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A Change of Character March 3, 2018

Posted by Tom in Thoughts.
Tags: , , ,

Mar. 2, 2018 – Years ago I took a 6 week course in evaluating mutual funds from Michael Price; a very nice and knowledgeable fellow.  One thing (of many) that stood out during his instruction was the comment “markets will react poorly to news in weak markets, but shrug off bad news during strong markets.”  As Yogi Bera said, “You can tell a lot just by looking.”  What we’ve seen is the reaction to an event (the VIX rotation debacle) in an over bought market, but with a foundational shift.  That shift is (I believe) concern about this administration; what it is doing and what it has done.  Case in point is the +400 point drop in the Dow over Trump’s comments about tariffs.  Markets don’t like uncertainty, and now we’ve got it over a multitude of fronts; and it’s not likely to stop soon.

It appears that the reaction after the peak in late January signals a change in character for this market.  That doesn’t mean that we’re in a Bear market, but it could mean that we certainly can’t expect advances like we’ve had over the past year.  Corporate earnings will be strong; the tax cut has nearly assured that, but that’s “old news” now.  I think that any significant bad news will likely shake this market again.  The analogy is “2 steps forward & one step back”.  We’ll make progress, but it will be slow, selective and choppy.  We’re entering into a stock pickers market.

OK, enough editorializing. Sentiment has turned positive, Money and Volume Flow indicators are lethargic at best, so I’ll call them neutral.  We’re currently bouncing off that blue Resistance level around 7332, with the Price Strength indicator very lightly Bullish.

I’m selectively buying positions in Technology and leading Internet companies.  My sector model does not show enough strength to jump in with any more funds at the moment, so I’ll stay mainly in Cash in that model.

The pie chart below should give you an overall view of the health of this market:

Stocks in the broad S&P 1500 Index that are positioned in relation to their 52 Week High price.

Stocks in the S&P 1500 Index that are currently in Accumulation (buying), Distribution (selling) or Neutral.

That’s all for now.  I’m being careful and selective and “expecting the unexpected” in this environment.  Have a good week.   ….  Tom  ….

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


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