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Above Resistance, Close to Previous High October 26, 2019

Posted by Tom in Thoughts.
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Oct. 25, 2019 – Well, onward and upward.  The NASDAQ Composite Index closed above resistance indicating strength.  That’s all well and good but the next level of resistance (above) would be 8325, which was the previous high on 7-26-19.  As we approach that level it is logical to expect a pause to digest the previous up move.  Since we’re right in the middle of earnings season there is always the potential for a surprise.  So far the earnings have been pretty good, with some guidance lower in the 4th quarter.  Volume has been average, so no one is rushing to buy.

                                                      (click on chart to enlarge)

For now we just have to go with the flow and watch for signs of weakness.  The support level is near the 8045 mark and any minor correction should hold near there.  If that level breaks we could be in for further downward action and just wind up in a broad trading range.  The good news is that we’re in a generally bullish sessional period as we head into the Christmas session.  Everyone will now begin to watch for consumer / retail spending, and that will weigh heavily on the market over the next 2 months.

On the sector front, the Technology sectors have regained their dominance.  Latin America and Small Cap stocks are also back in trend.

I am nearly back to being fully invested.  Still looking for a few more stocks to fill in the growth portfolio.  Lately my research has focused on “when to sell” to lock in profits during a correction.  Transaction costs are so low there’s no sense in trying to stick it out and be a hero.  The trouble is most growth stocks go down about as fast (or faster) than they go up.  Timing is a big factor.

That’s it for this week.  Have a good week.   …….. Tom  ……

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

Market Improving, but . . . . October 19, 2019

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Oct. 18, 2019 – This week we saw a market improvement by breaking the 8062 level, but then stall out at 8172, which is close to a previous swing high (note on the chart below “failure”).  This stall can be considered very normal and merely a pause at a significant level before regaining momentum.  Or, it could be a “double top” which is bearish.  Volume did pick up a little on Friday but we didn’t see a wholesale exodus out of stocks.

What we’ll do is carefully watch for either signs of strength or weakness in the coming week and take our ques from that.  These signs will be where the closing price is in relation to the bar range (either top or bottom) and whether volume increases on those bars (buying or selling pressure).  A close below a previous swing low would confirm bearishness, and a close above a high would be bullish. (click on chart to enlarge)

What I do find curious is the sudden change in sector strength late in this past week. (see table below)  Recall that the Tech sectors (Technology, Semiconductors, “the Q’s”, etc.) were right near the top of the list; refer to the table in last weeks posting.  And now look at how far they have dropped in just a few days.  They’ve been replaced by more defensive sectors (Banks, Telecom, Wireless, etc.).  Are traders getting cautious?  Possibly, but this table is geared to short term strength, thus it can turn around quickly (i.e. made for trading).

I haven’t shown the “percent of stocks in the S&P 1500 Index” pie charts for awhile, so let’s see what they show –

Price Strength-Nothing very remarkable as nearly half the stocks in the index are above their 20 day moving average.

 

 

Accumulation/Distribution-

This pie chart shows a little more tentative strength.  “Normal” would be roughly 1/3 of the stocks in each of the three categories.  Too much green or red would indicate “over bought” or “oversold” conditions within the broad overall trend.  A big chunk of yellow / neutral shows indecision.

That about it for now.  I’m going to be especially observant next week for signs of strength or weakness.  Right now I am “cautiously long” with still some Cash to invest IF conditions continue to improve; but I always want to know where the exit door is located.  🙂  Have a good week.   …….. Tom  ………

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

Hopeful, but Not Great October 12, 2019

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Oct. 10, 2019 – This will be short since I’m “on the road”.  The gap up on Friday was “hopeful”, but the close was very weak (Not Great), hence the price action did not confirm that a new up trend had begun.  For this reason I think it’s wise to go slow until the structure of this market improves.  No need to be a hero in here.

It sure would be nice to see a solid close above the 8062 level on the NASDAQ Composite Index.  Volume is picking up but the “Money Flow” indicator shows that a lot of selling was done and so far has not been over come with buying.  Once again “news” has driven the market and if things don’t “pan out” with trade negotiations, the market could revert back lower.  Until we see some earnings coming across the wire from the end of the 3rd quarter, we will likely not be on solid footing.  I am not convinced that the all clear sign has been given just yet.

The sector table is below.  I note that Technology is the most optimistic of the sectors.  Not surprising since that area got hit hard during the last down swing.

I am slowly taking small position in here; the light hedge has been removed.  Have a good and cautious week.   ………….  Tom  ……………….

Not Much Buying Demand October 5, 2019

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Oct. 4, 2019 –  A pretty dismal week with a blip up on Friday.  The problem is the volume on Friday was very low, i.e. “No Demand”.  Looks like a simple short covering rally to me.  We are very close to the last swing low and the moment of truth is near.  Does this level hold (7663 support) or do we break down even lower.  It’s mixed and could be resolved via a news item.  But the US economy is slowing and with it corporate earnings.  The market is looking for stability and a good reason to rally back to the previous high.  With BREXIT and Impeachment looming in the background that doesn’t look all that great.  In addition, “price action” remains weak & “in the noise” without a clear direction.  (see last week for a description or in the “publications” page)

The market likes the idea of lower interest rates, but that usually means things are not that good and the economy needs help.  A double edged sword so to speak.

When you see government bonds, Utilities and Real Estate as strong sectors you know that (in the short term) things are not that great.  Here’s the table below:

Not much more to say.  I’m heavy in Cash with a light hedge on as insurance.  Have a good week.     ………… Tom …………

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

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