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Slow Grind Upward July 30, 2016

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July 29, 2016 –  This will be a short posting, but not much has changed.  The market are continuing to grind higher, but notice the series of narrow range bars.  Buying and selling pressure is about equal.  Volume is picking up though.  It’s looking more and more like the UTAD ?” label is off the table.

NASDAQ

The price action is slowing and rolling over a bit, so I’ve drawing a additional short term trend line to reflect that.  There are not a lot of great buying opportunities though Wireless, Semiconductor and Tech in general are the strongest areas of the market.  I’m also keeping an eye on Emerging Markets.  The question is whether this is the “Summer Doldrums” or the market showing signs of fatigue?  I have been carefully adding positions and watching for sectors to “roll over” as money tries to find the best place to be.

Overall market sentiment is bullish and the trend remains up.  Have a good week.    ………..  Tom  …………

Proceed With Caution July 23, 2016

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July 21, 2016 – I’m on the road, so this will be short.  But really, not much has changed.  True the markets are moving higher but I am wary about the narrow bars (not much commitment) and look volume (activity, No Demand).

NASDAQ

.Market Sentiment remains Bullish but there is very light bullish commitments.’  Money Flow is neutral and light to mirror the low volumes that we’ve seen.  Second quarter earning are about half way through reporting and so far have been “OK” in general.  What is there to drive the markets higher?  I’m not sure

The sectors I’m watching and are strong (for the time being) are:

Real Estate, Software, Metals & Mining and (select) Consumer Products.  (pie chart below)

Industy

Also I’m seeing positive activity in Latin America, Emerging Markets, Semiconductors and Technology (all have been beaten down latterly).

I have purchased some stocks but I’m holding a good chuck of Cash too.  If you must, “Proceed With Caution”. Have a good week.   ……..  Tom  ……

 

A Scary Place July 15, 2016

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July 15, 2016 –  At times . . . the world can be a scary place, and at times, so can the markets.  Things just don’t feel or seem “right” and I’m thinking we may be in one of those places.  First let’s take a look at a chart that I’m sending to my clients this weekend.  It’s of the S&P 500 Index over the past +3 years.  (click on it to enlarge)

S&P 500 Perspective

Now the S&P 500Index has been one of the better markets in the world as of late.  It measures the 500 biggest US companies.  I’ve highlighted the fact that for nearly 1 1/2 years we’ve not gained anything . . . 0% return for all of that risk.  The red line shows a 10% change in price (either up or down), and we’ll call that volatility “risk”.  Also on this chart is the area last spring / summer where the market took a noticeable “change in character” (in purple).  No longer did we get higher highs and higher lows as the market stair steps upward.  Wyckoff warned of this “change in character” and the question is whether we’re in a large trading range of re-accumulation with higher highs returning, or in a big Distribution structure.  In any case things are NOT like they were in the pre-spring of 2015 period of steady gains.

The chart below is my trusty NASDAQ Composite chart.  A lesser known index, but much broader since it covers far more companies and not just the big guys.

NASDAQ

I’m still labeling the current move as a possible UTAD (Up Thrust After Distribution).  Prices above previous swing highs, (check) on lower volume / demand, (check).  Now this is not a slam dunk “got to move down” call.  It doesn’t have to play out as a Distribution structure but we should at least acknowledge that this is present and could continue to develop.  IF it does, next week we would see a sharp sell off on a wide range bar, with a Close at / near the bottom of the daily range (maybe a couple of days).  This would be a sign of weakness (SOW); volume could be light to average.  Then a weak move up on narrow bars (buying = selling), with volume increasing.  This would show a  significant liquidation of stock.  Then a continued, steady drop.  IF we don’t see this structure develop then a minor drop to around the 4905 level on light volume and then a snap back on increasing volume would take the UTAD off the boards.

I note the volume dropping off the last few days and the Money Flow indicator (top chart in red) weakening as well.  Also the narrow range bars this week don’t show a lot of buying commitment or interest.

The world is scary this week and so could be the stock market.  No time to be heroic, but a time for caution.   I’ll be traveling for the next few weeks so postings may be late and/or brief, but I’m make every effort to keep things going in a timely manner.  (Always check the date at the beginning of the post for the last data date.  Charts & comments are circa that time frame.)   Have a good week.    …….  Tom  ……..

charts by MetaStock; used with permission.

