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Market on Pause May 22, 2021

Posted by Tom in Thoughts.
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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.

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