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All Good for Now November 6, 2021

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Nov. 5, 2021 –  The market price action has been very positive and strong as earnings continue to be good to very good and the economic numbers show a continued rebound.  What’s there not to like?  Well really, not much.  Last weeks “Steady as She Goes Captain” title pretty much sums it up.  But the rate of upward movement is not typical, at least not for long.  I still think that we’ll see some volatility during the rest of the year.  Nothing terrible but some small pull backs.  Seeing renewed strength during these pull backs will serve as a positive confirmation of the overall trend continuation . . . . up.

click on chart to enlarge

A quick look at the chart above shows what I mean.  That 45 degree climb over the past 3 weeks has been great, but let’s not get too complacent about “that’s what it’s supposed to do”.  Our attention may rightful shift to focusing on whether sector rotation comes into play.  The general market indexes may be climbing to lofty heights but is the participation equal?  Also, is money shifting around from one sector to another as the leaders become “overvalued”?

It’s good to see the Technology sectors back in the lead, but the question is how long can that continue?  I think it’s wise to keep an eye open for slowing and stagnation in these groups over the next few months and pay attention to others that are rising.  My message is: don’t fall in love with any sector or stock.  It may be great now, but “tomorrow is promised to no one” and things can, and will, change.

For the time being let’s enjoy the ride, just don’t expect it to be always a smooth ride.  I am very nearly 100% invested.   Have a good week & Take Care.       ……..  Tom  ……..

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

Steady As She Goes Captain October 30, 2021

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Oct. 29, 2021 – What a difference a week makes (plus some pretty good earnings reports).  We’ve broken higher and the Advance / Decline line is very positive.  Why is that important?  Well simply, there are more stocks advancing (in price) than declining.  A month ago that was not the case with leadership narrowing to fewer and fewer stocks driving the indexes higher.

click on chart to enlarge

The chart above confirms the price enthusiasm via the increase in volume.  That rate of change can’t continue forever so I would not be surprised to see a drawdown back to around the 15198 level (very modest) or worse case the 15085 mark.  There . . .  we should expect buying to come in and a resumption of the push higher.  One caveat I note was some companies provided muted or poor earnings guidance going forward.  But that’s months away . .  just keep that in mind after early January when the next batch of reports get rolled out.  Things may be different.

Looking at the Short Term Sector Strength table below we note the grouping of Technology based sectors leading the way.

Expecting a Volatile Fall October 23, 2021

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Oct. 22, 2021 –  I’m expecting a slight pause / pullback before the broad market pushes higher.  Friday may (just may) have been the start.  Note the volume blip on Friday.  The earnings of NetFlix, Tesla, Snap pushed prices down.  Many of the internet companies that rely on ad revenue are seeing a challenge since advertisers don’t see a pressing need to generate demand when supply is presently constrained.  Inflation concerns continue as the supply / demand economic factor once again comes into play.  Not surprising.

click on chart to enlarge

The 15085 level was our first resistance, then 15380 above that.  Steady price action around 15085 would be bullish and a launching pad for a break higher.  14182 is the support level.

Interesting that more than 80% of the stocks in the S&P 500 Index are above their 10 day moving average.  Both the Dow and S&P 500 reached all-time highs with the NASDAQ Composite and “Q’s” a bit behind.  Margin debt is below its previous high, and that’s good, as buyers appear to be stepping back into the markets.  This remains a volatile environment with the inflation concerns (the Producer Price Index jumped up), earnings continue to roll in and of course the economic / political news continues.

The Short Term Sector Strength table is below –

I note the sudden jump of China and the continued lethargic action of Technology sectors.  Financials are doing well.  We just need a little more leadership out of Tech.

Overall I’m fairly positive about the prospects in the long run, but expect some setbacks over the next 2-3 months.  Take Care and have a good week.   ……….  Tom  ………..

Go For It . . or Wait For It October 17, 2021

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Oct. 15, 2021 -I saw the play “Hamilton” yesterday and it was a “Wow” even thought I was prepared via Lin Manual Maranda’s book. Impressive through and through. OK. let’s move on.

