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It’s Just Not Right Yet April 25, 2014

Posted by Tom in Thoughts.
Tags: , ,

Ever get that feeling . . . that something is just not “right”?  As much as the TV talking heads of Wall Street were trying to plant the idea that the worst is over and “We’ll soon be making new highs !”, it just didn’t seem “right” yet.  I’ve been working on a new market sentiment indicator that is a composite of 5 non-price indicators; they range from option volatility (VIX) to Advance / Declines, etc.  Interestingly enough, on Tuesday it went from (short-term) Bearish to Neutral.  The Neutral is a “heads up” that a trend change may be confirmed, but the indicator slipped back to Bearish by the close of business on Thursday.   So . . . it looks like the market sentiment indicator is doing its job.

There were some early signs of strength at the beginning of the week but by Friday they had pretty much headed “South”.  Let’s do a Wyckoff scan of the chart below:


I see a failed High (possibly) this week, and also note that the volume in the last up swing (circled in orange) was a few notches below average (that red line going across the volume bars (50 day simple MA).   So . . price structure leans toward Distribution: failed high swings in the background and anemic volume on Up bars and going higher on Down bars.  Hummmm, looks like a Lack of Demand right now to me.  (Comments?)

Fundamentalists will tell us about earnings disappointments, and there have been a few, but there were also earnings beats too (i.e. Apple, Microsoft, Netflix).  But then these have taken on some water as of late.  The Ukraine?  Yeap that’s a wild card, and traders would rather be in Cash over the weekend.  So let’s see if there is a follow thru to the down side after the first hour on Monday.  Will the “buy the dips” bargain hunters come in to stop the slide or will folks get even more nervous?

Let’s see what’s doing best right now:

Top Sectors

Interesting.  Utilities, Energy, Real Estate and other quite / defensive sectors.  I also note the mediocre RS (relative strength) readings on the far right column.  Yellow at best . . no green.  Perhaps we’re just going to have to put up with a summer trading range this year.  If the Russians behave themselves, I doubt if this slow down will actually amount to much unless you’ve got small cap stocks (and they have been hit rather hard lately).

So I continue being defensive and cautious here.  Hope for the best, but plan for the worst.  🙂   Have a good week.         ………..  Tom  ………..


1. hlask - April 26, 2014


Definitely a contraction of demand but a contraction of supply too last week which at least is somewhat positive. The increase in supply in the reaction to 4000 is at levels not seen for a couple of years however – indicates a probable retest of that level or at least further consolidation….





Tom - April 26, 2014

Good to hear from you Howard . . .Love the comments, keep them coming ! Sounds like you’re getting a lot our of Roman’s course . . that’s great.

What concerns me most is what type of “swing” volume (i.e. Supply) comes in. To my eye, there is more Supply coming into the market on Down swings than Up; at least currently. That appears to be a possible “change of character” to this market. Also the (more speculative) small cap stocks are showing significantly more weakness than the large cap / “blue chip” stocks.
It just looks like risk aversion to me right now, though I doubt this will be a serious correction. On the world economy side China and emerging markets have recovered some, but are still “Iffy”. Tech and Financials are lack luster . . . not much leadership out there currently. Time to be (very) selective, but there are opportunities.
Cheers ! …….. Tom …….

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