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Still “In Range”, but Getting Close August 1, 2014

Posted by Tom in Thoughts.
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I’ll be rather short this week due to the monthly “Client Report” which you can download under the Newsletter tab.  No need to be redundant with top / bottom sectors and the Price Strength & Money Flow charts here, since they are in the newsletter.

On to the markets !

NASDAQ

It was if the market turned on a dime on Thursday (the second bar in from the right side above).  A gap down and it continued.  Today (Friday) was a little bit like a roller coaster, up, down, then up, then down.  For the time being the (closing) price is holding within the trading range, though just barely.  4485 at the top and 4350 at the bottom.  I look at the volume and try to confirm a Wyckoff distribution price structure, but I still can’t confirm any type of Up Thrust After Distribution (UTAD).  It may be there in small cap stocks just not in the broader index averages.  A close below 4350 will bring genuine concern.  After all, we did see a market change of character when the upward price channel was broken in early July.

Market sentiment remains poor / weak / bearish.  My market model continues to say “Stay Neutral”, so some stocks have been sold as stop level were hit and a small “hedge” is in place.  No need to go short just yet.

Yes, there are many “reasons” for the weakness in the market, but the most likely one is “it’s about time”, especially since the summer is drawing toward a close.  August is a traditionally weak month, so I’ll be happy just to stay in the trading range or have a minor correction.  But if we see more defaults in Latin America or in parts of Europe, that could escalate selling.  A Chinese “hick up” would also be a problem.

So let’s not over react, but be prepared to take more defensive positions IF prices fall.  Watch for supply (i.e. volume) coming into the market on a down day: quick liquidation.  Not good.   Think summer and enjoy.  Have a good week.            ………….  Tom  …………..

chart courtesy of MetaStock, used with permission.

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