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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.

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