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Year Ends with a Whimper December 31, 2016

Posted by Tom in Thoughts.
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Dec. 30, 2016 – First let me wish everyone a very Happy & Prosperous New Year.  With a new administration in the U.S., continued world geo-political issues and a stock market at / near all time highs, I’m sure that it will be dynamic.  May you always be on the “right side of the markets!”

The past 2 weeks have now proven to be a time of selling.  We can see that from the “Money Flow” indicator at the top (below the zero line).  The good news that it has been rather light.  We can see that in the “Volume Flow” indicator below (flat & has not crossed the red moving average).

nasdaq

I’ve spotted in a new reverse trend line (purple) and it coincides with the 5340 level of near term support.  While Sentiment is neutral, my other trend indicators (not shown) have recently put up the yellow flag of caution.  From Wyckoff analysis we know that the “CO” (a.k.a. smart money) will liquidate inventory over a period of time when the market remains strong to camouflage their activity.

Is this an Up thrust after Distribution?  On an index chart it’s hard to tell because indexes are averages of many stocks.  Also the light holiday volume makes it tough too.  My concern is what happens during the first week of 2017.  We could see significant tax selling as profits are booked early in the year and taxes delayed; maybe even lower.  For the past couple of weeks VERY few stocks have made it through my potential candidate filters.  A sign of weakening.  Right now I don’t see a significant rotation from one sector to another, at least not yet.

This could be just a pause with buyers sitting on the sidelines, and with the volume light, that’s the indication.  But let’s pay very close attention to the coming week (actually 4 days; US & most European markets closed on Monday).  I think a test to 5340 is now a given and if we don’t see buying coming in it could easily go down to 5250.  That would be the pre-elections lows.  Watch the spread of the price bars, the volume of those bars and what stock sectors are moving.

For those of you who want to see a performance review of major hedge & commodity operators, please click on the link below:  http://www.automated-trading-system.com/trend-following-wizards-november/ .  This data is through November, so not complete 2016 data, but you’ll see how the “big guys” have done this year (hint: not all that great).

Here’s an overall look at market strength using stocks in the S&P 1500 Index –

First, Price Strength:

price-strength

Next, # in Accumulation or Distribution:

a-d

The pie chart below shows the sectors of stocks that have made my initial cut for buying candidates.  It also gives me an idea what sectors are strongest now by the number of stocks in those sectors.

sectors

As always, click on a graphic to enlarge it for easier viewing.

That’s it for 2016.  Watch the early 2017 movements.  It could start of with a bang.   …….  Tom  ……

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

Rally Slowing December 25, 2016

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Dec. 23, 2016 – This will be very short because not much has changed since last week.  There were additional signs of this post election rally slowing down, and even the media has now picked up on that.  Volume was very light (as expected) last week as Christmas vacations kicked in.

nasdaq

I see the 5340 level on the NASDAQ Composite Index as a likely retracement and 5250 as a major support level.  I continue to label this structure as a possible Distribution pattern; I’m always looking for changes.  Though the most likely scenario is a pause and re-accumulation.  I think the key factor will be what happens after the first of the year.  Will we see tax selling in 2017 (with presumed lower taxes), or will this rally have some legs to it?  Hard to tell right now.

Sectors that are strong are Telecom, Japan, Semiconductors, wireless and Banks.  I do see weakness in China and in some Emerging Market countries though, and Utilities are making a surprise move upwards (defense?).

Happy Holidays to all.  Take Care.      ………  Tom  ………..

(chart by MetaStock, used with permission)

Continue With Caution December 17, 2016

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Dec. 16, 2016 –  I’m controlling my home computer remotely via a small laptop, and I don’t care for doing graphics or typing on a small screen.  So . .  this will be brief, but that’s OK because not a whole lot has changed.

The market continues though much more selective than the previous weeks.  Small cap stocks and the broader market are not a strong as the big name, large cap stocks.  OK, I’m continuing to make a case for a pull back, but likely it will be delayed until after the first of the year to defer taxes (my opinion).

nasdaqFriday was options & futures expiration which accounts for the big volume spike, but the broad NASDAQ Composite Index really didn’t do that much.  The reverse trend line that I’ve spotted in may give us an early warning of any weakness.  The other indicators (above the price chart) are still pretty bullish for now.