Last week I talked about a “Change of Character” in this market, making the case that we’ve been overvalued and the 50 day moving average was NOT a support / buying the dips level. All well and good but the last 2 days have been a little impressive. How so? (reference the chart)

click on chart to enlarge

First off, higher “highs” and higher “lows”, i.e. swing 3 is higher than swing 1 and swing 4 is higher than swing 2.  Next, volume is beginning to return / increasing.  I call out two possible scenarios going forward:  in yellow, we stay in a trading range, in green, a breakout higher and a retest of the breakout before moving higher still.  A “Change of Character” would support a trading range between 15085 and 14182, this could likely be a period of re-accumulation before an eventual breakout higher.

In either case, this next week should give us a clue.  A diverse group of companies report earnings: JNJ, NetFlix, airlines, Tesla, financials and P&G; the broad waterfront is covered.  Good news drives us toward the green line, disappointing news drives us toward the yellow.

The Short Term Sector Strength table is below –

In particular, Financials and Technology sectors moving higher is a big plus. Keep an ear open for earnings reports and how the stock and markets react. That will provide some insight on whether to Go For It or Wait For It. Have a good week. … Tom …

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

Two Steps Backwards & One Forward October 9, 2021

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Oct. 8, 2021- The title sounds “bass ackwards” but that’s the point.  This time we’ve taken two steps backwards and we’re not anywhere near two steps forward.  Taking a look at the chart below, Sentiment, Dollar and Volume Flows and Price Strength are Bearish.  The Trend Channel is sloping down; not positive signs.  Take a look at the volume over the last 2-3 days during a “mild” rebound . . . very low, no commitment by traders.  Bottom line: it’s still a weak market.

click to enlarge

Richard Wyckoff would call this a “change of character”; that is the market is not responding in the way that it used to recently.  There are many signs of this, so if you’re interested just “Google” it.  But here’s one of my favorites.  The chart below shows how the S&P 500 responded to selling pressure by touching the 50 day moving average, then rebounding and continuing the stair steps higher.

click to enlarge

I’m not saying that we’re into a bear market or even a major correction, at least not yet, but traders are not rushing back into this market . . .  yet.  There are just too many issues challenging and too many unknowns for them to be comfortable.  Besides, third quarter earnings are just around the corner.  How companies report will be a big factor in how the market proceeds.  It is overvalued right now.  Two areas to look for are how Technology and Consumers Discretionary companies report and respond.  They were the previous market leaders.  Next comes Financials and Healthcare.  We need to regain leadership to move higher.

I’ve been raising some Cash, and if things get worse will raise some more.  But this could just be a pause and a re-accumulation phase.  Watch both bar strength and volume for clues.  Have a good week.  …  Tom  …

charts by MetaStock, table by http://www.HighGrowthStockInvestor. Used with permission.

Lions and Tigers and Bears, Oh My! October 2, 2021

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Oct. 1, 2021 – Apologies to The Wizard of Oz but this market got “spooked” this week.  Yes the overall market breath (the number of stocks leading the indexes higher) was getting narrower and narrower.  The old adage comes back: “When the market is weak, it reacts poorly to bad (or perceived bad) news, and if strong, it ignores it.”  This market is weak.

There is plenty to worry about: FED tapering, Inflation, Supply Chain issues, Debt Ceiling and the Pandemic.  While all of this could become serious to economic growth the current economy is doing pretty darn good.  But, the stock market lives in the future and is looking out 6 to 12 months ahead.

click on chart to enlarge

Thursday the NASDAQ Composite Index dropped below the 14530 support level but recovered on Friday.  That puts us back to mid-August and mid-July levels.  14178 is the next support level, and I need to see strength above 15380 (resistance) before I’m comfortable with an “all clear”.  Putting it into perspective, the NASDAQ has dropped 5.19% and the S&P 500 3.93% since the (about) 9/3/21 peak.  A 4% to 5% correction is pretty minor; at least so far.  I’m sounding optimistic because late this week ETF’s saw a net inflow of dollars, and the biggest increases went to small cap and the leveraged “Q’s” (tech index).  Sounds like some folks are also optimistic and “buying the dips”.  But not so fast investors.  The Money and Volume Flow indexes are still pretty negative.  Let’s wait for confirmation; it shouldn’t take very long.  Look for volume increases on up bars.

The Short Term Sector table is shown below –

That’s about it for now, be careful and observant.  Plus, scale into positions as conditions warrant.  Have a good week.   ………..  Tom  ………….

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

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

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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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