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Direction Still Up: Clouds Forming? November 16, 2019

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Nov. 15, 2019 – Make no mistake, the direction of the US markets remain “Up”, but . . . . storm clouds may be forming.  Two signs of that are the percent of “Smart & Dumb money” (from SentimentTrader. Com) and my own sentiment composite (top pane, chart below).  The difference between “Smart & Dumb Money” is fairly high indicator of where market tops happen.  That does not mean “all Hell is breaking loose”, but it does raise the caution flag.  The “big guys” are cautious.

Note just how far & fast this market has come in the 6 weeks.  Due for a change or at least a pause?  I’m certainly thinking that is a strong possibility.  It’s just natural.  I also note that price action “Price Strength” is back to Neutral.  Time to Sell?  No, but not a great time to buy either.  Let’s continue to monitor the reaction of the market to any news, whether it be earnings, geo-political or the like.  That will be a clue.  Trade news is going to be a key item here.  Right now we’re being whip-sawed back and forth on that front.  There is a big incentive to inflate these market over the next year (i.e. election); watch the big picture carefully.  (click on chart to enlarge)

Short term, here’s where the sector action is:

That’s about it for now.  I’m in there with significant positions, but getting more uncomfortable as this market pushes higher.  Watch volume spikes on big move days.  Also be aware of “Lack of Demand” (low volume), especially over multiple days.

Have a good week.    ………… Tom  ………..

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

Continuation Higher November 8, 2019

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Nov. 8, 2019 – What’s there not to like?  The market gapped up higher on Monday and pretty much stayed in a narrow range most of this week.  Ignoring the impeachment and on again – off again China trade news.  So for now, I’ve just got to stay in this market even though I’m not entirely comfortable with it.

The chart above shows all positive indicators; not much else to say.  (click on chart to enlarge it)  Let’s take a look at the stocks in the very broad S&P 1500 Index below.

Price Strength –

Over 50% above their 20 day moving average, so strong price movement for most stocks in the index.

Accumulation (buying) & Distribution (selling) –

(Again) over 50% of the stocks indicating Accumulation of shares.  Maybe a little over done, so a pause is not out of the question here.

Sector Strength –

The Technology sectors continue to lead this market higher in the near term.

So the bottom line is this market continues higher until something forces investors to get nervous and sell.  We’ve come up a fair amount and survived (most) of the 3rd qtr. earnings.  The seasonality is generally good for the rest of the year, so got to go with the flow.  When changes comes, I’ve got a feeling it will come very quickly.  Hopefully the stair step higher will continue in the mean time.

Have a good week.      …….. Tom  ……..

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

New High . . What’s The Problem ? November 2, 2019

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Nov. 1, 2019 – OK, the markets are at / near all time highs so what is there to worry about?  Maybe nothing, but then again maybe there is at least some concern.  I’m changing the perspective and the time frame of the regular chart of the NASDAQ Composite Index (below).  The daily bars show us one thing but weekly bars can provide us with a different perspective.

I’m taking a liberal view of what a “top” is on this chart so bare with me.  The chart goes back about 17 months and the area over a year ago (mid Sept., 2018) is labeled “1”.  Thereafter we see labels at the swing highs / peaks of 2, 3 and 4.  Each time the market gets near the current level it has pulled back, and sometimes very quickly and significantly.  Presently many of the indicators are positive, thus indicating strength and continued prices moving higher.

Now I’m not saying that the market has to correct and head lower, it’s just that we’re once again at / near an inflection point.  I am currently “long” this market because in the short term it is headed higher as far as we know.  From a historical perspective one could have gone to Cash over a year ago and not missed much, and actually come out ahead.  The question to ask is what makes this top, top #4, different?  Or perhaps we’re in a very broad trading range and need to be quick on our feet to make any type of head way.

In any case we will have a much better idea within a few weeks.  Either the markets will continue to trend high after this current breakout, or it will confirm a “shake out” of the last buyers “holding the bag”.  I’ve read where the big institutions are very reluctant to buy into this market at these levels. The point being that we are closer to the top, than we are to the bottom.  It’s been a while since the trend bottom; an unusually long period.  I feel it’s a good time to be nimble and extra careful because the next minor correction could be more than that.  Let’s watch the bar action and confirm them with volume.  Signs of a rush to the exits are wide range down bars on high volume.

In the mean time here’s a table of short term sector strength –

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

Above Resistance, Close to Previous High October 26, 2019

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Oct. 25, 2019 – Well, onward and upward.  The NASDAQ Composite Index closed above resistance indicating strength.  That’s all well and good but the next level of resistance (above) would be 8325, which was the previous high on 7-26-19.  As we approach that level it is logical to expect a pause to digest the previous up move.  Since we’re right in the middle of earnings season there is always the potential for a surprise.  So far the earnings have been pretty good, with some guidance lower in the 4th quarter.  Volume has been average, so no one is rushing to buy.

