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Uncertain Market Driven by News January 5, 2019

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Jan. 4, 2019 – First off I’d like to wish everyone a very Happy New Year.  By all indications (economic, political & governmental) 2019 will be a “doozie” of a year . . . much to expect in the months ahead.  In the past week we’ve seen a near 10% change in prices of the major indexes in just 2 days from top to bottom.  Amazing since is some years that would have been the price range for the entire year.

We’ve seen a significant rally from the Christmas Eve lows, but there has been so much damage done since late September that a weeks rally on modest volume won’t wipe away the lingering bearish concerns.  Apple dropped the bomb that investors should NOT expect healthy gains in profits and the tariff war continues though news leaks try to paint a more optimistic future.  The US government shut down and Fed concerns  make investors nervous and uncomfortable; a bad recipe for higher prices.  With all of those in mind my feeling is that we’ll trade in a broad range roughly between 6930 at the top and 6130 at the bottom (purple freehand drawing below).
The chart above shows investor Sentiment improving while most other indicators remain Bearish or Neutral.  Next week the full complement is back on Wall Street, so we’ll see if they drive prices much higher or not.  Right now it’s anyone’s guess.  For the time being I’ve removed my hedge (i.e. sold off the bear funds) and only hold modest positions in Bonds and Precious Metals.  I’m considering buying Latin America (index) and Biotech, but that’s about it . . . heavy in Cash.

Here’s a look at the major US sectors as far as short term strength is concerned.

Even “the strong ones” are not that great right now.  Have a good week and buckle up for volatility in the coming months.  Weak markets don’t like surprises.………  Tom  ………..

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

Volitile Bottom (?) looking for a Bounce December 29, 2018

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Dec. 28, 2018 – The last post of the year and wow, what a week.  Massive moves inter and intraday.  I understand that we had a nice rally after Christmas but so much damage has been done on the way down that the light buying volume has not made up for it.  I’m still looking for a “head fake” rally to around the 6930 level (green dashed line) then likely a big move lower, but let’s take this one step at a time.  There’s always a possibility that we just chop around between these Resistance and Support levels and build a base.
All of the indicators shown above remain Bearish except for Price Strength which is neutral.  I don’t think we’ve seen the true market here due to the end of the year portfolio rebalancing from bonds to stocks by big pension funds and institutions.  Also there has been a fair amount of short covering (buying back stocks that traders shorted a month ago).

Price Strength of stocks in the S&P 1500 Index has improved but is still predominately “red”.

The Accumulation / Distribution pie chart hasn’t changed much from last week; it moves slower and the volume last week was very light.  The table below shows the very short term sector strength.
For the time being I’m happy to be mostly in Cash &/or hedged out.  Let’s see what the new year brings and maybe the markets will show their hand.

Happy New Year to All !            ………..  Tom  ………

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

Expecting a Bounce Higher, then . . . December 23, 2018

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Dec. 21, 2018 – First off let me wish everyone a Merry Christmas (for those that celebrate it of course).  Next week will be a slow trading session so I’m hesitate to read much into price and volume indicators.  Let’s start by looking at a bigger picture for perspective, namely the NASDAQ Composite Index on a weekly bar time frame, back 3+ years.
We’re currently back to the Fall of 2017 price levels . . . . yes, the “Trump Bump” has been wiped out.  Support at the 6375 level has been hit and the next level down is about 5425.  But I don’t expect this market to get there in a straight (falling) line.  Let’s switch back to a daily chart.

This market is extremely “over sold” in that it went down too much, too fast.  A possible scenario is a short continuation sell off on Monday (12-24-18) then a bounce back up to about the 7000 level before heading back toward a new low at 6375’ish level.  During any rally higher we’ll watch the price action and us volume to confirm it.  The tricky part is the volume analysis during a holiday period.  The bottom line is: are traders and institutions using a rally to lighten up even more by selling into a rally.  The news is not great world wide and any match toward the powder keg could mess things up without warning.  This is NOT a time to buy and forget; wait for a confirmation of a new trend because this one is lower.

