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Market: “Please Hold for the Next Move” March 23, 2013

Posted by Tom in Thoughts.
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If we could “call the market” (on a telephone that is), we might get a message . . . “Please Hold”.  This last week was full of activity but really not much movement (note below, from the dashed line to current).

After all the hype about new high’s (and sucking in the public) the markets took a cue from the continuing issues in Europe and did a “test of supply”.  By a test I mean bringing the market down to see if there was anyone willing to sell.  It lasted a few days and then appears to have dried up.

NASDAQ Composite Index

The chart above shows the dashed line a week ago Friday.  Heavy volume, likely caused by options expiration (or preview of Cyprus?) on a narrow bar.  That gets my attention.  This week there was a sudden drop with news and the market finished about where it was a week ago.  The down bars did not bring with them increasing volume, hence not much supply.  Market on hold.

Being on hold is a natural thing at this point.  The indexes are at or near multi-year highs (resistance) and also skirting along the upper edges of price channels.  All it takes is some ‘bad news” to get traders nervous.  But what are the longer) term investing institutions doing?  It doesn’t look like they are selling at this time.  Let’s look at Price Strength below:

Price Strength

This pie chart measures where the price is in relation the stock’s  price “envelope”.  Green means the price is toward the top end, Yellow neutral/middle and Red toward the lower edge.  Next we look at Money Flow; that is, is money flowing into or out of stocks.

Accum-Distrib

Again we look at the stocks comprising the S&P 1500 Index.  61.8% (Green shades) are in Accumulation, 20.8% (Yellow) are Neutral and 17.4% (Red shades) are in Distribution.  Now I’ll leave it up to you, but on the basis of this data I don’t see any trend toward selling this market.

Until we get a break of a Trend Line and a break of a Support price level I really can’t get very concerned.  So far this appears to have the structure of Re-Accumulation and not Distribution, though a failed rally that doesn’t break into new high ground would start to change my mind.  We’re approaching the adage: “Sell in May and Go Away” and that may hold true again this year.  The middle of the year may prove to be (nearly) uneventful.  That’s why selecting the right Sector and Stock could very well be important over the next 6 months.  More on Sector Strength next week.

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

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