                                                      (click on chart to enlarge)

For now we just have to go with the flow and watch for signs of weakness.  The support level is near the 8045 mark and any minor correction should hold near there.  If that level breaks we could be in for further downward action and just wind up in a broad trading range.  The good news is that we’re in a generally bullish sessional period as we head into the Christmas session.  Everyone will now begin to watch for consumer / retail spending, and that will weigh heavily on the market over the next 2 months.

On the sector front, the Technology sectors have regained their dominance.  Latin America and Small Cap stocks are also back in trend.

I am nearly back to being fully invested.  Still looking for a few more stocks to fill in the growth portfolio.  Lately my research has focused on “when to sell” to lock in profits during a correction.  Transaction costs are so low there’s no sense in trying to stick it out and be a hero.  The trouble is most growth stocks go down about as fast (or faster) than they go up.  Timing is a big factor.

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

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

Market Improving, but . . . . October 19, 2019

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Oct. 18, 2019 – This week we saw a market improvement by breaking the 8062 level, but then stall out at 8172, which is close to a previous swing high (note on the chart below “failure”).  This stall can be considered very normal and merely a pause at a significant level before regaining momentum.  Or, it could be a “double top” which is bearish.  Volume did pick up a little on Friday but we didn’t see a wholesale exodus out of stocks.

What we’ll do is carefully watch for either signs of strength or weakness in the coming week and take our ques from that.  These signs will be where the closing price is in relation to the bar range (either top or bottom) and whether volume increases on those bars (buying or selling pressure).  A close below a previous swing low would confirm bearishness, and a close above a high would be bullish. (click on chart to enlarge)

What I do find curious is the sudden change in sector strength late in this past week. (see table below)  Recall that the Tech sectors (Technology, Semiconductors, “the Q’s”, etc.) were right near the top of the list; refer to the table in last weeks posting.  And now look at how far they have dropped in just a few days.  They’ve been replaced by more defensive sectors (Banks, Telecom, Wireless, etc.).  Are traders getting cautious?  Possibly, but this table is geared to short term strength, thus it can turn around quickly (i.e. made for trading).

I haven’t shown the “percent of stocks in the S&P 1500 Index” pie charts for awhile, so let’s see what they show –

Price Strength-Nothing very remarkable as nearly half the stocks in the index are above their 20 day moving average.

 

 

Accumulation/Distribution-

This pie chart shows a little more tentative strength.  “Normal” would be roughly 1/3 of the stocks in each of the three categories.  Too much green or red would indicate “over bought” or “oversold” conditions within the broad overall trend.  A big chunk of yellow / neutral shows indecision.

That about it for now.  I’m going to be especially observant next week for signs of strength or weakness.  Right now I am “cautiously long” with still some Cash to invest IF conditions continue to improve; but I always want to know where the exit door is located.  🙂  Have a good week.   …….. Tom  ………

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

Hopeful, but Not Great October 12, 2019

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Oct. 10, 2019 – This will be short since I’m “on the road”.  The gap up on Friday was “hopeful”, but the close was very weak (Not Great), hence the price action did not confirm that a new up trend had begun.  For this reason I think it’s wise to go slow until the structure of this market improves.  No need to be a hero in here.

It sure would be nice to see a solid close above the 8062 level on the NASDAQ Composite Index.  Volume is picking up but the “Money Flow” indicator shows that a lot of selling was done and so far has not been over come with buying.  Once again “news” has driven the market and if things don’t “pan out” with trade negotiations, the market could revert back lower.  Until we see some earnings coming across the wire from the end of the 3rd quarter, we will likely not be on solid footing.  I am not convinced that the all clear sign has been given just yet.

The sector table is below.  I note that Technology is the most optimistic of the sectors.  Not surprising since that area got hit hard during the last down swing.

I am slowly taking small position in here; the light hedge has been removed.  Have a good and cautious week.   ………….  Tom  ……………….

Not Much Buying Demand October 5, 2019

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Oct. 4, 2019 –  A pretty dismal week with a blip up on Friday.  The problem is the volume on Friday was very low, i.e. “No Demand”.  Looks like a simple short covering rally to me.  We are very close to the last swing low and the moment of truth is near.  Does this level hold (7663 support) or do we break down even lower.  It’s mixed and could be resolved via a news item.  But the US economy is slowing and with it corporate earnings.  The market is looking for stability and a good reason to rally back to the previous high.  With BREXIT and Impeachment looming in the background that doesn’t look all that great.  In addition, “price action” remains weak & “in the noise” without a clear direction.  (see last week for a description or in the “publications” page)

The market likes the idea of lower interest rates, but that usually means things are not that good and the economy needs help.  A double edged sword so to speak.

