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“Riding the Range”: in Congestion November 16, 2018

Posted by Tom in Thoughts.
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Nov. 16, 2018 – I’ve talked before about the “need” to build a base if this market is to go higher; Wyckoff would call it “building a cause”.  That’s what appears to be the case right now.  A quick look below at the chart shows prices in a well defined “short term price channel” (purple lines) and that channel is nearly horizontal.  One thing to note is that causes don’t necessarily need to be perfectly straight horizontal to effectively build a base for re-accumulation and hence a move higher.

We’ve seen prices having a hard time breaking through the 7443 level (green line) and stalling out around the 7520 level.  Those define the top or resistance areas.  6880 defines the lower support level (red line) for the time being.

Earnings guidance for the coming quarters was mixed, some OK while others (notable Apple) are less optimistic.  This market was priced for continued “gang buster” profits and when those appeared to slow down so did this market.  The question is this market now “fairly priced” for slower growth?  Good question.  What will drive direction now is more news related since 3rd quarter earnings are now out of the way.  All eyes will be on the Fed and G20 meetings in December.  Interest rates and trade tariffs are making investors more nervous than at anytime in the last 3-4 years; this is new business and uncharted territory.

While we observe how the market interprets the news we’ll have to be on guard because the next significant move will come fast.  For now the table below shows sectors that are ranked by strength.  I note that the past leaders are down toward the bottom of the list and more defensive and consumer related at closer to the top.

I am “lightly long” here and cautious since a clear trend is not well defined at the moment.  Next week in the U.S. will be light due to the Thanksgiving holiday at the end of the week and trading volume will fall off significantly.  More than likely we’ll have to wait until December for any significant market moving news.

Wishing all in the U.S. a Happy Thanksgiving and everyone a good week.  Take Care.   ……….  Tom  ………..

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

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