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

Posted by Tom in Thoughts.
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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  They’ve been replaced by more defensive sectors (Banks, Telecom, Wireless, etc.).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.

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