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Expecting a Bounce Higher, then . . . December 23, 2018

Posted by Tom in Thoughts.
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Dec. 21, 2018 – First off let me wish everyone a Merry Christmas (for those that celebrate it of course).  Next week will be a slow trading session so I’m hesitate to read much into price and volume indicators.  Let’s start by looking at a bigger picture for perspective, namely the NASDAQ Composite Index on a weekly bar time frame, back 3+ years.
We’re currently back to the Fall of 2017 price levels . . . . yes, the “Trump Bump” has been wiped out.  Support at the 6375 level has been hit and the next level down is about 5425.  But I don’t expect this market to get there in a straight (falling) line.  Let’s switch back to a daily chart.

This market is extremely “over sold” in that it went down too much, too fast.  A possible scenario is a short continuation sell off on Monday (12-24-18) then a bounce back up to about the 7000 level before heading back toward a new low at 6375’ish level.  During any rally higher we’ll watch the price action and us volume to confirm it.  The tricky part is the volume analysis during a holiday period.  The bottom line is: are traders and institutions using a rally to lighten up even more by selling into a rally.  The news is not great world wide and any match toward the powder keg could mess things up without warning.  This is NOT a time to buy and forget; wait for a confirmation of a new trend because this one is lower.

A quick look at what a bear market looks like (% of stocks in the S&P 1500 Index):

Price Strength –

Accumulation / Distribution –

The lack of green in these pie charts is not an error, there is very little to see.

There really is no need to talk about sector strength because there is very little.  Think “Defensive” (Utilities, short term Bonds) and you’ve got it.  If you must expand that add Real Estate and Aerospace (military wise) to the short list.  I’m heavy in Cash and net short the indexes.  Looking for a “sign” if & when we get a rally.  Have a good holiday.          ………….  Tom  …………

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