When you see government bonds, Utilities and Real Estate as strong sectors you know that (in the short term) things are not that great.  Here’s the table below:

Not much more to say.  I’m heavy in Cash with a light hedge on as insurance.  Have a good week.     ………… Tom …………

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

Tough Call, but Markets are Weak September 28, 2019

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Sept. 27, 2019 –   No doubt about it, the news is driving this market and driving it hard.  Yes, the turmoil in Washington is significant, but perhaps more important is the loss of creditability of the administration in other areas such as trade and the economy.  There have been so many tweets and brief comments about China trade negotiations (that never panned out) that traders are beginning to doubt the comments coming out of the Trump administration.  (Are talks really starting again in October?)

Any way all we have to go on is price, volume and time and that’s where charts come into play.  We’re now back to a likely bearish trend with a possible low of 7643 on the NASDAQ Composite Index.  Momentum has all but dried up.  All one has to do is look at what sectors are strongest to see, that in the short term, playing defensive is in order.

(click on graphics to enlarge them)

I’ve been skeptical about this latest price structure for a month for reasons that I explain below.  The Price Action did not confirm the Price Movement.  Take a quick look at my explanation about Price Action and Trends and you’ll see what I mean.

Sector Strength is shown below –

What concerns me is that a desperate president might “pull a rabbit out of his hat” in the form of a quick China trade deal in order to look better.  The “deal” doesn’t have to be “good”, just bringing an end to the tariff war would be bullish for most US and World businesses.  So . . .  beware the news and a desperate administration that is looking to deflect from it’s own deeds.  At any sign of price weakness I will “hedge out” the light positions that I have in our portfolios (Cash is OK).  This is not the time to be brave, but discreate.

Have a Good Week.   ………….  Tom  …………..

Ideas About Market “Price Action and Trends” Sept. 2019
First, let’s look at an old definition of trends of both stocks and indexes. It can quickly be summed up as if the security is making higher Highs then it is in an “Up Trend”, but if it is making lower Lows it is in a “Down Trend”. A “High” or “Low” is typically defined as a swing high or low and not necessarily a bar price high or low. For the purpose of illustration on the chart below, the blue “zig-zag” line shows a closing price movement of 2% or more. This “zig-zag” helps to visualize the swing highs and lows of price action.
Confirmation of an up trend change would not be just a break of a previous swing high level, but also a swing low that was higher than the last swing low. The opposite holds for confirmation of a down trend. The advantage of this conformation is to filter out brief price level breaks during a period of congestion, or sideways movement. The disadvantage is a delay waiting for that confirmation.

The red lines on the chart above show points where a swing low (level) was broken/failed; the green lines show where a swing high (level) was broken/failed.
Next let’s take a look at an indicator (top window) that attempts to factor price and volume over a short period of time to confirm “price action strength” early in a price move. I put a filter of “3” on the indicator to show if the movement is in the “noise” level of price movement or if above 3, a potential significant move. You can probably guess that the red is bearish movement and the green line is bullish movement.
I note that in the cases where a price swing high or low price level was broken, the indicator confirmed it at or before that point, except for Sept. 5, 2019, where the bullish price strength was below the “3” level and therefore considered “noise”. Currently both the indicator and break of a swing low level indicate a “bearish” short term trend in the NASDAQ Composite Index.

At Resistance; Next Move ? September 22, 2019

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Sept. 20, 2019 – (editorial comment)  I just returned from spending 4 weeks in Europe, both Northern & Southern. I saw a lot of infrastructure projects in full bloom, and (IMHO) an absorption of immigrants into their society; it hasn’t been easy, but they are doing it. (I saw a north African man speak pretty good Finnish, and take it from me, that’s not an easy language to learn.)  🙂

NASDAQ

US market trend in the short term is up, but again, the price action is not that favorable. Looks like we’ve hit a resistance at the 8172 level on the NASDAQ Composite Index; volume is about average but I’m thinking a “lack of demand”. Next week should be interesting. I think we’ll see a significant move one way or the other.

Sectors

All of the sectors have a ranking below 200, which makes me a bit uneasy as far as trend strength is concerned. (table attached) So, I’m continuing to be cautious here with any big positions.

A short post today, more as I recover from jet lag.  🙂  Have a good week.

…………  Tom  ……….

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

Uneasy Market September 14, 2019

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Sept. 13, 2019 – OK, the NASDAQ Composite Index (i.e. “market”) made it above the 8048 resistance level, but the price action remains poor. This type of condition is very unusual so I’m calling it an “Uneasy Market” for now. Thus I’m not taking an aggressive / fully invested position right now. What would change my mind is a close above 8243, the “3 bar reversal” level.

I’m going to be brief; on a short term cell phone wi-fi network. Let’s look at sector strength:

An unusual combo of strong sectors: Banks, Energy, Small Cap stocks.

That’s it for now. Be cautious and have a good week. …… Tom ………

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