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Early Positive Signs May 29, 2021

Posted by Tom in Thoughts.
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May 28, 2021 – I’m starting to see some return of positive short term market indicators. These are coming from the Russell 2000 Index (primarily small cap stocks), which tend to indicate “risk on” or “risk off”. The broad NASDAQ Composite Index (below) is showing some early signs as well. To soon to say the the coast is clear, but perhaps we can get to a “muddle through” summer and not go into the Summer Doldrums.

click to enlarge chart

From what I see above, Market Sentiment is slightly bullish, Money Flow remains bearish, Volume Flow is not determined (?) and Price Strength is now neutral. At least the steady down price channel was broken to the up side and volume has increased. I do note that Friday, the last bar, closed toward the lower range. Concern remains about inflation; not a surprise since the economy is awash with liquidity.

We also see early signs of returning strength in the SP 1500 stocks. The first pie chart is where they stand in relation to their individual 20 day moving averages. We’re seeing an increase in Strong and Neutral slices here.

Next are the same 1500 stocks and their 5 day percent price returns. Again, more greens and less red slices. Overall a good week for many stocks.

And finally a table of where the strength is coming from. The short term sector strength table is below.

Interesting to note that the Technology sectors are beginning to rise toward the top. Encouraging. So I’m looking at next week to confirm at least some of this strength. I doubt if the past long steady climb returns, but we may see indications that certain sectors and stocks in those sectors are gaining ground in a more predictable way. So the yellow flag is flying. Be careful and be skeptical but also don’t be afraid, since we can always back away IF conditions don’t follow through.

To those in the U.S., have a great holiday weekend (US markets are closed on Monday, but international markets are not . . hint). …………….. Tom ……………

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

Market on Pause May 22, 2021

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May 21, 2021 This market continues to be in “pause mode”, so there’s not much new to say. Note in the chart below the drop off in trading volume over the past 6 days (bars; blue arrow). That dashed blue line is the 20 day moving average of volume and the red is 30% above the average. Not many folks see the need to buy or sell.

click on chart to enlarge

OK, we’re well past the half way point of earnings announcements and they have been overall very good . . . but that was expected by this market. Since we’re at the high end of evaluations (earnings vs. stock price, P/E ratio) there’s not a whole lot of incentive to push things higher without some good reason to do so. Small businesses are coming back and the economy is gaining strength everyday. But that’s the concern; inflation and higher interest rates.

And so the market is on a “pause” for now. My only concern is that it is vulnerable to bad news. But one can’t predict these things. In the mean time let’s look at the stocks in the broad S&P 1500 Index. The pie chart below shows how many are above their 20 day moving average adjusted for volatility (i.e. Bollinger Band strength). Pretty neutral right now.

Next the short term sector strength table.

Of note is the strength of Precious Metals (gold & silver), plus the weakening of Oil related sectors. The number of “green” sectors (top 20%) has shrunk down lately.

I’ve raised some cash mostly because there’s not much sense in being exposed to sudden news items and there is little compelling need to be totally invested right now. Have a good week. ………… Tom …………

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

A Good Place to Stop, but . . . May 14, 2021

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May 14, 2021 -We’ve known that the markets are “overvalued” and certainly nervous about interest rates and inflation, so this drop is not much of a surprise. Looking at the chart below, the 12985 level would be a “logical” / nice place to stop a correction, but . . .

click on chart to enlarge

But . . . the low volume ‘up bar’ on Friday (note arrow on the volume portion) gives me pause. A nice move higher on low volume . . . not much commitment to stopping at least not yet. The other indicators remain bearish so let’s wait and see what Monday / Tuesday of next week brings.

The pie chart below shows the 5 day % return of 48 major industries. Only one (recreational) managed a decent week and there is a lot of weakness out there.

Earnings continue but are now slowing. There are a few ‘darlings” but nothing really that surprising. It just seems like the market is looking for leadership and a excuse to resume the steady upward trek. Retail sales were good but the street was expecting a lot more. The Consumer Confidence indicator will be coming out May 25th but that’s over a week away. We need some bullish news coming out of somewhere.

The Short Term Sector Strength table is below –

Banks and Materials continue to do well. Oil / Energy as well, but how long can that continue? All of these are basing off of the increase in economic activity . . . . as pretty much expected. Where is the new growth?

I’ve pulled in some positions for Cash but remain about 70% invested. Waiting for the next move in either direction as the signs are rather mixed as of Friday afternoon. Have a good week. ………… Tom ………..

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

Continuing to Wait and See May 9, 2021

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May 7, 2021 – This will be a brief post since I’m “on the road” in Atlanta for Mothers Day. And . . . for those . . . Happy Mothers Day !

We’re about half way through first quarters earning season and the news has generally been as expected / good. So why the pause? I think it’s still more “wait & see” thinking. Concern about (possible) interest rates increasing and if corporate taxes might also increase. This market is “hooked” on low rates and low taxes, no doubt about it.

The chart below is of the very broad NASDAQ Composite Index. While large cap indexes like the S&P 500 and Dow Industrials are at /near all time highs I note that many other broad metrics are at a pause. That said I note most of the indicators on the chart are really not very bullish at all. IF weakness appears it typically shows up first in the smaller companies, so we’ll keep an eye out for weakness here.

click on chart to enlarge

I’ve put support at the 13440 level and a close below that would concern me. Resistance is at the 14207 mark. Again I note the rathe low / modest volume; many appear to be waiting.

The short term sector strength is shown below. I note the oil / energy and financials are doing well, technology not so much. Looks like a pause.

I am invested more in “value” securities since “growth” is not moving and could be more vulnerable to a correction IF that were to develop. Have a good week. …………. Tom ………….

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