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Short Term: Stuck in the Middle; Long Term: Down ? August 16, 2019

Posted by Tom in Thoughts.
Tags: , , ,

Aug. 16, 2019  A quick look at the chart below shows the market in a trading range / consolidation between 8041 and 7643 (green & red dashed lines).  Major damage was done during the latest drop and once again volatility has returned.  In my opinion this volatility is being driven in a major way by “algo” / computer trading, as once a move starts we see volume coming into the markets to amplify it (in either direction).  The computer programs basically “dog pile” into and out of the market.  It’s something we have to live with, and the way to look at it is what has happened over the past 5-10 days and not just the last 2 or 3.  (click on chart to enlarge)

Market Sentiment, Volume and Money Flow indicators remain Bearish.  The short term Price Strength is Neutral.  The question is are we in a consolidation / base building phase or just a pause?  Until the price closes with a break in either direction we won’t know.  But my “guess” is we have more room below than we do above at these levels.  All that’s needed is a news item (like China trade or Iraq) and away we go; and go quickly.  That quick response makes managing a portfolio a lot harder.  But there is an old saying, “It’s better to be out wishing you were in, than in wishing you were out !”.

I remain in a fairly hedged out / cash neutral status for now.  A look below to the sector strength table shows why.  The majority of the top sectors are defensive (China being the exception).  Not exactly an endorsement for a strong, growing equity market right now.

So, not much else to say except try to keep some powder dry and if things get worse, I may go slightly short (net overall).  Watch the daily volume and what the price bar does on those high or low volume days.  Direction wise, but also the spread of the bar and where it closes within the range.  Is the volume being absorbed or is it pushing price in a direction easily?  These will be the clues on who is doing what.  So far the big holders have not liquidated much, but if they do, we’ll see it and act accordingly.

Have a good week.  ………….  Tom  …………..

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


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