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A Slower Go . . . . April 1, 2016

Posted by Tom in Thoughts.
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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”.


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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