What I am showing below is the velocity (speed) of Accumulation (buying) and Distribution (selling).a-d-directionI note that the “buying” has slowed.  Now that does not mean impending doom, but more a caution sign.  This market is narrowing with select banking, financial, materials and tech stocks in the lead; the rest . . . are not that enthusiastic.

That’s it for now.  Enjoy the holidays and the family, but be carful about this market.  It can change “on a dime”.

…………..  Tom  ……………..

How Long Can This Go ON ? December 10, 2016

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Dec. 9, 2016 – “How long can this go on? Lord I’m so tired!”  Lyrics from “Work’in In The Coal Mine”, but hopefully you get the idea.  The point being that since the election (11-8-2016) the S&P 500 has gone up 5.61% . . . .  that’s an annualize rate of 86.81%.  Does anyone believe that a year from now the S&P 500 will be up 81%?  OK, then.  While I’m not predicting gloom & doom, I do think that this steep rate of increase is unsustainable for much longer.

That said, the issue now is how much longer and what next.  The chart below is (re) labeled as a possible Distribution structure; that is selling.  The UTAD is “Up Thrust After Distribution”.  Now we may not have seen that Distribution in its entirety, but we could be getting close.  Why?  Because of those narrow range bars late last week.  Narrow ranges mean that buying and selling are about equal, and after a healthy run up, that means a pause or a possible change in trend.

nasdaq

The problem is we don’t really know just yet which it will be.  Money Flow is neutral, Volume Flow is somewhat positive and Sentiment remains Bullish.  The volume bars in the lower screen show average volume, so no panic to sell yet.  We’ll just have to watch how price and volume acts when we get a pull back.  IF volume increases on wide range down bars, I’m “out a here!”  Let’s keep an eye on the 5250 area for clues.  Every minor pull back has been met with buying and the end of the year is coming with the hope of lower taxes next year .  Any significant weakness may have to wait until after January 1, 2017.  But  . . . be careful the rest of this year.

This is what an “over bought” market looks like (% of S&P 1500 Stocks) . . .

Price Strength:

price-strengthCurrent Accumulation / Distribution:

a-d-sp1500

There’s a lot of green up there.  The question is how much more “buying” (money coming in) is there to go before everyone is onboard?  That’s something to think about.  Next, what sectors are moving the most & strongest right now:

leading-sectors

No real surprises here either.  So I’m “riding” this rally for as long as I can, but we could be getting late in the game for a significant pull back.  After that, does the buying resume?  We’ll see, one step at a time.

For further Wyckoff analysis click here: http://stockcharts.com/articles/wyckoff/2016/12/there-are-no-free-lunches.html

The next two week are very busy for me, so I’ll try and post what I can, when I can.  Please be patient; and have a Happy Holiday.  …..  Tom  ….

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

“Trump Rally” Fading December 3, 2016

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Dec. 2, 2016 – Well, “all good things must come to an end” and right now it looks like the recent “Trump Rally” is indeed slowing down.  Nothing could continue at this rate for very long anyway.  On Friday the NASDAQ (below) stopped at near the 5342 level, which is a minor support area.  Notice the narrow bar where buying = selling and the indicators that show that the buying enthusiasm is in fact slowing down.

nasdaq

The next question: is this just a pause or the start of a different trend?  Right now, no one can say for certain.  If the indexes rally back up, what type of volume do we see?  Wide spread bars on at least average volume would be Bullish and indicate this is just a pause.  However if we see continued weakness, especially wide down bars on high volume that would be Bearish.

It’s hard to get too Bearish at this time of year which is a traditionally Bullish season for the markets.  So we may just bounce around in here and wait for the New Year (that’s my guess).  What appears to be doing well are Banks, Oil Services, Oil, Japan, Basic Materials and Financials.  The Energy sector is very volatile, so caution is advised.  Many of these sectors have come up very quickly and that’s a concern too (late in the moves?).

Overall the very broad S&P 1500 stocks look fairly positive right now.  Many are in Accumulation modes –

a-d

And many have strong Price Strength as well:

price-strength

My biggest concern in here is that the stocks that I see as candidates to accumulate appear to have significantly slowed that accumulation.  The bottom line is they are “long in the tooth” and many folks have already gotten on board.   The next phase can either be a re-accumulation phase (more money coming in) or distribution (selling).  Right now things appear to be in equilibrium.  Let’s keep an eye open for signs of change.

Happy Holidays and have a good week.  ……….  Tom  ……..

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

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