A quick look at what a bear market looks like (% of stocks in the S&P 1500 Index):

Price Strength –

Accumulation / Distribution –

The lack of green in these pie charts is not an error, there is very little to see.

There really is no need to talk about sector strength because there is very little.  Think “Defensive” (Utilities, short term Bonds) and you’ve got it.  If you must expand that add Real Estate and Aerospace (military wise) to the short list.  I’m heavy in Cash and net short the indexes.  Looking for a “sign” if & when we get a rally.  Have a good holiday.          ………….  Tom  …………

Within The Range December 15, 2018

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Dec. 14, 2018 –  I’ve removed a few lines on the NASDAQ Composite Index chart this week, kind of getting back to basics, to make a point.  First this market structure is pretty much in a defined trading range. At the top is the 7520 green dashed line and at the lower edge is 6920 with the red dashed line.  Now these levels are not chiseled in stone but rather rough benchmarks to alert us when there is a change of character in either direction.

Also I note that the last 3 days of this past week have had volume falling off; Low Demand to Buy and Low Supply to Sell = lower prices on low volume.  For the time being that shows there is no rush for the exits, but also no rush to get onboard either.  The typical scenario for a trading range.  It just feels like everyone is waiting for either some news (trade talks or BREXIT) or for the end of the year.  The price levels that we’re at go back to February of this year . . . . we’ve lost the “Trump Bump” as reality sets in.  Reality is that stocks were expensive and the sugar high of corporate tax cuts have worn off.  It’s back to “what have you done lately!”.

The pie chart below is a new idea.  I took the stocks in the broad S&P 1500 Index that were within 5% of there 52 week high price.  Then put them in a pie chart by their industry groups / sectors.  You can follow the list down by going counter clockwise around the chart.

No surprise that Utilities, Real Estate and Consumer Products are holding up better than other sectors.  Another way to look at this is via my regular table which is ranking sector by there short term strength.  This style ranking will be valuable when an up trend develops, but for now it sure looks like being defensive or in Cash is a good idea.

The best news is that Christmas is coming, no matter what !  🙂  Have a good week.     ……….. Tom  ………..

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

 

Back to the Trading Range December 8, 2018

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Dec. 7, 2018 – Wow what a week.  Even though the markets in the US were only open for 4 days (because of the Bush funeral) there was volatility galore.  This market appears to be settling in a trading range between 7520 and 7000 on the NASDAQ Composite Index (see chart below).

Both the long and short term channels are pointing lower but they are beginning to flatten out.   I know many people feel strongly that the markets will either go up or down a fair amount before the end of the year, but what they may be missing is that we just remain within this basic base building range until some economic news sends the markets in some other direction.  I note that Market Sentiment (top window), Money & Volume Flows are Bearish.  Price Strength is Neutral.  Actually, this rather supports a trading range theory.

Looking at the stocks in the very broad S&P 1500 Index –

Accumulation / Distribution:Far more stocks in Distribution, but about equal to those in Accumulation & Neutral.  OK, weak but not terrible.

Price Strength:Here is where we note a strong bias toward weakness in price.  No surprise since this market has fallen a bit since it’s highs.  Bottom line: yes prices have fallen, but we’re not seeing a major rush to sell and get out of the market (i.e. not a major Distribution . .  at least not yet).

Stocks that are holding there own in the sectors of Utilities, Real Estate, Consumer Staples and (even) Gold Miners.  These are all defensive sectors to hide out in IF you must be invested.  Right now I’m heavy in Cash (still) and have a small “hedge on” via a Bear fund as “insurance”.  No need to be heroic here since there is no clear path in either direction.

Have a good week.        …………  Tom  ………..

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

Market at a “Hopeful” Point December 2, 2018

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Nov. 30, 2018 – Overall a positive market reaction since a cool Thanksgiving week.  Currently I’d call it “Hopeful”, but quite an all out Up Trend (even in the short term).  Looking at the chart below I’d really like to see the NASDAQ Composite Index close above the 7332 level and we’re very close to that now.

