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At a Near Term Turning Point August 24, 2013

Posted by Tom in Thoughts.
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Interesting week.  On the chart below you can see that we had a fair amount of selling this week (shown as Distribution in the top window).  Friday closed mixed.  Yes, Friday was an Up Day but note the narrow range (narrow between the high and low prices).  That indicates (to me) indecision, and about as many folks buying as selling . . . neither made any head way.  Right now we’re at about mid-channel (dashed purple line) and that’s a typical level to make a turn one way or the other.

NASDAQ

Volume remains average to light, not much force behind the prices.  But I think it could be a turning point in that we did bounce off the 3590 support level (note the green line).  Also that level has been important in the immediate past (dashed green line).  I am seeing some very preliminary signs that the Distribution phase has either stopped or at least paused for now.  What is needed is some news to push those investors on the fence one way or the other.

I really hate news driven markets because they are driven by emotion and gut feel but they can drive shares out of weak hands and into strong hands (at a discount).  So any 1-2 day blip down could be as much of an opportunity as a bad oman.  Volume will be the best indication of which it is, and the bar immediately following a high volume day.

For now my Market Model is Neutral / Cash.  It flashed a one day “Sell”, but that’s just a heads up to watch for the next days action.  There was no follow thru so back to a Cash status.

Select stocks are holding up well here as I’ve only had to sell about 30% of my stock holdings.  As the old saying goes: “Strong stocks hold their own in a weak market, while weak ones show their true colors”.  So the 3592-3590 area remains our line in the (shifting) sand.  For now I’m being very selective on the buy side and “dancing close to the exit” just in case some geo-political issue drives the market sharply lower.  No sense in being a market hero, preserve capital as necessary.

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

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