; at Important Level March 30, 2018

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March 29, 2018 – A short week this week but at seen below, price volatility is back and we’re at / close to my “spring level”.  This “spring level” (6880) is important because that’s the nearest price where buyers “came into the market” on a weekly basis.  It’s the low price of a Wyckoff “significant bar”.  IF this is an Accumulation structure, this price level would be logical for the price to bounce off of and head higher.

That remains to be seen as next week is a holiday week and volumes are expected to be light.  If this level does not hold, then we could very likely be headed lower and the whole price structure scenario would have to change.  The big wild card is the news.  And with that, anything could happen to spook investors.  It would take much in this weak market environment.  The damage was done, now the market has to prove itself.  Earnings season is just around the corner.

Many major sectors remain “bearish”, but I’m playing it safe with only a small position short Latin America and short Japan.  It won’t take much on Monday to close these positions out; any hint of strength would do it.

Happy Easter & Happy Passover to all.  Have a good week.     ……….  Tom  ……….

Chart courtesy of MetaStock; used with permission.

A Weak Market Driven by News March 25, 2018

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March 23, 2018 – The old saying “A weak market reacts to bad news, while a strong market ignores it.”, holds true again.  This is not the same “go-go” market that ended in early February.  Reality is setting in, and the market is not happy with all of the unknowns that are floating around.  The reactions on Thursday and Friday of last week showed that investors prefer to “sell and ask questions later”; and they did.

Now, a good portion of those drops were driven my computer algos, which eccentrically “dog pile” on top of any move.  But someone had to get the direction down started.  The rest was amplified.

Our support levels (red & blue) were blown through.  OK, now what?  A possible scenario would be for the market to drop to around the 6880 level (my projected “spring area”) before finding a base.  IF this bullish price structure is to hold, it would then have to stabilize and go higher, at least bad into the “long term channel”.  IF the 6880 level is broken solidly on a close, I’m concerned that increased selling will enter into the market.  I note that the Volume & Money Flow indicators turned negative early last week.  Market Sentiment is now bearish as well.

Here’s a bit longer term view of the damage as indicated by the stock in the S&P 1500 Index:

Price Strength (above) is certainly negative.

And we see that selling (Distribution) has entered the market.

At this point I’ve “hedged” my positions by buying a “Bear Market” fund; one that goes up when the market goes down.  I’m using the NASDAQ 100 Index as my proxy for “The Market”, but the Dow or S&P 500 should work equally as well.  I’m watching that 6880 level and how my stocks are reacting vs. the market.  Selling the weak ones (selectively) won’t hurt; it’s nice to have cash at a market low.

Have a good week and be careful.       ………. Tom ……….

Back in the Channel Again March 17, 2018

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March 16, 2018 – The NASDAQ Composite is “Back in the (Saddle) Channel Again” . . . guess I’m showing my age.  🙂  But in any case prices have returned to that “Long Term Channel” (gray on the chart).  That’s great but there are some signs of at least a slowing of the advance (chart below).

Sentiment (top) remains positive but Money Flow & Volume Flow are slowing / weakening.   My new Price Strength indicator also shows a “Neutral” status.  The 7332 level is the first support level with 7205 being more of a “primary” level.  Breaking these will raise concerns.

It’s been a while since I’ve shown the S&P 1500 stocks in the pie chart format, so let’s look at them.  The % of stocks in a Price Strength position:

This confirms the recent advances, but Neutral is about equal to Strong, which indicates the moves are not universal; one should be selective for sure.

Next are the % of the 1500 stocks in Accumulation (buying) and Distribution (selling) status:

Not much revealed here.  This was not a great week for the previous leaders (Tech. Semiconductors, Internet), the big movers were more defensive in nature such as Utilities and Real Estate.  IF this is an early move to a defensive position we should monitor those sectors closely next week for follow through and clues.

I am 80% invested, having paired down a few lagging stocks.  If my Price Strength indicator softens more I’ll continue to raise Cash and / or hedge positions.  Have a good week.        ………… Tom  …………

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

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