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Still Concerned March 21, 2014

Posted by Tom in Thoughts.
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OK, an interesting week, especially Friday.  Looking at the chart below we see Friday being a wide range down bar.  It opened near the top and headed down all day with the Close near the Low of the day.  Top that with the heavy volume.  Now some would point out that the heavy volume is not unusual for the 3rd Friday of the month; options expiration.  This Friday also saw the March futures contract stop trading.  But lately we’ve seen much of this “roll over” volume spread out over the last 3 days.  I wonder if anybody waits until the last day of trading to roll over into the new contract, but it’s possible.  (click on chart to enlarge)

NASDAQ

I just don’t like this market in here.  One reason is that many of the market leaders are no longer leading.  Sector rotation?  Sure, but it looks like more “I’ve made my money and I’m getting out while the gett’in is good”  type of thing.  I’m looking for fresh leadership, but don’t feel very comfortable with it (Financials and Semiconductors to name two).

The question is: was Friday a SOW (sign of weakness)?  Sure looks like it to me, unless it was a one day rollover thing.  Monday should help confirm or deny that.  I have continued with my support line at 4240 (dashed blue line) as an important level to hold.  A Close below that would cause me to view this structure as (at least) a minor Distribution one.   It would also show a failed swing high; i.e. a lower High swing.  In that case we may re-test the February lows.  March has not been a very positive month so far and if we are to go back and break into new high ground that should begin to happen.  Maybe investors are waiting for 1st quarter earnings before making any move.  We’ll just have to wait and see.

Below you see a pie chart of the component stocks within the S&P 1500 (a broad group).  It shows the number of stocks in the stages of Accumulation (buying) and Distribution (selling).  While this has slowly gotten weaker over the last 3 weeks, it indicates that we’re not in a dangerous position just yet.  So far, just a “healthy pause” in the up move.  I also note that this indicator in a lagging one; nice to monitor but it does not pick up on quick changes.

Accum - Distrib

Next week I’ll be at a technical analysis conference, so the posting may have to wait until Monday.  But you should have a good idea of what to look for in the mean time.  Have a good week & be cautious here.     ………..  Tom  ………..

chart by MetaStock; pie chart by www.HighGrowthStock.com; used with permission

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