Sentiment is positive as is Money Flow and Volume Flow has just turned up.  That’s all good, but the structure still is in a short term down trend with lower lows and lower highs (purple channel).  There has been so much damage done since late September that some base building is in order before we can be confident of any resumption of a Bull market.

Late word is that the China tariff increases have been put on hold for 90 days while a longer term agreement is being worked out.  The market will initially like this but again the “devil is in the details” and a longer term agreement will need a lot of work and compromise.  Are both sides willing to compromise?  We’ll see.

Here’s a list of short term sector strength –

We’re starting to see some upward movement is the previous market leaders like Consumer Goods, Technology and Healthcare.  I’m beginning to take small cautious positions in stocks and the “Q’s” index (NASDAQ 100 Index).  Continued strength will quicken the exposure while the opposite will be true.  This market is “hopeful” but not healed just yet.  What type of response we get from the China news and particularly how long it lasts will be an indication of overall strength.

Have a good week.    ………  Tom  ……….

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

Trend Lower, but at Support November 24, 2018

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11/23/2018 – This will be short to match the abbreviated trading on the U.S. exchanges and the very low volume due to the Thanksgiving holiday.  Well the trend continues to be down but we’re right at an important support level of 6880 (red line) on the NASDAQ Composite Index (see below).  To move higher I’ll have to see a close above 7225 (green line) and some measured buying volume returning.

Trade tariff concerns, BREXIT and general international economic concerns are just making buying common stocks a difficult decision.  Oil has dropped dramatically over the past month and there just is a negative “funk” in the world markets; no one is in a hurry to do anything it seems.  I sure would like to see a Selling Climax to wash out the weak hands.  There really aren’t any “strong” sectors presently, so I’ll forgo that for the time being.

I thought it would be nice to take a look at how the big trend following hedge funds are doing as we close out the year.  This data is from the website http://www.automated-trading-system.com/trend-following-wizards-october-2018/ , it’s free and you too can subscribe to it; it comes out monthly.

You can see that there are some very big funds with assets under management (AUM) in the billions of $.  But . . . look at how they are doing !  So don’t feel to bad about your own performance as these pros typically get 2% fixed of assets + 10% of your gains.  It doesn’t look like a good year for any of them.

That’s it for now.  Next week should set the environment for the rest of 2018 as many traders return.  I’m heavy in Cash right now and that looks OK to me.

Have a good week.        …………….  Tom  ……………

chart courtesy of MetaStock; used with permission

“Riding the Range”: in Congestion November 16, 2018

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Nov. 16, 2018 – I’ve talked before about the “need” to build a base if this market is to go higher; Wyckoff would call it “building a cause”.  That’s what appears to be the case right now.  A quick look below at the chart shows prices in a well defined “short term price channel” (purple lines) and that channel is nearly horizontal.  One thing to note is that causes don’t necessarily need to be perfectly straight horizontal to effectively build a base for re-accumulation and hence a move higher.

We’ve seen prices having a hard time breaking through the 7443 level (green line) and stalling out around the 7520 level.  Those define the top or resistance areas.  6880 defines the lower support level (red line) for the time being.

Earnings guidance for the coming quarters was mixed, some OK while others (notable Apple) are less optimistic.  This market was priced for continued “gang buster” profits and when those appeared to slow down so did this market.  The question is this market now “fairly priced” for slower growth?  Good question.  What will drive direction now is more news related since 3rd quarter earnings are now out of the way.  All eyes will be on the Fed and G20 meetings in December.  Interest rates and trade tariffs are making investors more nervous than at anytime in the last 3-4 years; this is new business and uncharted territory.

While we observe how the market interprets the news we’ll have to be on guard because the next significant move will come fast.  For now the table below shows sectors that are ranked by strength.  I note that the past leaders are down toward the bottom of the list and more defensive and consumer related at closer to the top.

