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Rally Continues, but Narrows April 28, 2019

Posted by Tom in Thoughts.
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April 26, 2109 – The march higher for this market continues, but it’s beginning to narrow down to fewer and fewer stocks.  More on that shortly.  Looking at the chart below it’s clear that all basic indicators are positive and now we’ve broken to new highs.  Earnings drive the market and generally they have been fairly good so far.  Next week will bring more reports, especially from the big name companies.

So . . . what’s to worry about?  Well, not to worry so much as to be concerned.  I thought it would be interesting to see just how many stocks (in the S&P 1500 Index) are at or near their 52 week high (price).  After all, most should be up there since the market indexes are . .  right?

The pie chart above shows that nearly half of the stocks in the index are actually more than 20% below their previous 52 week high (pink).  And, only about 25% are within 5% of their high (darker green colors).  What this means is that the climb in the index value is being fueled by fewer and fewer stocks.  The general term for this is “market breath”; i.e. how broad is the actual market and how many are participating in the rally.

Since many indexes are weighted by either the size of the company (S&P 500) or the stock price (Dow Jones Industrials) or by industry (NASDAQ 100 – technology) we sometimes forget about the “other guys”.  This doesn’t mean that “all Hell is breaking loose”, but it does bear watching.  If this narrowing continues into the major indexes and only the “big guys” (Apple, Amazon, Google, etc.) are participating, then we have a problem.  For the time being we just have to go where the price strength is and monitor the rest.

Speaking of price strength, here are the sectors that show it (in the short term):
In the same vein, no surprise that Tech, Internet, Consumer Services continue their leadership roles while Banks and Financials are catching up now. I continue to be long this market but I’m seeing fewer good opportunities.  Is it time for “Sell in May & Go Away”?  Could be, but in this 4 year election cycle it probably will be a minor correction that will be short lived.  We’ll see.  Nothing is promised, that’s for sure.

Have a good week.    ………  Tom  ……….

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

Market on “Hold” April 20, 2019

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April 18, 2019 – Another lack luster week.  The S&P 500 (large cap index) down 0.08% and the broad NASDAQ Composite Index up 0.17%; in other words a flat week (though only 4 days long).  It just appears that this market is on “Hold” . . waiting for more earnings data . .  waiting for the reaction to the Mueller Report . . . waiting for direction.  Next week we will begin to see some major corporate earnings coming out and that will likely provide some reason to move in one direction or the other.  A few major banks reported last week and though it was mixed, it was better than expected and banks rallied.

Of note is the sentiment indicator that turned down this week, while other indicators remain positive.  Prices remain within the Short Term Channel (purple lines) and above the 7777 Support level but below the 8107 Resistance level.  That 8107 level is important because it was the last significant high price way back in September.

Looking at sectors we see short term strength in Semiconductor stocks, Technology, Banks, etc.  I note (again) that China has slipped down to mid pack levels.  Concerns about the trade negotiations?  Also of note were the Healthcare and Pharma sectors stocks that took a major beating this week.

I remain nearly fully invested but getting a little concerned about the momentum slow down and the overall value of stocks in the US.  In order to move much higher there will need to be signs of profit or growth or both.  Until then I’m watching for signs of Distribution . . . none yet, but I’m watching.

Happy Easter & Happy Passover to those who celebrate them.  Take Care and Good Trading.        ………… Tom ……….

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

Continuation April 14, 2019

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April 13, 2019 – Not much to say this week as this market continues to grind higher.  All indicators remain positive, though Volume Flow is weakening somewhat.  We can see a slowing of trading volume in the lower volume bars as well.

Lower overall volume does not necessarily means lower prices, but IF “everyone is in” this market that is going to buy, the next direction is not up, but rather down.  Let’s keep an eye on volume when we get a down bar.  A wide spread bar on heavy volume would indicate strong selling.  But until then I show resistance at 8107 (previous market top) and support of prices at 7777 (last significant weekly bar).

Sector strength remains very similar to previous weeks.  Semiconductors, Consumer Services and Technology issues are ahead of other sector stocks in the US.  I note that China has weakened over the past week and Banks & Financials have move up.  (likely driven by JP Morgan’s positive earnings report)

Now we are headed into earnings season and any nasty surprises could upset the “apple cart”.. I sense that many traders are nervous as we approach the previous market high.  A slight pull back would be typical.

That’s if for now; a slowing of the upward momentum but the trend continues.  Have a good week.  …………..  Tom  ……………

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

Market Continuing Higher April 6, 2019

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April 5, 2019 – The train keeps rolling down the track.  While there is “excessive” optimism from many sources you just can’t ignore the steady drive higher.  We’re now fairly close to the previous high set back in September and that 8107 level (green dashed line) is now our next point of possible Resistance.
The 7777 level (red dashed line) is a point of possible Support.  Market Sentiment, Money & Volume Flow and Price Strength indicators are all Bullish.  This week the bullishness was fueled by China trade hopes, strong employment data and Trump seemingly backing down from shutting down the boarder with Mexico.  (Editorial:  Interesting how someone can create a problem, then “solve it” by not following through, and ask for “credit”.)

Overall the pie charts of the percent of stocks in the S&P 1500 Index (below) are very bullish as well.

Price Strength – Accumulation / Distribution –There is a fair amount of green in those charts, supporting the bullishness of this market.

The table below shows where the short term strength is in this market:

Let’s not get overwhelmed by this strength but rather continue to move with it and adjust positions as it matures.  Stocks and those sectors inevitably change and rotate, and so should we.  China, for example, was going sideways just a week ago.

Have a good week.      ………..  Tom  ………..

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

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