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Tough Call, but Markets are Weak September 28, 2019

Posted by Tom in Thoughts.
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Sept. 27, 2019 –   No doubt about it, the news is driving this market and driving it hard.  Yes, the turmoil in Washington is significant, but perhaps more important is the loss of creditability of the administration in other areas such as trade and the economy.  There have been so many tweets and brief comments about China trade negotiations (that never panned out) that traders are beginning to doubt the comments coming out of the Trump administration.  (Are talks really starting again in October?)

Any way all we have to go on is price, volume and time and that’s where charts come into play.  We’re now back to a likely bearish trend with a possible low of 7643 on the NASDAQ Composite Index.  Momentum has all but dried up.  All one has to do is look at what sectors are strongest to see, that in the short term, playing defensive is in order.

(click on graphics to enlarge them)

I’ve been skeptical about this latest price structure for a month for reasons that I explain below.  The Price Action did not confirm the Price Movement.  Take a quick look at my explanation about Price Action and Trends and you’ll see what I mean.

Sector Strength is shown below –

What concerns me is that a desperate president might “pull a rabbit out of his hat” in the form of a quick China trade deal in order to look better.  The “deal” doesn’t have to be “good”, just bringing an end to the tariff war would be bullish for most US and World businesses.  So . . .  beware the news and a desperate administration that is looking to deflect from it’s own deeds.  At any sign of price weakness I will “hedge out” the light positions that I have in our portfolios (Cash is OK).  This is not the time to be brave, but discreate.

Have a Good Week.   ………….  Tom  …………..

Ideas About Market “Price Action and Trends” Sept. 2019
First, let’s look at an old definition of trends of both stocks and indexes. It can quickly be summed up as if the security is making higher Highs then it is in an “Up Trend”, but if it is making lower Lows it is in a “Down Trend”. A “High” or “Low” is typically defined as a swing high or low and not necessarily a bar price high or low. For the purpose of illustration on the chart below, the blue “zig-zag” line shows a closing price movement of 2% or more. This “zig-zag” helps to visualize the swing highs and lows of price action.
Confirmation of an up trend change would not be just a break of a previous swing high level, but also a swing low that was higher than the last swing low. The opposite holds for confirmation of a down trend. The advantage of this conformation is to filter out brief price level breaks during a period of congestion, or sideways movement. The disadvantage is a delay waiting for that confirmation.

The red lines on the chart above show points where a swing low (level) was broken/failed; the green lines show where a swing high (level) was broken/failed.
Next let’s take a look at an indicator (top window) that attempts to factor price and volume over a short period of time to confirm “price action strength” early in a price move. I put a filter of “3” on the indicator to show if the movement is in the “noise” level of price movement or if above 3, a potential significant move. You can probably guess that the red is bearish movement and the green line is bullish movement.
I note that in the cases where a price swing high or low price level was broken, the indicator confirmed it at or before that point, except for Sept. 5, 2019, where the bullish price strength was below the “3” level and therefore considered “noise”. Currently both the indicator and break of a swing low level indicate a “bearish” short term trend in the NASDAQ Composite Index.

At Resistance; Next Move ? September 22, 2019

Posted by Tom in Thoughts.
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Sept. 20, 2019 – (editorial comment)  I just returned from spending 4 weeks in Europe, both Northern & Southern. I saw a lot of infrastructure projects in full bloom, and (IMHO) an absorption of immigrants into their society; it hasn’t been easy, but they are doing it. (I saw a north African man speak pretty good Finnish, and take it from me, that’s not an easy language to learn.)  🙂

NASDAQ

US market trend in the short term is up, but again, the price action is not that favorable. Looks like we’ve hit a resistance at the 8172 level on the NASDAQ Composite Index; volume is about average but I’m thinking a “lack of demand”. Next week should be interesting. I think we’ll see a significant move one way or the other.

Sectors

All of the sectors have a ranking below 200, which makes me a bit uneasy as far as trend strength is concerned. (table attached) So, I’m continuing to be cautious here with any big positions.

A short post today, more as I recover from jet lag.  🙂  Have a good week.

…………  Tom  ……….

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

Uneasy Market September 14, 2019

Posted by Tom in Thoughts.
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Sept. 13, 2019 – OK, the NASDAQ Composite Index (i.e. “market”) made it above the 8048 resistance level, but the price action remains poor. This type of condition is very unusual so I’m calling it an “Uneasy Market” for now. Thus I’m not taking an aggressive / fully invested position right now. What would change my mind is a close above 8243, the “3 bar reversal” level.

I’m going to be brief; on a short term cell phone wi-fi network. Let’s look at sector strength:

An unusual combo of strong sectors: Banks, Energy, Small Cap stocks.

That’s it for now. Be cautious and have a good week. …… Tom ………

Better, But Not “Out of the Woods” September 7, 2019

Posted by Tom in Thoughts.
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Sept. 6, 2019 – OK, the general U.S. market has recovered and is above my short term resistance level of 8048 (green line, chart below), but other indicators are not confirming this breakout.  This is unusual.  The “price action” is just poor.  Normally I’d remove all hedges and be in Cash ready for the next (likely) “Buy” signal.

I have reduced my short / hedge positions but still am keeping a light position open for some protection.  Note that “Money Flow” has turned back down.  This market is just too dependent on news to suit me; one news comment and off the market goes on a 2-3% move based on hope.  Not the sign of a strong market.

My “fall back” level is 7847.  That’s where I’d re-enter a significant hedge for increased portfolio protection.  My focus tends to be shorter term since I’m managing retirement funds without any tax consequences.  I remain is a strong Cash position now with only a few “longs”.

The chart below from Bloomberg is interesting on two fronts.  First, it shows that generally the estimates of EPS (red line, Earnings Per Share) for stocks are lower than what the actually are (blue line).  I guess you can call it “worse case” estimating.  Secondly, and important now, is that we see EPS falling in 2019 (green circled).  Regardless of what is said, earnings growth is slowing.

And that slowing is what I believe is behind the stalling in the market.  After all in the long run what effects the price of a share of stock is it’s earnings per share.  Short term is another story.

Lastly the table below shows what sectors in the US markets are doing in the short run.

Many of the defensive names have dropped off the top; Technology, China and Telcom are in the immediate lead now.

That’s it for now.  It will be an interesting week to see if this market can hold onto the breakout of it trading range that it was in.  Have a good week.        ……………..  Tom  …………….

 

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