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Still Cautious May 13, 2016

Posted by Tom in Thoughts.
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May 13, 2016 –  Friday the 13th was not a good day for stocks.  After a promising Tuesday (up sharply) the rest of the week drifted back down.  Tuesday was a (very) short term breakout but this market could not hold it.  We’re seeing continued signs of weakness but not panic selling.  The Distribution Volume is picking up (red line) and Market Sentiment continues to be weak.  From other indicators (not shown) I feel that the previous swing low of 4684 is an important level to hold.

NASDAQ

A close below 4684 will likely send the markets substantially lower.  There’s just too much bad news on the earnings front and internationally, folks remain concerned about growth in China.  It’s kind of funny that two years ago people were in fear of a run away Chinese economy swapping the world and wondering how to slow it down; it did all by itself.  Try as I may to find a Distribution structure on the NASDAQ chart, I can’t see one.  So I remain for the time being thinking this is a large trading range inside of a Re-Accumulation pattern.  But in any (and all) cases you don’t get extra “points” for being stubborn or a hero, only for being on the right side of the market.  It’s important to Stay In The Now.

Right now I am light in exposure and I’ve “hedged off” even that amount via inverse index funds.  This market is just too susceptible to any bad news and I don’t want to be exposed in that case.  The NASDAQ Composite Index is right back where it was in early March of this year, it’s just hard to make money on such short tern swings.

S-P 1500 Price Strength

The pie chart above shows the relative price strength of all stocks in the S&P 1500 Index.  A weak trending market but not in a panic.  I can’t help thinking that this could go on for the summer while the “Smart Money” picks up bargains for the Fall run higher, but that remains to be seen.

Strong Sectors

This pie chart shows the industry sectors of stocks that pass my initial “buy screening” process.  Of these, only two pass my final candidate list and I’m not very wild about taking even those positions right now.  But . . . . at least you can see where the strength is and what’s holding this market up right now.  The Gold Miners trade is rather late and very volatile, so I’ve cut way back on that one too.

So . .  that’s it for this week.  Be careful out there.    ……….  Tom  ………

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

click on graphics to enlarge for easy viewing

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