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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.

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