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Hot and Bothered Market April 24, 2021

Posted by Tom in Thoughts.
Tags: , ,

April 23, 2021 -I sound like a “broken record” but this week showed how vulnerable this market is to even the potential of (select) bad news. Case in point was the drop on Tuesday because Biden might (just might) raise the capital gains tax on those making over $400,000 / year. (yeah, I feel bad for them too)

click on chart to enlarge it

The market valuation and expectations are high. Anything less than blow out great news is met with OMG reactions. Add to that margin debt (i.e. borrowed money to buy stock) is very high, flows into leveraged ETF “bullish” funds are at all time highs and corporate insiders are not participating in the buying. Thus volatility, but I’m more concerned about a chain reaction where stocks go into forced liquidation and the snow ball rolls down the hill (and quickly). The larger question is “when” and not necessarily “if”. The ‘when’ point is unknown and again, my concern is we won’t have much time to protect ourselves. In the mean time, the march higher continues.

Of note is an interesting statistic: Roughly 80% of the stocks in the S&P 500 (large cap) are above their 50 day moving average (i.e. appear to be going higher). Only 40% on the stocks in the Russell 2000 (small cap) are above their 50 day average, and 30% of those in the broad NASDAQ Composite index are above. Perhaps signs of narrowing participation; generally not a positive indicator.

Getting back to the chart above. We see Volume and Money Flow are positive, Price Strength is positive, but Market Sentiment is slightly bearish; it just has not recovered from the previous highs in mid-February. The Price Channel (purple line) is sloping up and we have recovered from the recent dip in prices. I note the significant decrease in over all volume (lower chart). Perhaps a lack of fresh demand. Has everyone that wanted to buy . . . have all ready bought? Without new buyers, who will buy and push prices higher? Something to consider.

Here’s the Short Term Sector Strength table:

I note Healthcare, BioTech and Real Estate are at the top. These can be considered to be defensive sectors. Something to keep an eye on going forward. (the 5,10, 15 & 21 day price changes support these ranks)

And so I continue to be invested but watchful for a significant change in character. Have a good week & Take Care. … Tom …

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


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