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Weakening Market, Will Tuesday Stop It? November 5, 2016

Posted by Tom in Thoughts.
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Nov. 4, 2016 –  U.S. and world markets continue to weaken and we can all hypothecate as to why.  But in reality, “why” does not matter.  The old saying of “Price is truth” has an eerie ring to it.

But, before I forget, I think it’s interesting to see what the “big boys” are doing.  The following link will take you to a brokerage site with the performance figure for some of the top commodity hedge funds: http://www.wisdomtrading.com/managed-futures-september/ .   Now many think that these funds just print money, but the fact that they ALL are having a hard time this year should put things into perspective.  Let’s take a look at the charts . . . .  (click on graphic to enlarge)

nasdaq

This past week we broke 5106, which is important because that level was a key “test” of price support.  Next we have minor support levels at 4970 and 4685.  The next major support level is way down at the Brexit low of 4565.  Could we go there?  Yep, it’s quite possible.  But the next move depends on the emotional make up of traders and investors.  Note that volume has picked up over the week with lower prices (selling), but there is no panic selling.  Sentiment is bearish, both Money & Volume Flows are bearish as well.  No doubt about it, this market is weak and that goes for world markets as well.  The Latin American markets were on fire a week ago . . . not now.

I’m in favor (continue to be) of waiting for the election, but more importantly, how the financial markets behave afterwards.  Let’s look at the stocks in the broad S&P 1500 Index.

sp1500-price-strength

The pie chart above shows the “price strength” of those stocks.  Well over half are well below their 20 day moving average (weak); yellow shows near the 20 day, green well above it (strong).

sp1500-a-d

This pie chart measure the number of S&P 1500 stocks in Accumulation and Distribution phases.  Pretty straight forward as these indicators confirm overall weakness.  Are there any strong sectors?  Well, a few: software, metals, hardware and semiconductors . . . but, these stocks are very selective and in this environment, fairly speculative.  If the market rebounds quickly, these are areas I’d be considering . . . just not right now.

That’s it for now.  Have a good week and for those in the USA . . . Vote !            …………….  Tom  …………….

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

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