jump to navigation

Reddit Revolt January 30, 2021

Posted by Tom in Thoughts.
Tags: , ,
add a comment

January 29, 2021 – This will be short since I’m typing on a small keyboard & screen. The long awaited pullback is here and it’s long overdue. Volatility is with us and likely will be for all of 2021. The NASDAQ Index (below) pulled back near the 12950 level. We could expect that support to hold in a bullish market so let’s not overreact to this (actually) minor pullback.

click on chart to enlarge

Money and Volume Flow indicators are “bearish”, Sentiment and Price Strength are “neutral”; volume is very high, as expected with a major “short squeeze” with positions being covered / closed out.

What happens by mid next week will be telling for the market going forward. The pie chart below shows how the stocks in the broad S&P 1500 Index did last week. As expected, more “red” on the pie chart as stock fell across the board. But let’s take a step back and note that little has actually changed from a market conditions point of view.

My detailed market timing model does NOT indicate significant trouble ahead, so I have done only minor adjustments this week. The key here is follow through. Will the “smart money” come in and buy this dip or will there be more selling? (I’m thinking “buy the dip” at discount prices; we’ll see.)

The short term sector table is below.

The control of COVID and the resulting impact on the world economies are the important thing right now, so let’s keep focused on those bigger priorities. Have a good week ! ………… Tom …………

Markets Continue the Climb January 23, 2021

Posted by Tom in Thoughts.
Tags: , ,
add a comment

Jan 22, 2021 – With all of the active news items (especially in the USA) it is amazing that these markets have not slowed down let alone corrected lower. Let’s see: virus deaths continue higher, vaccine in short supply, (US) government still “dynamic”, margin debt extremely high, option call activity at all time highs and money pouring into small speculative stocks. I might add that the ratio of stock prices to earnings is very high too. What could go wrong? Disappointment; and earnings season has just begun. So far the banks have held there own as well as NetFlix . . no so much with IBM though.

click on chart to enlarge

As we can easily see prices continue higher and at the top of their channel. Trading volume is high and the Money Flow is the only indicator that’s negative. The result is we have to follow the trend, but remain cautious for any signs of weakness in the broad market. My market internals model (not shown) shows a slight slowing in momentum but no signs yet of a correction.

Just how strong is this market? The pie chart below is of all of the stocks in the S&P 1500 index. The color relates to where the price is in relation to the Bollinger Bands of each stock (i.e the standard deviation / volatility based off of the 20 day moving average). Generally, this looks pretty positive with not too many in the red zone. Again, so far, so good.

Taking a look at what sectors are doing in the short term via the table below:

Of note is the strength of China and continued strength of Small Cap stocks. The columns to the far right show per cent return over 5, 10, 15 and 21 days. Not much more to say except “stay the course”. I’m continuing to research market correction warning signs and hope to provide some insight into that to avoid account draw downs. Remember, in order to make up a 50% lose, you need to have a 100% gain just to come back to break even. We need to avoid big losses as much as trying to get big gains. With all of these caution signs things may turn very quickly.

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

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

Momentum Slowing, Due for a Pause January 16, 2021

Posted by Tom in Thoughts.
Tags: , ,
add a comment

Jan. 15, 2021 -Regardless of the reason(s), this market appears to be slowing its rise and maybe consolidating the recent gains. We see that in the % returns over the past 5 days pie chart at the bottom but also in Price Strength in this chart, which is back to Neutral.

Click on chart to enlarge

Money Flow remains down but Sentiment and Volume Flow are positive; thus a mixed bag. I draw attention to the heavy increase in volume since the first of the year (bottom of the chart). Volume shows activity (“Effort”) but not much Price movement (“Results”) in Wyckoff terms. Possible indications of Buying being absorbed by Selling. At this stage it could be a pause / minor correction or something bigger. Right now I don’t see anything “bigger”, but it’s good to be on guard for it.

Earnings (4th quarter) begin to ramp up now and that is always a catalyst for movement in either direction. Something to pay attention to since this market is rather highly valued and all ready anticipates good earnings. We closed Friday near the first level of support (12963) so failing to the next level (12652) would be a minor reaction. How investors react to disappointing earnings and news will tip their hand as to where things could go.

The reason for increased concern is the excessive optimism in the market. The chart below shows that in a historical context. We’re back to levels seen in 2000/2001 and that ending badly.

Not to say next week or month all Hell will break out, but once things start moving it could very well snow ball. Another chart shows the more recent bubbles of optimism. I’m not “dis-ing” BitCoin but there are times when evaluation (price) exceeds value of the underlying security. Then things correct back to “normal”. I’ll sure try to provide readers with a “heads-up” if I see excessive selling coming into the markets.

