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Building a Base . . . Getting There January 14, 2023

Posted by Tom in Thoughts.

January 13, 2023 –  Time to revisit “The Big Picture”.  Right now investors are caught between being optimistic and pessimistic.   Let’s review.

Optimistic / Bullish –

  • The ratio of Advancing stocks compared to Declining stocks is positive; more are advancing.
  • The US Dollar continues to weaken, so US goods and service are more competitive.
  • US Bonds (for now) are holding their own, up from the lows in early November.

Pessimistic / Bearish –

  • Market reactions continue to be ruled by “FED Speak”.  News drives a weak market.
  • 4th quarter bank earnings were good, but forward guidance was poor.
  • The politics of the US debt are on the horizon; possible default?

Let’s look at the weekly chart of the broad NASDAQ Composite for some clues.

Click On Chart to Enlarge

Three Bullish Things to Watch-

What I’m showing is a downward sloping trending line (blue) draw from the market high and touching recent swing peaks.  Two consecutive weekly closes above that line would be Bullish.  That’s one.  Then I draw a 38 week simple moving average (purple).  Again, having two consecutive weeks closing above it is Bullish.  That’s two.  Lastly, we need a weekly close about a resistance level (green arrow).  That Level currently is 11492 and would indicate a breakout; if it’s on high volume that would confirm.  That’s three.

Right now all I can say is that we’re still in a wide trading range and hopefully building a base to launch a move higher.  But . . . that could all change, see the Pessimistic items above.  For the time being I’m seeing strength in the rest of the world.  Specifically select European and Asian countries.  I’m “dipping my toe in” with small positions there.

The Short Term Sector Strength table is shown below –

I don’t expect this market to turn on a dime, but once a breakout does come (not yet) we’ll know that by wide up bars on heavy volume day after day, then minor pull backs on light volume.  That’s it for now.  Have a good week.   ………..  Tom  ………….

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

Note: This blog is updated on weekends, hopefully by Sunday night at the latest.


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