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A “Line in the Sand” August 21, 2021

Posted by Tom in Thoughts.
Tags: , , , ,

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.


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