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Volitility Continues, No Clear Direction March 29, 2020

Posted by Tom in Thoughts.
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March 27, 2020 – Sorry about being late last week.  The post was completed but only in Draft form.  It took until mid-week before I found that out.  I’m now back to using the “classical editor” and should happen again (I hope).

Yes, back to volatile up and down swings.  Each move seems to begin with news, then gets amplified by computer algos.  And so it goes, back and forth.  I’ve laid out two possible scenarios.  The first is “bullish” and is shown via dashed green line.  The logic is the NASDAQ Composite Index retreats back to roughly a 7194 “mid point”, then rallies higher nexy week.  This puts in a “higher low” price swing, which is positive.  The “bearish” version is shown with a dashed red line.  It just continues back to the previous low.  At that point it just oscillates between Resistance & Support areas or, worse yet, heads even lower.

It all depends on virus and corporate news.  Which in this environment is not a surprise.  The markets are weak and nervous, and just about anything will send them off in any direction.  No value in trying to predict but knowing key price patterns can help decipher overall directions; if only for the short term.

The table below tries to show short term sector strength.  Though it’s hard to read too much into these right now.  (Who would have thought Utilities / Defensive would be right near Semiconductors – Aggressive?)

That’s about it for now.  I’m trying to avoid jumping into things too quickly, but also trying to remain optimistic as well.  Have a good week.   ……….  Tom  ………

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

Don't Be Surprised If . . . March 24, 2020

Posted by Tom in Thoughts.
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March 20, 2020 – I don’t like predictions and much prefer looking at data, but . . . I just need to mention that don’t be surprised if we get a quick explosive rally in the stock market (based off of rosy news) and then an equally quick sell off back to the previous lows (or lower). It’s an age old game of trying to pick the bottom, sucking people in, then selling into a rally. How will be know? Likely by very high volume since there has to be a seller for every buyer, volume will go “off the charts” as folks scramble to get in . . but also to get out. It’s a swing door.

NASDAQ Composie Index

Right now I prefer to see a close above 7878 (green line), with support at around 6686 (red line). When either of these get taken out on a close, then (and only then) will it get my attention. Plus, let’s see if any rally has any “legs” or staying power. This action is easier to see on an intraday chart, say looking at 30 minute bars. Is a price move up being met with heavy volume and resistance as sellers come in to meet the buying demand?

This is not going to be easy, as nothing worthwhile is, but it’s important to be skeptical. There has been a lot of damage done and the outlook for the world economy is still unknown. There will be bad news, especially about corporate earnings. And we know that in the loooong run. It’s all about future earnings.

To illustrate how tough it is, I’m showing a pie chart of the percent of stocks in the S&P 1500 index that are in Accumulation (buying), Distribution (selling) and how strong their prices are.

Accumulation/Distribution –

% of Stock in S&P 1500

Price Strength –

The bottom line is to stay safe and look out for one another. Then be patient about this market. IF there is any logic . . it shouldn’t turn on a dime, but will take time to settle and build a base to effectively launch from.

Take Care and have a good week (or as best that you can). ….. Tom ….

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

Waiting for the Next Shoe to Drop March 14, 2020

Posted by Tom in Thoughts.
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March 13, 2020 – Ok then . . a volatile week that ended in the last half hour on Friday with short covering before the weekend. Is that it? Not expecting a “V” style bottom, but I’m thinking about two scenarios: 1) we bounce around up and down for a few weeks, maybe months, roughly between 8347 and 7194; attempting to build a base. 2) more bad news, both virus and corporate and we continue lower.

click to enlarge

The light blue arrows on the chart above give you a rough idea of scenario #1; #2 is just lower. All indicators are Bearish / Negative, with no surprise there. Why not just a rip upwards? Way to much damage done plus the virus threat, plus the likely effects on corporate revenues. We’ll just have to wait this out for more clarity. Next week should provide us with at least a hint of what’s on the minds of traders.

Sector wise there is not much to see on the long side . . possibly long the US Dollar, but that’s about it.

short term sector strength

I’m very heavy in Cash and the few remaining holdings are hedged out with a “Q’s” Bear fund / ETF. Now is the time to be patient and wait for an opportunity to re-enter. It make take awhile for that to develop.

Have a good week and Stay Safe. ……….. Tom ………….

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

The Three Scenarios March 7, 2020

Posted by Tom in Thoughts.
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March 6, 2020 – Another volatile week in the world markets.  But the question is always, “What Next?”  Right now there are 3 scenarios / possibilities.

1) Could we just rally from here go back up?  Sure, but not likely.  There has been a lot of damage done; a lot of money has been pulled out of the markets.  Just look at the volume on down bars.  2) Could we fall down even further?  Again, that’s possible and it all depends on news and the revenue streams coming into companies.  Thus, a time to be extra careful and watching price and volume.

3) Could we just remain in a trading range going back and forth with blips in the headlines?  In my opinion that’s the most likely direction; bouncing between 9070 at the top end and 8438 at the low end.

It looks like the markets are building a base / in consolidation.  But then again . .  it all depends on how badly business are feeling the virus effects on their revenue stream.  The virus scare impacts both supply of goods (manufacturing) and demand (will consumers buy?).  The virus effects on people is terrible and unfortunate, but one thing is fairly certain: the markets will recover.  The only question is when.  I’m watching for the results on consumer confidence & company revenue guidance for clues.  If there is a close below 8264, then more downside is likely.

The pie charts below tell the story of how the sell off has effected the stocks in the broad S&P 1500 index.

% in Accumulation / Distribution –% Price Strength –

BTW, what stocks were considered “Strong” in the S&P 1500 Index?  Only six.  Those six below –

The table below paints a lot of red as far as short term sector strength is concerned:

I am heavy in Cash with the remaining mutual fund holding completely hedged.  Have a good week and try to be patient.  Likely this is not going to get resolved soon or quickly.   …  Tom  …

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

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