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A Good Week, but Still Cautious May 27, 2016

Posted by Tom in Thoughts.
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May 27, 2016 – OK now, this was a pretty darn good week for US and (generally) the world stock markets.  We just barely (in the last hour on Friday) crossed the 4905 price area and that’s “a wonderful thing” . . . but . . . looking at the volume this past week, not as many folks agreed with that move.  Volume this week was noticeably below average.  In the US we’re heading into a 3 day holiday and the unofficial kick off of Summer so one could use that as an excuse, but I’m really not on board with that.

NASDAQ

What concerns me is the possible set up for an Up Thrust After Distribution, where prices move above the previous swing high on low volume.  This would be a classical peak to a Distribution Structure.  We’re NOT there yet, but the possibility exists none the less.  Something to watch for next week and perhaps the week after.  What would strengthen this idea is a continued move up to & above the 4970 (previous peak) price level on lethargic volume.  A rally to new highs on low volume = lack of demand = lack of participation.  Prices can not continue to rally without that “fuel”, and hence a strong possibility of falling.

That said, I did remove my hedge this week going back to a light net long status.  I did make a few (and only a few) select buys.  The table below shows the areas in the US market where short term strength is showing itself.

Top 20 Sectors

These are the top 20 out of 46 Industry Sectors ranked in order of short term price strength.  The “A/D Letter” is a ranking of Accumulation (buying) and Distribution (selling) on the familiar A thru E scale coupled with the color code.

In summary, I’m going with the flow (currently Up), but not jumping in with “both feet”.  The reason is not many others are getting on board just yet.  Perhaps it’s the FED concerns about raising interest rates or whatever.  Wyckoff would scale into a position, and that’s a good idea here until we see a good confirmation of a new trend.

Have a good week and Happy Memorial Day to those in the US.  Time to remember those who have served and sacrificed.  ….  Tom  ….

chart by MetaStock; table by http://www.HighGrowthStock.com; used with permission.  Click on any graphic to enlarge for easy viewing.

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