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Back Within the Channel January 25, 2020

Posted by Tom in Thoughts.
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Jan. 25, 2020 – The price action on Friday afternoon took out all of the gains for the week.  We could kind of see it coming . .  narrow range bars that have overshot the top of the price channel.  A narrow bar shows that buying is being absorbed by selling and that they are nearly equal.  Bringing prices back within the channel can be considered a healthy sign.  I’m thinking that short term traders were nervous holding positions over the weekend, plus it’s always nice to “ring the cash register” every so often.  A little move was likely amplified by computer programs (a.k.a. “algos”) which instantly jump on a price move in either direction for a quick profit.  In & out.

Also of note is that the Money Flow indicator turn (barely) bearish and Sentiment has gone from Bullish to Neutral.  We’ll need to wait until Monday to see if there is any follow through past the first hour of trading.  We could go back to “buy the dips” mentality in short order.  So this test is a good one to gage the overall health of this market.  Sure, the virus and impeachment scare could be factors, but I’m hesitant to accept all of that right now.  (click on chart to enlarge it)

Broadly the 1500 stocks in the S&P 1500 looks like this . . .

Price Strength –

Accumulation/Distribution –Price Strength has weakened, but stocks in general have not succumbed to broad based selling (i.e. distribution) at this time.

Sector Strength –

I do note that some defensive sectors (Utilities and Real Estate) have moved up towards the top, though select Technology issues return strong (so far).  This correction is OK as long as it stabilizes at / near the support level of 9193 (red dashed line on the price chart) and it was expected.  We will know the actual strength early next week by observing the price bar spread (difference between high & low prices) plus the volume being traded.  Wide down bars on higher than average volume would confirm weakness.

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

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

Keeps Going and Going and Going . . . . January 18, 2020

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Jan. 17, 2020 – This market is like the TV “Every Ready Bunny” (a battery commercial).  It just keeps going higher and higher.  But . .  we know from experience that it WILL stop.  The only question is when.  So, for all practical purposes, there really is not much new to talk about.  A few earnings report last week (mixed) with the real activity starting next week.  All eyes will be on Consumer stocks earnings.  Nearly everyone is looking for the first signs that consumer spending is slowing.  Oh yes, the impeachment “wild card”; who knows?

What is of concern is that the price bars are hugging that upper trend channel line (purple).  The daily spread on those price bars are fairly narrow, indicating seller and buyers are about equal with the bias toward the buyer demand, thus prices increase.  Volume is back to “average”, so not much of a clue there.  (click on chart to enlarge for easy viewing)

Let’s look at the stocks in the broad S&P 1500 Index and see where they are in comparison to each other.

% of those in Accumulation / Distribution% of those with Price Strength

Yes, lots and lots of “green” in both pie charts.  The market IS strong with the majority of stocks participating in the move.  But (again) this is unusual in that it can not last for extended periods of time.  So, we must be careful.  Bad news of any kind will likely re-rail or at least  cause a cause / correction in this rally.  For now, we can only stay the course and closely monitor.  Looking for selling . . . .  wide range down bars on high volume.  Ouch !

Sector Strength

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

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

Pushing Higher January 11, 2020

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Jan 10, 2020 – Wow, has this market been resilient or what?  In the face of bad news both domestic and geo-political, it just keeps going.  General concern is the timing of the overall business cycle.  The basic idea is that a capitalistic economy goes through cycles of expansion and contraction.  Expansion and growth are the result of a recession and a contracting economy (pent up demand).  The contraction occurs with things get “so good” that speculation gets out of control.  Read into that the recent mortgage “melt down”.

Next week, Tuesday I believe, we start the 4th quarter earnings reports.  Concern is that with all of the expansion and good news over the past 8 or so years are we in for a let down?  This market is priced for near perfection and broad disappointing earnings reports will catch up to the current “fear of missing out” philosophy.  Now that may not happen . .  yet, but it will eventually.  The key figure in the US is consumer spending which makes up about 70% of the overall economy.  Watch that for signs.

From the chart above we only see a positive trend, and we’re trend followers.  But I note that prices remain near the upper trend channel line and while wonderful, can lead to disappointment.  (click on chart to enlarge it)  The first level of support is 8934 on the NASDAQ Composite Index, next lower is 8790.  So I’ll get cautious with a close below 8934, and if it’s on high volume (significant selling), I’ll get very concerned.  In reality a bounce down to 8790 would be “healthy” and set things up for a run even higher IF earnings are reasonably healthy.

The (short term) sector strength table is shown below.  Not much changed but I note that Heath Care is showing recent strength.

Not much else to say.  So far in this climate one must be in the market . . . .  I just get concerned when everything and everyone is so complacent.

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

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

Continuation (for now) January 4, 2020

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January 3, 2020 – First off, I wish everyone a very Happy, Healthy and Prosperous New Year.

With a shortened and ultra low volume week, this posting will be short.  Overall, not much has changed.  The chart below shows that we remain in an upward trending price channel (purple lines).  Money Flow is showing some signs of weakness, though that’s preliminary.  All other indicators remain strongly positive.

One item that caught my attention was the significant volume increase on Thursday and Friday last week.  The activity significantly above a regular trading day (the red line is +30% above average volume). . . unusual for a holiday period.  Perhaps early signs of investment shift in the new (tax) year?  Not to get ahead of ourselves, but something to watch closely next week . . .  rotation, either by sector our to cash.  (click on chart to enlarge)

The sector strength table is below.  Again, little changed, Oil, Technology and China remain strongest for now.

 

Have a good week and keep an eye on volume confirming price (direction).  That will be a pre-cursor to strength or weakness.       …………  Tom  ………

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

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