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A Mixed Bag of Indicators June 19, 2021

Posted by Tom in Thoughts.
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June 18, 2021 – An interesting week since there are bullish & bearish indicators on both sides. First, Small Cap stocks were hit far worse than larger company stocks (NASDAQ & S&P Indexes). Small Cap stocks are usually considered to be an indicator of more bullish “speculation”. Another negative is that Treasury Bonds continued to outperform stock indexes (see table below).

The indexes to a significant hit on Friday, but . . . keep in mind that Friday was option expiration, so big moves in either direction (and the volume) need to be taken with a “grain of salt”. I’m told that 53% of speculative call buying is by small traders (i.e. buying < 10 contracts). So Friday may just have been a “flush day” to drive as many options as possible out of the money. Lastly, equity hedging, i.e. option contracts set up to limit exposure, are at a near term low. So the “pros are not looking for a major pullback.

click on chart to enlarge

We’ve bounced off of that previous high at around the 14200 level and Money & Volume Flow look OK. Price Strength is neutral. (Sorry, my Market Sentiment indicator is not cooperating due to a problem with TeamViewer.) I any case a minor blip down on Monday to around 13840 is not out of the question, but I doubt we’ll see much more than that.

The Short Term Sector Strength table is shown below –

But, one last cause of near term concern is the yellow flag of stocks above / below their 50 day moving average. The pie chart below shows that on Friday we dropped well below the 50% mark.

My general rule of thumb is to start looking for what could be a problem when the % of stocks drop below 35% (those > 50 MA). Now the S&P 1500 Index is very broad and has a lot of Small Cap stocks in there. The question is: is this market leadership narrowing down? If so, that narrowing could be a precursor to a more significant correction. IF the general investor population is now fully invested . . . who will buy and drive prices higher?

I’m not getting excited just yet, but next week should be something that confirms or rejects a market correction theory. Have a good week. …………………. Tom ……………………..

A Cautious Breakout Higher June 12, 2021

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June 11, 2021 – OK, on Monday we got the breakout above the 13836 level and continued higher. The next level to keep an eye on is the 14206 level which was the previous high level. Price support now moves to 13548. Everything is good; right? (click on chart to enlarge)

Sentiment (top window) is Bullish, as is Money & Volume Flow. Price Strength is very good as well. What’s there not to like? Well I note at the bottom of the chart how volume is falling off. I was hoping for at least an average level as prices push higher. But one can’t have everything line up perfectly.

The pie chart below is of the number of stocks in the broad S&P 1500 and where they are in relation to their 50 day simple Moving Average. Generally, when a stock is above it’s 50 MA that’s considered a positive / Bullish sign. The good news is that there are about 65% of them above their MA. IF that were to drop to say 40%, it would be a sign of narrowing market leadership and a sign of contraction and a price correction. Also of note is the color coding of just how much the stock is above / below its MA.

The last piece of information is that of the Short Term Sector Strength table. This is where I tend to “prospect” for candidates that are performing better than the general market.

I have highlighted the 20 Year Treasury (#7) and the S&P 500 Index (#14) to point out a caveat. Note that (in the short term) Treasury Bonds have out performed the S&P 500. Humm. A flight to safety or just concerns about inflation, etc. ? I also saw that Treasury bonds have been out performing (a.k.a. Relative Strength) Corporate bonds. That’s unusual. So everything is not lining up perfectly, but it rarely does.

I have been taking increased positions in instruments (stocks & ETF’s) in the strong sectors, but watchful of the overall strength. We’ve come a long way in an unusually short period of time. It would be quite appropriate for things to slow down or become volatile over the Summer. Keeping an open mind about the next move.

I should note the next 2 weeks will be short posts, not that they may be less important, but I will be extra busy over that time. Have a good week & Take Care. …………. Tom …………

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

Oh So Close . . . June 5, 2021

Posted by Tom in Thoughts.
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June 4, 2021 – Last week I mentioned the possibility of “green shoots” and the market showing early signs of returning to a Bullish stance. A number of my market model indicators were showing recovery from a very mild drop and I just needed one more factor to “click”. And . . it almost happened on Friday. That factor is the closing price.

I’m looking for a closing price above the 13836 level to confirm a more Bullish direction. Interesting that all of the other indicators show in the chart above are in a Bullish position and interesting that my “Short Term Channel” trendlines (in purple) virtually overlay my Support and Resistance levels. (BTW, both are drawn automatically via an algorithm and not by hand.) I also note that trading volume has picked back up, another positive sign.

But not to get tooo carried away, we are entering the Summer months where thing typically slow down. Even if these markets push higher it’s likely to be slower and more subdued than the previous 6 months. That said we should remain selective in investment selection since it’s more and more likely that not everything will be moving the same.

The Short Term Sector table is shown below.

I find it interesting that the Oil complex is so strong, but much of that is the recovery of the economy and not necessarily a long term trend. Same goes with Real Estate and Latin America.

Have a good week. ………. Tom ………

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

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