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Selling Begets Selling February 10, 2018

Posted by Tom in Thoughts.
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Feb. 9, 2018 – A week ago Friday was just the beginning, and then came this past week.  That’s when the wheels came off and the computer “algo” selling programs kicked in.  The swiftness of all of this was the surprise, and not that it happened.  This market was well over bought.  Note the chart below that the short term trend channel is standing up compared to the long term channel.  Now we’ve corrected back to the bottom of the long term channel, and that may be a good place to pause and consolidate.

Both price support level were violated as were both the Money Flow and Volume Flow indicators.  I’ve added one additional indicator, that of (short term) Price Strength.  My goal was to provide an early warning indicator.  It oscillates from neutral, moderate, to very strong status.  Something to watch in the future; since this is new, I’ll do some back testing with it.

No surprises about the overall market strength.  The percentage of stocks in the S&P 1500 Index are shown in the pie charts below.

Price Strength –

Accumulation / Distribution –

There’s a lot of red up there, the damage has been done.  I’ll wait for a base to form and then a show of strength before I drop my hedged position (i.e. cash neutral).  I’ve liquidated 90% of my sector rotation positions (only high risk shorts are showing now; I’ll pass).  Truly weak stocks were sold and the remaining positions are hedged out.  Watch out for Monday morning retail selling though.  We need buyer not seller in the coming days, and the pro will lead the way.

I really thing that volatility is back and the time frames are shortened by computer trading.  It’s getting hard to NOT to get caught with your “pants down”, but we try.  Have a good week.        ………..  Tom  ……….

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

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