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A Slow Recovery . . . (?) September 25, 2021

Posted by Tom in Thoughts.
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Sept. 24, 2021 – Last Monday the bottom feel out and the NASDAQ Composite Index (chart below) dropped below my first level of Support at 14896. My general rule is to use the low of the bar that closes below that first level of support as my guide to hedge / close positions going forward . . . unless the volume of that day is very high (folks rushing toward the exit). This drop has been generally expected for weeks now and all it took was for the Chinese real estate developer Evergrande to rumor a series of loan defaults. That “lit the fuse”. But notice that the volume was not excessive, a little above average (dashed blue line) but not up into the red line (average + 30%). In short, “orderly”.

At this time this just looks like a slow recovery, but make no mistake, this IS a different market than the previous 9 months.

I came across an interesting presentation. Here’s the short of it. The US economy is made up of 74% consumer spending activity. This drives the potential for corporate profits; i.e. spending = profits. Next, who (& what) drives spending? Well the segment that has the highest income and needs / desires. That age segment are those between the ages of 35 and 55; the ages where they have the most income & needs. Right now we’re seeing the biggest population / age segment are the Millennials. They are the ones currently between ages 35 and 55. The bottom line is their consumption / spending will continue through the year 2034 (roughly). The theory is that the behavior of those between 35 and 55 . . and if that segment is large enough, will drive a secular Bull market.

Now, that does not mean or even imply that there will not be volatile corrections that are significant. It only implies a recovery from a short term drawdown in the markets. OK, it’s an interesting theory and only a theory. Back to “what’s happening”.

Let’s look at manufacturing as a gage of this economy. The chart below shows recovery; it’s not a straight line but it never has been either.

I guess one could say, “so far, so good”, even with that recent dip lower. Likely driven by supply and semiconductor shortages and not by lack of demand. (my Thanks to Doug Short & Advisor Perspectives for this chart)

The Short Term Sector Strength table below shows the initial recovery of Technology sectors late last week. That must continue plus adding Financials and Small Caps would be a big plus too.

That’s about it for this week. Continue to Take Care and keep an open mind on what this market is telling you. ………… Tom ………….

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

Mixed Signals September 18, 2021

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Sept. 17, 2021 – Just a quick comment: You can get a notice when postings have changed by clicking on the “follow” button (I believe that’s what it’s labeled is). I update some time over the weekend, so it could be any time from Friday evening through Sunday night.

So it looks like we’ve got a bunch of mixed signals and sentiment. Unrest in China, inflation fears, economy slowing, Covid continuation, concerns about higher corporate taxes (please !), domestic politics and lingering “funk” about Afghanistan. So lets try to break some of this down via the chart below.

click on chart to enlarge

A top to bottom view: Market Sentiment actually improved a little this week and remains positive overall. Money Flow is negative (not much buying on Up bars) and Volume Flow is pretty much neutral. Price Action is negative, just because we’ve had a bunch of down days the last (near) 2 weeks, but nothing terrible (yet). Prices remain in that upward sloping channel and above the 14896 support level. The volume spike on Friday was the predictable surge due to options expiring on the 3rd Friday of every month (plus futures too).

Now that options expiration is behind us, let’s see if we get some renewed buying interest next week . . . “Buy The Dips” as they have for years now. OK, the Covid scare was the exception, but that was not a surprise either. Over all the stocks in the broad S&P 1500 Index as shown below –

A split / “mixed” of Weak (50% to Strong & Neutral (50%), not really a surprise given the price action lately. The table below shows Short Term Sector Strength –

Technology and Financial sectors are about at the middle of the pack, hence a mixed view of what sector leadership is saying. I’m finding it hard to believe that oil & gas will remain dominate for very long and that’s propping up the US $ also. So it looks like the seasonal weak month of September is living up to its reputation. The good news is October is just a week + away. I’ve done little trading of late, my holdings are doing OK, at least for now. No need to get whipsawed until there is a better definition of a trend change. Staying steady for now.

Have a good week. ……….. Tom ……….

Mixed Signals = Volatility September 12, 2021

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Sept 10, 2021 – I’m seeing some mixed signals so I’m thinking ‘volatility ahead’. Up until Friday, we had strong price action and improving market breath. All good signs. But we can get too much of a good thing too. Actually the market breath improved so much that one could call it a ‘thrust upward’. Those typically occur at market tops and not in a well developed bull market. Nothing “magical” about a thrust and I think it is more an indication of a “FOMO” (Fear Of Missing Out). Nobody wants to be left behind especially as the 3rd quarter end is only a few weeks away.

click on chart to enlarge

I note Sentiment remains positive, Money Flow negative, Volume Flow slightly positive and Price Strength neutral. Since we hit all time highs this week there are not resistance levels as such; the support level is 14896 on the NASDAQ Composite Index. Friday was weak and volume increased. We’ll need to wait on Monday / Tuesday to see if that weakness (i.e. volatility) follows through. One of my “early warning” signals fired on Friday, so that’s got my attention . . . a “yellow flag”. But we’re still within the up sloping channel, so let’s not over react and get whip sawed here.

Technology sectors have eased off a bit and Bonds have shown some strength. China and Japan are kicking up their heels too. The Short Term Sector table is shown below:

That’s about it for now. Markets rarely go in a straight line so an orderly ease back would be “normal”.. Have a good week. …. Tom ….

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

“Steady As She Goes” September 4, 2021

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Sept. 3, 2021 – First off ‘Happy Labor Day’ (for those in the USA). The US markets will be closed on Monday but keep in mind the rest of the world exchanges will be open. Note: I like to peek at the Asian market before I turn in for the night and the European as I get up, they give me an idea of the overall feelings before the US opens . . . not to mention the near 24/6 trading of S&P 500 futures.

The chart below shows a steady rising market. “What’s there not to like?”

click on chart to enlarge

We saw again that this market is nearly addicted to low interest rates. Jay Powell indicated that the FED will not be aggressively tapering soon, hence interest rates will remain fairly low for awhile at least. The market loved it ! And so it goes. Here’s the recovery of the stocks in the S&P 1500 Index as they relate to the 20 day Bollinger Bands:

Fairly steady and benign, but positive. The short term sector table below shows Tech (which makes up a BIG part of the S&P 500 and NASDAQ 100 Indexes) is back in the lead. Note the sudden strength of Japan though. Let’s see just how long that lasts. Also Real Estate.

I have continued to make some minor changes in my holdings, obviously favoring the strong sectors. As stocks or ETF’s fail to keep up with the others in the group they will be sold and replaced. I’m close to being fully invested, but not quite yet.

Have a great week & Take Care. …………. Tom …………….

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

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