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Recovery, Now Slow & Steady September 30, 2016

Posted by Tom in Thoughts.
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Sept. 30, 2016 –  This was the end of the third quarter, 2016 and about the best phrase to sum it up is “Recovery, Now Slow & Steady”.  A glance at the chart below shows the major burst down in June, then a dramatic recovery in July, ending in Slow & Steady for August and September.  There was (and is) plenty to concern this market.  The FED & interest rates, European banks, the US elections and the ongoing issues with ISIS, Russia et al.

nasdaq

To top off concerns we have to add concern about the possible slowing economy.  The political rhetoric paints a sad picture, but reality is joblessness is way down, especially for those with a skill, housing has recovered, energy is cheap and interest rates are low.  Things are not that “bad” compared to where we’ve been.  But corporate profits are not growing as fast as before (no kidding, we did come out of a major recession BTW).  So this market appears to be looking for the next big thing to really push it higher.

Here’s a snap shot of sector where I’m looking at strength in the short term:

top-sectors

Pretty selective right now, and as we cautiously break into higher ground, things will likely be slow with volatility increasing.  I note that Market Sentiment is neutral and my “Volume Flow” indicator is lightly Bullish.  Not many seem to be in a rush to buy into this market, though it rises slow & (fairly) steady.

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

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

Market Recovers but Uneasy September 23, 2016

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Sept. 23, 2016 – This week the market continued to recover from it’s sharp sell off but looking at the price action on Thursday & Friday I see very narrow range bars.  The market is not finding it easy to move much in either direction.  We’ve gone through the Bank of Japan and the FED announcements this week (both stayed the course, no changes), and now the market appears to be looking for a reason or motivation to move.  Monday will be the presidential debate so that may be why we’re in a state of “uneasy wait”.  Noting that volume is about average and market sentiment is neutral.

nasdaq

I’ve drawn a very tight trend channel to give us a quick “heads up” when we break the current trend.  It’s been a sharp recovery.  I’m watch for signs of an Up Thrust or a continuance of Accumulation (re-accumulation).  The 5108 level remains an important level in my mind.

Looking at the broader market, using the S&P 1500 stocks in that index as a barometer for the pie charts below:

Price Strength (% of stocks) – –

sp1500-price-strengthAccumulation / Distribution (% of stocks) – –

sp1500-a-d

There doesn’t seem to be an overwhelming imbalance in either (buying or selling) direction.  Back to the “uneasy waiting” mode idea.  The number of stocks (in sectors) that are potential buying candidates has dried up over the last 2 days.  Biotech and Semiconductors were strong but now Consumer Discretionary is replacing them.  Kind of strange IMHO.

top-sectors

That’s about it for now.  I’m looking for a break either way before I put more money to work.  Have a good week.  …. Tom  ….

price chart by MetaStock; others by http://www.HighGrowthStock.com; used with permission.

A “Blah” Market Awaits the FED (?) September 16, 2016

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Sept. 16, 2016 – This was a fairly “blah” week.  OK it did recover from its recent low & support level of 5108, but it struggled to approach its previous high.  I don’t see much enthusiasm for buying and most don’t feel compelled to sell either.  Are investors waiting for next week and the FED to announce no interest rate increase or is it just dull?  I’m thinking mostly dull.

nasdaq

Volume was OK / average but nothing special to indicate significant buying going on.  Fridays volume spike was caused by options and futures expiring and the day was tight with little movement.  The biggest thing was Apple and the hopes for record sales of the iPhone 7.  That helped select semiconductors stocks climb back up.

What is showing near term strength are: Biotech/Pharma, Media (especially internet based), Software and Semiconductors.  Now most of these movers are select ones, moving on stories & hopes, so it is not very broad.  The bottom-line line is we’re just going to have to wait until next week and after the ‘FED concerns’ to get a true read out of this market.  Right now my trend indicators are mixed with a slight favor toward the upside, but not much.  Market Sentiment continues weak as well.  A “blah” market for the time being.

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

chart by MetaStock, used with permission

It’s All About The Market September 10, 2016

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Sept. 9, 2016 – At this point it is “all about the market”, so I’ll focus on that this week.  Wyckoff was a believer in the classic “top down analysis”, that is analyzing the market environment first, then sectors, then selecting stocks.  I hope that most folks agree with the statement that it’s easiest to pick strong stocks (& make money) when the market is strong, so let’s look at this market in more detail.

The chart below shows market weakness, and has since Aug. 17 when we had a “change in character” driven by the (reverse) trend line break (red arrow).  Next my “volume flow” indicator showed weakness with a falling level (blue dashed line).  Lastly a very subtle increase in “effort” (volume on Wednesday and Thursday) with very little “ease of movement” (price bar spread; circled in blue); likely the CO selling into a small rally and getting out.  The market headed “south” on Friday big time.

nasdaq

The question now is whether this is the beginning of a new Bear market or just a correction?  Let’s go back to price structure.  Is there a structure of Distribution here?  I don’t think so.  I don’t see a Buying Climax, a Test, let alone an Up thrust after Distribution.  But recall my comments about it can be harder to see these inflection points on an index, which is an average of many stocks.  Averages then to muddle things up and take the crispness out of structure (IMHO).  Also the Supply & Demand on an Index is not a “pure” as with a stock with limited shares in the float (# of shares available).

Let’s see if the 5108 level is broken at the close early next week.  (my guess is probably not)  If not, then maybe the “buy the dips” folks step in for some bargain hunting.  If it does break, then we’ll likely drop lower to around 4970.  After that the bottom could drop out.  This just looks like a “FED scare” issue.  (Does anyone believe that the economy will go into recession with a .25% interest rate increase?)

No need to be heroic here.  I did some selective pruning of stocks Friday afternoon to raise some cash.  If we break 5108 decisively I’ll start to hedge out, going cash neutral.

Here’s a table of sector strength.  Note the “RS” values in red for the higher ranked sectors, not very healthy in the long run.

top-sectors

That’s it for now.  Time to be cautious, but also nimble to opportunity.  Have a good week.    ………  Tom  ………

Notes:  This blog typically gets updated on Saturday or Sundays, see the “data date” stamp at the beginning.  Click on graphics to enlarge them.   Chart by MetaStock; table by http://www.HighGrowthStock.com; used with permission.

“Coiled Spring” September 7, 2016

Posted by Tom in Thoughts.
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Sept. 2, 2016 –  I’ve done over 200 posts and this is the first one that I’ve been “late” with  Sorry about that, but hurricane Hermine had something to do with it and this blog came in down the list of priorities over the weekend.  But the good news is that not a whole lot has changed.  The US markets have not really gone any where over the past month +.  Check out the chart below and you’ll see that the summer doldrums came in about mid summer and really set in during the month of August.

nasdaq

What many technicians would call this would be a “coiled spring”.  That is price action that appears to wind around itself like a spring.  The idea is that the price action will eventually unwind itself in one direction or the other and do so quickly.  I marked the tight trend line break in early August as the Change in Character for this market.  Since then is has just gone sideways.

Market Sentiment remains positive but volume and “Money Flow” are low and slow.  It just seems that investors and traders alike are happy to wait for some item to move the market.  Valuations are high, so stocks are generally not cheap, but where else can you invest money?  International bonds are at or near zero % and the US interest rates are not much higher.  And so the spring just gets coiled tighter and tighter for now.  It could really head in either direction.

Be patient and safe.     ……………  Tom  …………….

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