Back In (price) Range Again July 8, 2016

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July 8. 2016 – Well my aggressive call for the market structure to be in a Last Point of Supply  (LPSY) status did not pan out; so I’ve removed the label.  Instead I’ve re-labeled the most recent point as a possible Up Thrust After Distribution (UTAD).  Since we’re right up to the near term previous high we’d have to see prices rise next week on low volume to confirm a UTAD.  Continued strength would negate the UTAD possibility.

The recovery after the sharp BREXIT drop was amazing.  Talk about a V shaped chart formation . . . wow.  Right now money is flowing into the US market.  Into stocks and bonds, as well as more defensive sectors such as precious metals, utilities and real estate.  It is very unusual for all of these to be increasing at the same time.  But if you think about it, it does make sense.  If you’re a money manager, where do you put money?  The US Treasury Bond rates are low but at least they are positive, and you can’t say that in many other developed countries right now.  To top it off the US markets are very near all time highs, again, no one else can say that.  Sure looks like money is flowing into the US from nearly everywhere.  My concern is when it slows or even stops.

NASDAQ

The chart shows that we’re back in the near term trading range of 4970 at the top and 4685 at the bottom.  In order to break above that 4970 level and stay there, we’re going to need a sizable amount of buying volume coming in.  With the market “over valued” on a price to earnings basis it will be a tough climb indeed.  Second quarter earnings calls could be a decisive element going forward (or backwards).

Chart above shows “money flow” increasing, Sentiment Bullish and even my new indicator “volume flow” almost showing a bullish signal.  The pie chart below shows what sectors I’m looking in for “buy candidates”.  As you can see it’s a very broad group. (click to enlarge)

Top Sectors

I have been doing selective buying, but still have cash to invest.  It’s tough to buy at the top of a range, so I’m cautious in here.  A move higher next week on light volume could spell trouble.  A minor blip down retracing some of these gains would be a heathy sign.

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

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

 

Recovery, But . . . July 2, 2016

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July 1, 2016 – Before we start, just a reminder:  the date leading off the commentary is the “data date’, that is the last date of the data that the comments are based on (typically a Friday at the close).  Also, to enlarge the graphics for easy viewing, just click on them.

This week was a recovery from the “BREXIT Selloff” and we’re just about back to before the vote.  The first thing that comes to mind is how nervous this market is; anything can trigger a steep sell off.  On a price earnings basis the market is at the high end of valuation plus it’s been a while since we had a major correction.  In short, many folks are anticipating a significant sell off but buying the dips is still in vogue.

From a market structure stand point where do we stand?  Looking at the chart below I’ve labeled the current up swing as a possible LPSY (Last Point of Supply).  It is tentative because (theoretically) price should not over shoot the UTAD level at roughly 4905, and we’re very close to that now.

NASDAQ

I should point out that I’ve changed the chart.  I’ve deleted the “accumulation & distribution volume” indicator in preference to a new “Volume Flow” indicator.  This indicator is dimensionless so the thing to observe is how it changes direction.  The 20 day simple moving average (red line) helps in that regard.  Indicator (black line) above the red is “bullish”, below the red line is “bearish”; much easier to follow.  Thus the volume has recovered, but has not recovered its “bullish” position due to the heavy selling during the swing down.  Market Sentiment is Neutral.

Friday was a light day due to the 4th of July holiday approaching, so volume and price were muted.  A typical LPSY bar would have a low spread and average to above average volume (indicating selling into a rising price).  Friday does not fit that due to the very low volume.  So . . . we may have to wait until Tuesday, due to Monday being a U.S. holiday.  But here’s the good part:  Monday will be an open market in Asia & Europe, plus we’ll see price action on Monday night / morning on those exchanges too.  Those two sessions could give us a “heads up” on what to expect on Tuesday morning.

One last point of concern.  While it is true that many of the beaten down sectors have recovered last week, but defensive sectors have also done very well.  Money is flowing into (U.S.) bonds, precious metals, utilities, real estate and telecom.  That’s not what you’d expect during a roaring recovery in small cap and technology stocks.  Money is looking for safety as well.  Just something to keep in the back of our minds.

Here’s a look the short term price strength of stocks in the broad S&P 1500 index.

Price Strength

This rightfully shows strength, so no real surprises here.  The bottom line is Yes recovery, but we may not be “out of the woods” just yet.  Early next week should provide us with some evidence one way or the other.  Have a good week.   …..  Tom  …..

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

 

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