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Getting By With A Little Help From The FED August 28, 2021

Posted by Tom in Thoughts.
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Aug 27, 2021

With apologies to the (old) Beatles song, this market is getting by with help from the FED. The tone from the Jackson Hole annual FED forum was “dovish”, i.e continued accommodation. No doubt that the markets are addicted to low interest rates; that’s very clear. And so it appears that the positive environment continues for a while.

click to enlarge chart

Now then . . the market breath remains narrow, meaning there are fewer stocks that lead the indexes higher, not a good sign. But other indicators like up/down volume and new highs / lows remain more positive. We’ll take it. Looking at the short term sector strength table below we see the narrow focus is accentually on the Technology based sectors. That’s kind of OK, but it sure would be better to see Financials, Industrials and Consumer Discretionary improve as well. Since the US economy is consumer driven, that strength will be important if we are to move forward for any length of time. Also note below that Defensive sectors are toward the bottom of the list; that’s positive.

That’s about the long & short of it for now. I haven’t left the market, but I do have some Cash to deploy next week if things continue to improve. Take Care and have a good week. ……….. Tom …………

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

A “Line in the Sand” August 21, 2021

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Aug. 20, 2021 – I feel that the markets are near / at an important support level, a “line in the sand” so to speak. This week price came down to the first support level at 14584 and closed just below it on Wednesday. That close below triggered a yellow flag for me to pay particular attention to the following bars (days). Thursday also closed just barely below, but the close was near the high of the day (possible strength, so no hedging / selling was justified). Friday was a strong up day, back above the support level.

click on chart to enlarge

Now next week will be important. Does the “buy the dips” folks come back or does the “sell the strength” folks come into play. The market “breath” (advance decline ratios) has been looking very weak for over a month; less and less stocks were holding the market indexes up. When I look further at other Breath indicators (Up/Down Volume, New Hi’s/Lo’s) I see a potential that this would be more of a Re-Accumulation structure rather than Distribution. In either case I think that we’re at or near an important price level that will confirm or reject one structure or the other. With the FED Jackson Hole meeting next week that may be a news catalyst in either direction. (You can almost taste the hesitancy in this market; no one wants to miss the next move for sure.) And of course the continuing saga of Covid is yet another wild card. So far the market has discounted much of the virus since the economy and earnings are doing pretty well, at least for now. One last observation: Volume last week on those red bars was at best average. There doesn’t appear to be a rush to the exit right now.

Looking at all of the stocks in the very broad S&P 1500 Index we see that most are Weak or Neutral right now. If this market deteriorates the price erosion will be reflected here very quickly. For now it looks like a typical mild correction.

The Technology sectors are what made a big come back late Thursday and Friday. Those sectors will be important IF a market rebound will continue. I’ll be watching for signs of weakness and increasing volume here as a major trouble sign.

Short Term Sector Strength

I’ve got some Cash to invest but I’ll wait for a confirmation before nobbling; not hedging at this point though. Current holdings (most tech based) are holding up in the mean time. An interesting market that right now is indecisive. Have a good week. …. Tom ….

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

Summer Doldrums: Rev. 2.0 August 14, 2021

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Aug. 13, 2021 -Just as a reminder . . I update this blog every weekend. That might be Friday evening up to Sunday evening, it all depends on what’s happening “in house”. 🙂

A quick look at the chart below shows not a bunch of stuff happening. Conditions have improve just a little over the week and I’ve updated the Support & Resistance levels to reflect that, but really not much.

click on chart to enlarge

With that I’ll say that I’m “invested” but not enthusiastic about it; it’s been a slow period in here, hence “summer doldrums” . . . not much wind to our back. Let’s look at where the stocks are in the S&P 1500 Index.

Overall they look to be in good shape with the “green” are covering nearly half of the pie chart and the “weak” area about a third. Fairly typical of a steady market. (BTW, the colors refer to where the stock price is in relation to their Bollinger Band “buckets”; +/- 2 standard deviations from the stocks 20 day moving average.) Next let’s take a longer term look at the major indexes of stocks in the USA:

chart courtesy of Stock Charts.com Click to enlarge

This chart is the indexes year to date. Early in the year I note that Small Cap stocks were outperforming. Lately the Large Cap S&P 500 Index has been out performing, and to take it a step further, the NASDAQ 100 stocks are out performing the broad NASDAQ Composite Index. Once again it sure appears that big cap Technology stocks are back in the lead. Small Cap strength is consider to be “risk on” indicator, so it looks like money is moving to the more “well healed” Big Cap stocks. More typical of a maturing market.

Lastly, the Short Term Sector Strength table below:

I note some Financials in the lead group, but the broad Technology sectors seem to be the place for the time being. The lack of movement has me wishing for Labor Day, when the Wall Street traders (of size) return. Have a good week. ….. Tom …..

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

“Not a Whole Lot-a” August 7, 2021

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Aug. 6, 2021 – When I’d ask my daughter “What’s new?” she would (sometimes) respond: “Not a Whole Lot-a”, and it looks like the Summer slow down is in force. Without new news or astonishing corporate earnings surprises it appears that both positive and negative force are neutralizing price movement in the markets. COVID Delta on the negative side and good earnings and a rebounding economy on the positive side. Couple that with many traders being on vacation and we see a pretty much range bound market.

I’ve changed the typical chart by drawing in a “box” that encapsulates the range. It’s somewhat inspired by Nickolas Daris and referred to as a “Darvis Box”. Yes, there is a slight slope upwards, but the point is things have slowed down considerably. And, I’m thinking, because of counteracting forces. Investors don’t want to commit any more, at least for the time being.

click on chart to enlarge

Money Flow has turned down and Volume Flow is lethargic at best. We do see prices moving higher in the short term, hence Price Strength is positive. I remain “moderately invested” for the time being. The strongest sectors are positive, but not by much, thus I don’t see the “risk / reward” as being compelling to be there 100% for the time being. (I guess I’m like many others then too.) 🙂

The Short Term Sector Strength table is shown below.

We see a fair amount of Technology sectors in the lead . . . again. and that’s positive. It would be nice to see some Financials and Consumer sectors moving higher though. All in all things are “OK” some we keep tabs on things and try to enjoy the rest of the Summer. It seems like Wall Street is on vacation too.

Have a good week and please stay safe. ……….. Tom ………..

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

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