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A “Wait & See” Market March 20, 2021

Posted by Tom in Thoughts.
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March 19, 2021 – One could say that this market (depending on which index you benchmark) hasn’t done much over the past week and a half. Heck, you could go back even farther to mid to late February and say the same thing. That’s something that takes some getting used to but it’s not unusual. This past week trading volume was fairly low; that is below average. It just seemed like there is a “wait & see” perspective right now. Concerns about interest rates rising continue and add volatility to the day to day moves, but it’s more of a back and forth movement with a net result of not much overall movement.

click to enlarge chart

The chart above shows Sentiment, Money Flow and Volume Flow to be “Bearish” but just mildly so. Price Strength moderately Bullish. Resistance to any upward movement is around 1360 (green line) and support at 12985 (red line) in the near term. The price channel points downward.

So the end of the first quarter is close by and maybe investors just want to “run out the clock” and wait for something to inspire them one way or the other. We’ve come quite far very quickly since November and a pause is appropriate. The question is this “Re-Accumulation” or something more concerning? Since the bar color remain red I tend to be more cautious, though my major market model is still positive.

Short Term Sector Strength:

The only areas that did well last week were shorting Treasury Bonds (rates higher) and Japan. The “go-go” tech sectors were well off the high end on the strength table. And so, we join the “wait & see” crowd. Waiting for some sector to breakout and either break new ground or resume a previous move higher. And no one knows how soon that will happen or what will occur in the mean time. Right now I’m “lightly Bullish” but Cautious. Nuff said.

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

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

Better, But Not an “All Clear” Just Yet March 13, 2021

Posted by Tom in Thoughts.
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March 12, 2021 – A good week for the markets (both foreign & domestic) but I hesitate to call an all clear. I just don’t want to let my guard down and relax just yet. Let’s look at ‘why’ on the chart below.

click to enlarge chart

You’ll note that the Money Flow and Volume Flow indicators are better, but remain “bearish”. Sentiment and Price Strength are “Neutral”; plus the price bars are red. I’ll feel much better when the close is above the 13601 level on the NASDAQ Composite Index, and the channel lines flip. What is also telling is the low volume last week. OK, but folks are not rushing back into this market either. Let’s look at some of the major market indexes and see what we can learn.

There has been a lot of talk that investors are shying away from growth and moving into value stocks. The chart below is a ‘relative strength’ chart of the indexes over the past 90 days. All start from the same 0% point and the scale to the right is percent change

click to enlarge

Obviously Small Cap (small sized companies) were the place to be. Small caps are generally considered to be more speculative, but also an area to find growth. The NASDAQ 100 is a subset of the NASDAQ Composite of the largest 100 stocks. These generally are considered to be growth and typically technology based. The Dow Jones (30) Industries are a cross section of large, established American companies. And the S&P 500 is a set of the 500 largest companies; generally big cap and established.

The chart below is of the same indexes, but covers the last 27 days shown in the bracketed area on the chart above; i.e. that area “blown up”. It covers the time frame from the previous market peak to now.

So . . a little different story. Small Cap is holding it’s own but the stodgy Dow is doing much better and the NASDAQ 100 is now the lagger. This is a mixed bag. Speculative Small Cap is OK, low growth Dow has picked up and the “go-go” Nasdaq 100 is behind. I’m thinking that the market just has not yet determined what the next trend will be. True, the Dow could be effected more by the recent strength in the Oil sector and the concern over interest rates rising is spooking growth investors. Again, we’ll need to remain cautious over the next couple of weeks and watch for a “head fake”.

The table below shows the short term strength of the major sectors .

I have started to slowly return capital to the market but some Cash remains outstanding. I’ll wait for additional signs of strength. Have a good week. ………… Tom …………

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

Close Call March 6, 2021

Posted by Tom in Thoughts.
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March 5, 2021 – Wow, that was a close call ! I put out a rare “heads up” post about “Getting Concerned” and suggested to wait for a close below the low of the Thursday bar that closed below the 12985 level (in red below). The volume level on Thursday was high and that was another clue that traders were anxious. On Friday (the last bar) the open was higher but quickly dropped; in the afternoon it came back near the open and above the low of the previous bar (12553). Thus, a close call . . . . at least for now.

click on chart to enlarge

The bar on Friday many would cal a “High Close Doji” which is a short term reversal pattern via Japanese candlestick jargon. In term of Wyckoff analysis it was a “test” of demand, which was found. Those red arrows draw my attention to pay attention in these situations. Even with Market Sentiment weak and Volume Flow bearish Money Flow remained strong. The number of 52 week New Lows increased but not to the point of raising any flags. For now I am suggesting that this is a mild correction, driven by a reaction to news (the FED) but continue to watch extra carefully next week. I also expect a lot of this stimulus money will find it’s way into the markets and that will help buoy prices.

Looking at the stocks in the very broad S&P 1500 Index we see that this has not hurt prices very much overall. The theory is that “growth” stocks got hit much more than the “value” stocks; this pie chart tends to confirm that.

Another possible explanation is the rotation out of the “growth / high flyers” as opposed to a significant correction where nearly everything gets sold off. The table below shows the short term sector strength. Note the confirmation of Treasury Bonds taking a hit (last on the list) while Energy and Financials rose toward the top. Technology dropped down significantly.

That’s about it for now. I’m watching the market overall closely, but also for signs that money is just flowing into different sectors too. Mostly invested with about 20% of my “powder dry” for opportunities. Have a good week. …. Tom ….

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

Getting Concerned March 4, 2021

Posted by Tom in Thoughts.
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March 4, 2021 – * * * Mid-Week Commentary * * *

OK, with the price weakness and increasing volume . . . now I’m getting concerned. IF the NASDAQ Composite or Russell 2000 Indexes close below the low of today (3/4/21), or appear very weak near the close (i.e. the last 1/2 hour), I will either hedge or liquidate to save capital and wait this out.

This is not advice, just a Heads Up that thing are beginning to look weak. More this weekend. Be Careful. ……. Tom …….

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