I am “lightly long” here and cautious since a clear trend is not well defined at the moment.  Next week in the U.S. will be light due to the Thanksgiving holiday at the end of the week and trading volume will fall off significantly.  More than likely we’ll have to wait until December for any significant market moving news.

Wishing all in the U.S. a Happy Thanksgiving and everyone a good week.  Take Care.   ……….  Tom  ………..

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

2 Steps Forward and One Back November 10, 2018

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Nov. 9, 2018 – This market took “two steps forward and one back” this week.  I’ve got “that feeling” that we’re not out of the woods just yet.  While many are assuming a “V” shaped bottom and the only direction now is straight up I’m not nearly that confident.  The chart below shows Market Sentiment back to Bearish (top) and the Volume Flow is very anemic at best.  Sure Money Flow is Bullish and the green “strong price” bars are back coloring in the chart.

So what could be a problem?  Well for one thing, this sudden correction did a lot of damage as witnessed by the heavy volume on those nasty red bars.  Logic would tell us that after such heavy selling the markets need to consolidate / build a base before any resumption of an up trend.  Though the Short Term Trend Channel has been broken that’s only valid in the short term anyway, and we got that bounce higher.  Prices met resistance near the 7520 level (green dashed line) and that was a reflection of a “significant bar”; that is where buyers last came into this market.  We need to see closes above this level to validate buyers coming back.  Otherwise, we could be headed back to the 7443 level (dashed red line) and set up for that trading range / consolidation.

Consumer Goods, Healthcare and Wireless sectors continue to show strength; Financials and Banks are beginning to looks better too.  Tech had a short burst higher, but now looks tired.  The table below shows what the near term sector strength is:

Overall the stocks in the very broad S&P 1500 Index are improving with a improved split between Strong & Weak and those in Accumulation / Distribution.

Price Strength –   

Accumulation / Distribution –

I’m slowly and selectively re-entering this market with the aid of a cautious eye.  The price structure just does not provide me with enough confidence to jump in with both feet.  My main market model is slightly positive, but only slightly.  Maybe the coming week will shed some light on the next significant move . . . in either direction.

Note that this blog gets updated over the weekend with the data and perspective of Fridays close, so looking at it late in the week is just a little “stale”.  Don’t hesitate to make any comments, always happy to hear back.  Have a good week.        ………….. Tom ……….

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

Better but, “Wait For It !” November 2, 2018

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Nov. 1, 2108 – The British have a phrase “Wait for It!”, which is “English” for ‘Be Patient’.  And that’s about how I read this market.  Yes, improving but not enough to start phasing back in just yet.  The chart below shows prices breaking above the “short term channel” (purple line) and Money Flow improving.

Market Sentiment remains Bearish as does Volume Flow (above).  Another reason that I’ve observed on Thursday & Friday (both daily up bars) on an hourly chart, is that the intraday volume is rather low.  The only thing I can surmise is that prices are going up because of a lack of sellers and opposed to buyers rushing in.  The NASDAQ Composite Index hit my 7443 resistance level (dashed red line) on Friday.  Just above it is the 7520 level which is via a “Wyckoff Significant Bar” (weekly); that’s the level where buyers previous came into this market.

IF this market is to continue higher I’d like to see a close above 7443, but better yet, a close above 7520.  And to round out confirmation I’d like to see volume increasing on up bars; i.e. buyers coming into the market.  Could it be that the last two days were just a short covering rally?  Yes, it could be.  With all of the damage that was done in October it makes sense that we need some time to consolidate and build some type of a base before a spring back higher.  So, for the time being, I’m skeptical about this two rally.  Hence: “Wait for It!”.

Even with all of that, I did close out my market shorts on Thursday and went to a very heavy Cash position.  My model rules “required” the short close out, so it’s not good to second guess it.  Besides, Cash now give me the ability to go in any direction.  Nuff said.

The table below shows that sectors are doing in relation to the others.  In a nut shell . . . consumer products are the safe havens for the time being.

That’s it for now.  Have a good week and those of you in the US . . . Vote !     …………  Tom  ………….

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

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