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A Pause That Refreshes March 9, 2019

Posted by Tom in Thoughts.
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March 8, 2019 – It appears that we’re in the midst of the long anticipated “pause” in the market recovery from the Fall correction.  I’m thinking that this is a “pause” because, so far, we haven’t seen a significant Distribution structure.  I’m thinking that a 7 to 10% drop from the recent highs could be likely.  Looking at the chart below the called out resistance level of 7643 held as a “rejection of price” point with 6931 being the next support level below.  That 6931 level would be approximately a 9% drop.

Now, IF volume picks up on down bars next week this “pause” could develop into something more, so let’s not get ahead of the price action here.  Also noted are the confirmation of price weakness in Market Sentiment, Money and Volume Flow indicators.  The Price Strength indicators have gone to mildly bearish as well.  Looking toward the stocks in the broad S&P 1500 Index gives us an idea just how weak the overall market is.

Price Strength –The last 3 days have hit a large number of stocks moving to the weak side (red); the strong (green) section has diminished quite a bit lately.  This indicates a fairly wide spread decline.

Accumulation / Distribution –The number of stocks in a Distribution (selling) phase is not as great and is generally about equal to those in Accumulation (buying) and Neutral.  Fairly even on all three areas.  (Note: accumulation & distribution are a combination of both price and volume; two dimensional so to speak.)

Sector Strength –The table above shows the sector strength on a relative short term basis.  Not as much “green” up there but so far the Tech areas are holding up the best.

Over the past week my (more) involved market model went from Bullish, to Cash and as of Thursday is lightly Bearish.  The purpose of this model is to indicate when it is appropriate to “hedge” and protect the overall portfolio.  Protection is in the form of buying “bear funds / ETF’s” which are inversely correlated to the market.  Since Small Cap stocks are the weakest, that’s the index I purchased (bearish wise).  IF weakness continues I will buy more protection and go to a theoretical neutral / synthetic cash position overall.  The idea is to “win by not loosing”.  🙂

Also the number of stocks that I hold has gradually been reduced; selling the weakest ones.  OK, that’s a bout it for this week.  I’m expecting more weakness, but so far, not a rout . . . . that could change especially via a news item.  Time to be careful.  Have a good week.       ………… Tom ……….

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

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