OK . . . What Next? June 18, 2022
Posted by Tom in Thoughts.Tags: market analysis, market commentary, stock market commentary, technical analysis
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June 17, 2022 – Interest rates are going up (no surprise) and will continue to go up (again, no surprise). The question is how much and how fast, but really the bigger question is whether it will lead into a recession and just how deep and long it could be. Oh yes . . . inflation is a major factor.
In general, a news item typically causes a minor short term effect on the stock market. What REALLY concerns investors is a recession, because that has a major effect on profits, hence earnings. Over the long run, it’s really all about earnings and the future growth of earnings. Stock prices just reflect the “future hopes” (i.e. bets) of investors. I’m NOT predicting, but I do like to anticipate possible market structural scenarios. The idea is not to act on them now, but to be open to the possibility of movements so when they begin to unfold (or don’t) one can react quickly. So, here we go:
The Green lines represent a bounce up from where we are about now going way back to late September, 2020 (note the red arrow; this is a weekly chart). The idea is that this level is a logical support level and then we spend the next 6 weeks or so in a trading range (then possibly another leg down).
The Red lines represent a continued move lower, perhaps much lower. Sure, there will be small bounces, but the trend would be continued weakness for the foreseeable future.
The good news is that we shouldn’t have to wait much longer to find out. I note that billions of dollars of Put hedges expired on Friday, and since the prices did not fall (indicating option exercising) they appear to have been rolled forward (i.e. close out the June contract and open a July one). Why do we care? Because the big investment houses are continuing to hedge, thus “buying insurance” in case the market falls further. The big guys are cautious, I am too.
The Short Term Sector table is below:
China is showing some life and potential but much of the top sectors are defensive. Note that Energy has dropped down; is it short term weakness? That’s it for now. Have a good week, looks like this will be lasting for a while, no V bottoms this time. ………. Tom ………..
Price chart by MetaStock; & table by http://www.HighGrowthStock.com. Used with permission.
Back To Reality June 11, 2022
Posted by Tom in Thoughts.Tags: market commentary, Stock market analysis, stock market commentary, technical analysis
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June 10, 2022 – At the beginning of this week it appeared that a bottom might be in and a strong rally was underway, but . . . inflation data came out, retailers were reporting that their inventories were up 30 to 40%, consumer confidence continued to be low and (of course) gas prices crept even higher. That was it, two days of big drops. I was thinking that we were in-line for a pullback because of the low volume (a.k.a. low commitment) at the higher price levels and besides, nothing has materially changed either.
So what’s next? I’m thing lower prices early in the week, then a recovery. The strength of that recovery will be telling. But since the FED is meeting next week, and will put out a news release on Wednesday afternoon, not much will happen until late in the week. The market is expecting two more (at least) ½% increases this year. How Powell phrases ANY activity after the meeting will be an important factor on how the market reacts with anticipation. Does he sound dovish or hawkish and to what degree, that is the question. Then we need to evaluate how the market reacts and just how committed it appears. Is volume increasing? Is everything being affected or only a handful of sectors? The bottom line is: Is this market ready to rally?
Looking at the Short Term Sector Strength table below we see the Energy complex and China showing the most strength.
I’ve added a small China position to my Energy & general commodities holdings but still have Cash to deploy IF & When that’s appropriate. And when it’s time to take a position, scale into it. Nobody gives you “extra points” for jumping in with both feet. Have a good week. …………… Tom ………….
Price chart by MetaStock; & table by http://www.HighGrowthStock.com. Used with permission.
Showing Life, but Not Commitment June 4, 2022
Posted by Tom in Thoughts.Tags: market analysis, market commentary, Stock market analysis, stock market commentary, technical analysis
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June 3, 2022 – Interesting week, this past week. In the media I’ve heard: “The bottom is in, time to back up the truck” and then, “An economic hurricane is coming, get prepared.” Well . . . OK, looks like we’ve got two extreme predictions and the winner is: “Nobody really knows for sure.” The saying “Even a broken clock is right twice a day” comes to mind. Let’s look at the chart.
What do I see? I see a market that has many indicators positive and Bullish . . . but two things: 1. Look at the volume last week. Very low. You may say it was a holiday week, but in reality big trading firms have a staff on duty every week, regardless of vacations (they rotate throughout the summer) so there is always a trained staff manning the desks; they can’t afford not to. 2. What has changed? I mean has the Ukrainian war changed? Has the economic outlook changed (inflation, interest rates, etc.)? No and No.
What I’m getting at is let’s see IF the resent rally is anything to get happy about. Low volume = low commitment; period. Thanks but I’ll wait for at least some confirmation of a genuine rally before I get excited. Let’s see what the sector table indicates.
I see the Energy sectors showing continued strength and maybe China is coming out of a funk, but that’s it. No leadership from Technology or Finance or Consumer sectors. Not a great vote of confidence. Unless you’re day trading or in very short term trades, this remains an unfriendly market. That could change, but not yet. IMHO.
I remain in Energy and select Commodities, with a bit of Value exposure, plus Cash for the time being. That could change, but I need to see more. Have a good week. …………. Tom …………
Price chart by MetaStock; table by http://www.HighGrowthStock.com. Used with permission.
Special Risk Capital Management LLC 
A Good Week June 25, 2022
Posted by Tom in Thoughts.Tags: market analysis, market commentary, Stock market analysis, stock market commentary, technical analysis, Wyckoff
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June 24, 2022 – Last week was a good week for the stock market with some hopeful signs beginning to show. The markets are oversold so that nice bounce on Friday was somewhat expected. What is interesting was the very high volume on Friday. This was likely caused but “short squeezes”, that is people who were short stocks and then having to buy them back to cover their short positions (to avoid losses); a.k.a. “buying begets buying”. But another factor is there remains billions of dollars in Put options and some of them expired on Friday. The question is: did these contracts “roll forward” (in time) or did they cover/close? Lastly, we are approaching the end of the quarter and many funds will begin to rebalance their portfolios per their charters. We’ll have a better idea on Monday.
There has been extreme investor pessimism and there are very early signs that the Technology and growth stocks are beginning to at least stabilize. I still favor a possible bottoming and basing formation over the next 6-8 weeks. That process could be a positive if strength returns, or . . . if economies don’t show some improvements, a set up for another leg down that would be a flushing out and capitulation phase. That basing area could be between 12290 at the top and 10560 at the bottom (NASDAQ Composite Index).
The Short Term Sector Strength table shows what a difference a week makes. Energy at the bottom and select Technology sectors moving toward the top. Note the strength in Chinese stocks.
The bottom line is really no change, we continue to be in a Bear market but we must also be open to that will eventually change. The question is when, and it will likely take time over months. I’m watching for a base and “stopping action” to form. Have a good week. ………… Tom ……….
Price chart by MetaStock; pie chart & table by http://www.HighGrowthStock.com. Used with permission.
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