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Market Fears Continue June 18, 2016

Posted by Tom in Thoughts.
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June 17, 2016 – This will be a short post, it’s a busy weekend here.  🙂   But in any case(s) there not much new.  Concerns continue about “Brexit” and the unknown impact it will have on the US and world economies (IF it happens).  The FED can’t win.  If they raise interest rates there are fears of drawing money out of stocks (& from other parts of the world); if they don’t increase, things must be worse than anyone thought.

Political and social turmoil just add to the fears.  Stepping back we know that corporate earnings have slowed and we’ve recovered much of the equity lost during the “Great Recession”.  We’re close to the previous top.  More to loose than gain?  The market doesn’t know where to go next.  Back down or a slow grind up.  On top of that the summer season is typically not a strong one for stocks.  It looks like we’re settling in for the long hot (slow) summer.

NASDAQ

In the short term (hourly chart) I see lower Highs and lower Lows in the price swings; not a sign of strength.  The purple reverse trend line is clearly broken and there is more selling than buying.  A change in character for the market.  A key support level is the 4680 area (red dashed line), and we could very well get there.  Market Sentiment is Bearish.

Price Strength

The pie chart above shows the relative price strength of the stocks in the broad S&P 1500 index.  No surprise here, but so far it just looks like a correction.  I don’t see panic selling, just a mark down of price trying to shake shares out of “weak hands”.  Looks like the “smart money” is vacationing in the Hamptons.

Top Sectors

I don’t recommend taking new positions and hopefully we’re holding shares in one of the top sectors in the table above.  That’s were the short term strength lies.  This is a time to avoid losses and exit positions when they confirm weakness, especially relative to the overall market.  Preservation of Capital as they say.  The result is a market that doesn’t know where to go next.  Neither up or down look that great, but the nod goes to the weak side IMHO.  I’ve slowly raised Cash and hedged out my longs via a bear ETF.  Let’s wait in a near neutral position until the coast clears.

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

Price chart by MetaStock; others by http://www.HighGrowthStock.com. Used with permission.

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