Here’s that 5 day return pie chart I was mentioning at the top.

Notice a slowing from last week (less green), but still half of the stocks are showing gains. So far, so good.

Lastly the short term sector strength –

Right now the more defensive sectors are not showing strength, but I’m seeing fewer “buy candidates” in my daily stock scans. So I’m pretty darn cautious in here. Mostly because I’m close to fully invested and that always makes me extra watchful. There is a lot of positive news out there but we may have to wade through the bad stuff first. Take Care and have a good week. …………. Tom ………….

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

Amazing Markets Continue Up January 9, 2021

Posted by Tom in Thoughts.
Tags: , ,
add a comment

Jan. 8, 2021 – After this weeks events I (and likely many others) are amazed that the US markets did not correct significantly. I refer to the adage “Strong market remain so with bad news, where Weak markets react quickly” (or something to that effect). This market continues to be strong; so be it.

click to enlarge

Money Flow remains rather dormant and continues its sideways move but everything else is, well, positive. I have been working on a sensitive market internals model that combines advance / decline momentum with up/down volume and volatility of the VIX (put / call ratio) compared to the market. For a week it went from Bullish to Neutral, but on Thursday (much to my surprise) it returns to Bullish. I’ve been researching ways to provide an advanced “heads up” to changes in the market. Nothing is perfect but this may have some potential. The works continues.

Just how strong is this market? The pie chart below shows the percent of stocks in the S&P 1500 Index and their 5 day % change. There is a lot of green down there.

What could be driving this? Well the only things that I know for sure is there is more demand than supply. One theory I’ve heard is that money from the stimulus payments from those with jobs is flowing into the markets. This perception of “easy money” does concern me, but I have to trade what I see and not what I feel. I remain uneasy about the increase of new “investors” into this market (see previous posts), but we need to see some amount of smart money distribution before I’m ready to withdraw or hedge. It will come, just don’t know when.

Here are the sectors that are doing well in the Short Term –

What I find interesting is the Treasury Bond going down (bear going up), which indicates an increase in interest rates. Likely a short term phenomenon, but something to watch in the coming weeks.

I’ve made minor changes this week. Selling a couple of things that have lagged the market advance and picking up a few that have showed strength. If this trend continues for a few days I may add to my Index model a Mid Cap ETF; we’ll see.

That’s it for now. If you like something or want to see something else let me know. Otherwise Take Care and Stay Safe. We’re not “There” yet; patience. Have a good week. …………. Tom …………

Wobbly Market January 1, 2021

Posted by Tom in Thoughts.
Tags: , ,
add a comment

Dec. 31, 2020 – Not a whole lot new this shortened and light week. I am seeing some early signs of market internals weakening, so that’s my “story” about a “Wobbly Market”. I’ve got more work to do to verify this early signal indicator, plus the full market and it’s participants will be back next week, and that may verify the condition.

The chart below shows a calm market and my concern about tax selling in the final days of 2020 did not materialize. Money Flow dropped off but that is likely a symptom of low holiday volume in the between Christmas and New Years market. I note the Low price on Thursday is a near term support level with 12525 being the significant one.

click to enlarge

With the market rather quite I thought I’d give readers a little perspective on the economy and the market in general. First there is optimism in this market and that’s fine but where does the economy stand? The US economy is based on consumer spending and over 20 million Americans remain unemployed currently.

This chart just give perspective on how fast employment recovers from a recession, and by economic definitions, we are in a recession. The bottom line is that it will take years, not months to recover jobs. Once the vaccinations become effective in the second half of the year, things should kick into a higher gear. Corporate earnings (outside of on-line merchants, select technology and pharma companies) will take awhile to recover. 2021 will likely be a selective and focused market place.

Next who is in this market and are they prepared?

With the combination of “Covid stay at home” and “zero” commissions (which aren’t really zero BTW) activity in small volume call option orders has increased dramatically. The idea is that the market only goes up . . . it doesn’t. When reality hits this could cause panic and a bow wave of selling and margin calls (borrowed money), which drives the market down due to the late overreaction. Any news item could set this into motion.

This doesn’t have to keep us up at night but something to consider and be aware of. 2021 could very well be a very volatile market with changes happening quickly. OK, that’s it for 2020 and happy to see it go. 2021 brings hope but let’s stay focused on what we see and not just what we hope will be.

Take Care & Happy New Year ! ………………. Tom……………..

Price chart by MetaStock, used with permission. Sources as noted on charts.

%d bloggers like this: