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What Would Dick Do ? April 29, 2016

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April 29, 2016 – What would Richard do?; meaning Richard Wyckoff . . . right now?  Well it’s best not to listen to the “experts” on the financial channels because they are wrong about as much as they are right (I give them the benefit of that doubt).  Let’s look at the chart below –

NASDAQ

Now I’m NOT the traditional Wyckoff analyst, especially when it comes to looking at derivatives (indexes, ETF’s futures, etc.).  Why?  Because there is not the strict Supply /Demand relationship that stocks have.  In short, derivatives don’t have a defined amount of shares available (supply) . . . . derivatives can always “make more” shares or contracts (to meet demand).  Thus when looking at an index (like above) we’re likely not going to see the “purity” of classic Wyckoff bars.

Is this a Distribution Structure?  No I just don’t see it, even if I loosen up my classic Wyckoff definitions.  I don’t see a significant Buying Climax, nor an Up Thrust (higher price bar) with Lack of Demand (low volume).  At this point it just looks like a Shake Out before re-accumulation.  Thus I don’t expect the market to get very much weaker but likely forming a new, lower base of some time period so the Smart Money can re-accumulate shares at lower prices.  Then the mark up will resume.

Now I could be totally wrong, and this market just continues to get weaker and the selling (volume) increases to form a major correction.  If that is the case, we should see continued weakness after Monday morning (weak hands will sell into this on Monday morning).  This softness has been expected so hopefully folks are not too long, or at least have “hedged out” via inverse funds or the VIX ETF.

The pie chart below shows that the stocks in the broad S&P 1500 has not shown major selling . . yet.

A-D SP 1500

Sectors that are strong now continue to be Precious Metals, Basic Materials, Oil & gas, (some) Banks and (yes) even Latin America.  In any case, let’s be careful in here.  Let’s observe price bar spreads (difference between the high & low of the day), the Closing price within that spread and the Volume of that bar.  Did the bar close weak (low) on high volume?  (i.e. major selling) or are the market movers just flushing out the weak hands? (below average volume)  We’ll likely know next week.

Have a good week & Good Trading.           …………….  Tom  ……………

Market Stumbles April 24, 2016

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April 22, 2016 – Sorry this post is rather late, but I’ve been traveling.  Friday was an interesting day because for the first time in quite a while, it showed weakness on increasing volume.  It was a narrow range day with the Close about where the Open was.  Not much price damage but the market internals did take a hit.  The bigger question is whether this is the “normal” “Buy The Dips” that we’ve been accustom to?

We’ve retraced back to the 4905 level but I’m now showing volume increasing on down bar moves (red arrow on Distribution volume).  So far that has not shown up in the “Money Flow” indicator (above), but the trend line has been “gently broken”.

NASDAQ

So far it just looks like minor selling and perhaps nerves about earnings (Microsoft & Netflix were not that great).  Next week we see a number of high visibility names showing first quarter earnings, and that should set the tone for this market.  Either continued weakness (correction) or just a minor “blip” down.

Here’s where I’m seeing strength in the markets now:

Top Stock Sectors

The good news it’s fairly broad in coverage.  In the S&P 1500 stocks, her’s why I see strength:

A-D SP 1500

 

The majority of them remain in Accumulation mode.  Now, that could change in a few days IF weakness remains and selling increases, but so far . . that’s not showing up.

Got to go, have a good week !        ……………..  Tom  ……………….

price chart by MetaStock; pie charts by http://www.HighGrowthInvestor.com; used with permission.

A Blah, Waiting Market April 15, 2016

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April 15, 2016 – The major banks reported this past week and with mixed reported results, did fairly well (much to most traders surprise).  This market is holding up, but it did flirt with going from “Bullish” to “Neutral” on Monday, so we’re hanging in there but not by much.  Thursday and Friday were slow (price & volume wise) because of (potentially) big news meetings this weekend.  The ECB (European Central Bank), Brail’s impeachment vote and OPEC are all on the docket.  Not many folks were looking to add positions right before these meetings.

NASDAQ

We’re hovering near that purple upward facing trend line and above the last resistance level.  I don’t see major Wyckoff signs of a Buying Climax or any wild Up Thrust of price on low volume.  We continue to make higher highs and higher lows, and so the markets character has not changed.

And the market has turned rather “Blah” waiting for easy money or oil news going forward.  Earnings have just been OK so far and that’s another wild card with many big names reporting next week.  Gold (and miners) corrected a bit but picked right up again.  We need something to propel prices higher.  If not, we’ll likely fall back into the familiar trading range.

Of all the stocks in my watch list, these are the major sectors that they are from:

Top Sectors(click on any graphic to enlarge it for easy viewing)

With all of actions going on in the next 7 days we may not have to wait very long for a move one way or the other.  In the mean time, I’m “cautiously long” select stocks and sector funds.  Have a good week.   ….  Tom  ….

Market Slowing; Next Week Important April 9, 2016

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April 8, 2106 – Last week the market basically stalled.  Volatility, yes, with big moves both up and down but not much overall movement.  I’m not seeing a lot of selling just yet, more like a Lack of Demand (buying) coupled with knee jerk reactions to news.  Is oil going up or down . . is Japan devaluing the Yen ? (etc.)  Traders are nervous.  Corporate earnings have not been great with the major U.S. banks reporting next week,  and that could tip the markets one way or the other.  With all of this positioning going on whatever the move is it will be a quick one; nobody wants to be left behind.

NASDAQ

Money Flow is weak (top pane), Accumulation buying (green, volume) has slowed, but Distribution volume (red, selling) has not picked up.  We’re hugging that lower trend line (purple) as well as the 4905’ish price area.  It just feels like the “spring is coiling” for a move and the major players are waiting.

I’ve cut back on exposure though my market indicators remain Bullish / Long.  They’re been there for awhile and maybe we can make it though April with just a pause and not a decline / correction.  I am cautious, especially since I don’t see many stocks that are on my buy list.  The pie chart below shows the general price strength of stocks in the broad S&P 1500 Index.

S&P 1500 Price StrengthPretty evenly split between the three rankings, though the edge goes toward Neutral & Weak.  Even with Biotech and Semiconductors, Japan and Latin America showing up as strong this week, their recent volatility concerns me.  HealthCare and Real Estate look like safer sectors in this market environment.  Next week could be pivotal, so let’s keep a close eye especially on big bank earnings reports.

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

price chart by MetaStock; pie chart by http://www.HighGrowthStock.com.  Used with permission.

 

A Slower Go . . . . April 1, 2016

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April 1, 2016  It’s always a good idea to stop every so often and look at the “big picture”.  I’ve plotted the NASDAQ Composite Index weekly bars below.  What stands out is the steady rise until late last year when we put in a “lower low” price swing.  That was followed by a “lower high”.  Many define a trend as price action having higher highs & higher lows in the price swings.

NASDAQ weekly

Does this mean the Bull market is in trouble?  It sure could.  I spotted in an upper trend line where the market could fail and confirm with another “lower high”.  What also jumps out is the almost holiday level of volume over the last 4 weeks; very low (blue circled).

What’s driving this?  it really doesn’t matter, but stock earnings eventually effect stock prices (or at least their perception of future earnings).  The first quarter of the 2016 earnings season is almost over and it’s estimated that Q1 earnings are down an average of 8%.  That’s the 4th consecutive quarter of year to year declines.  The current forward P/E ratio of the S&P 500 is just over 16; still above the 5 & 10 year average of 14.

Are investors seeing slower growth and an over valued stock market?  Since this latest rally, we may not have to wait much longer to see if this long Bull market is over as we approach previous highs.  In the (shorter) mean time it still looks strong, though getting “long in the tooth”.

NASDAQ

I don’t see signs of selling, but do see signs of Demand Weakening.  Market Sentiment remains positive.  There is a dichotomy of leadership in this market.  Real Estate and Utilities remain strong, but also Technology and Emerging Markets are showing leadership.  Defensive and speculative sectors; interesting indeed.  I continue to ride the market up, but the higher it goes, the more concerned I become.  Time to make sure we have a exit plan if needed.

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

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