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“Not a Whole Lot-a” August 7, 2021

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Aug. 6, 2021 – When I’d ask my daughter “What’s new?” she would (sometimes) respond: “Not a Whole Lot-a”, and it looks like the Summer slow down is in force. Without new news or astonishing corporate earnings surprises it appears that both positive and negative force are neutralizing price movement in the markets. COVID Delta on the negative side and good earnings and a rebounding economy on the positive side. Couple that with many traders being on vacation and we see a pretty much range bound market.

I’ve changed the typical chart by drawing in a “box” that encapsulates the range. It’s somewhat inspired by Nickolas Daris and referred to as a “Darvis Box”. Yes, there is a slight slope upwards, but the point is things have slowed down considerably. And, I’m thinking, because of counteracting forces. Investors don’t want to commit any more, at least for the time being.

click on chart to enlarge

Money Flow has turned down and Volume Flow is lethargic at best. We do see prices moving higher in the short term, hence Price Strength is positive. I remain “moderately invested” for the time being. The strongest sectors are positive, but not by much, thus I don’t see the “risk / reward” as being compelling to be there 100% for the time being. (I guess I’m like many others then too.) 🙂

The Short Term Sector Strength table is shown below.

We see a fair amount of Technology sectors in the lead . . . again. and that’s positive. It would be nice to see some Financials and Consumer sectors moving higher though. All in all things are “OK” some we keep tabs on things and try to enjoy the rest of the Summer. It seems like Wall Street is on vacation too.

Have a good week and please stay safe. ……….. Tom ………..

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

A “Dull” Summer Market July 31, 2021

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July 30, 2021 – Not a whole lot of movement this week. Yes, there was some anxious moments on Friday as Amazon dropped, but it’s not unusual for these growth type stocks to fall back to around their 50 day moving average. That’s (recently) been a reasonable place to buy into them. Well see early next week if that holds true. It would be an indication of the overall strength of this market.

click to enlarge chart

Looking at the indicators above the price chart they are pretty neutral, and the trend channel is nearly horizontal as well. I’ve made some minor changes to the Support and Resistance level but the trend is fairly steady and straight across. Note that the trading volume (Below the price chart) is very low and drops off late in the week; a sign of summer vacations perhaps. 🙂 The short term sector table is shown below.

The Technology sectors are showing good strength and that’s a positive sign. The new comer is Basic Materials, particularly Steel & Copper. Signs of an improving economy.

The concerns about the Covid Delta virus remain an uncertainty and (again) the markets are richly valued so the “risk off” mentality is in control now. But there is plenty of liquidity thanks to the FED and low interest rates and for the time being there are not to many other places to place assets. I remain extra cautious, but also 75% invested for the time being.

Take Care & have a good week. ……… Tom ……….

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

Back Again July 24, 2021

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July 23, 2021 – What a week. Last week Thursday and Friday were major down days (especially Friday). Monday opened a big price gap lower then recovered over the rest of this week. So, we’re basically back to where we were a week + ago.

click on chart to enlarge

I note that prices gapped right through the 14371 (gray line) level on Monday then bottomed out very near the 14196 level (red) before recovering to close just above the 14804 level. All pretty much holding the previously drawn support and resistance levels.

The Money & Volume Flow indicators are now positive, but the dip on Friday of the Market Sentiment indicator could be a concern IF it continues to show weakness. Also note the very low trading volume (lower chart pane), volume tapered off as the week progressed. This does not show a commitment by traders or investors to this market rally. More of a skeptical “wait and see” approach I’m thinking.

I did close out the Bullish Market Index portion of my portfolios as a precaution on Monday Morning, didn’t go short, but I’m not quite ready to re-enter that portion just yet. Most of my positions in sectors and stocks have held, so not much of a change there. Let’s look at sector strength.

The positive news is that our “old friends” the Technology sectors (less semiconductors) are in the lead and that’s encouraging. But recall that the overall market is narrowing leadership to those specific sectors (not so positive) and it sure would be nice to see Financials and / or Industrials joining in. We’re early in the second quarter earnings reporting cycle and so far things are looking good. But (again) ‘good’ to ‘very good’ is expected. This market does NOT want to be disappointed by earnings or news, and Covid is still in the mix. The next 2-3 week will be important and possibly set the stage for the Fall.

That’s it for now. Continue to be cautious but realistic about this market environment. Have a good week. … Tom …

A Skittish Market Remains Vulnerable July 18, 2021

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July 16, 2021 – I know that (by now) I sound like a “broken record” repeating the same thing. The markets have internal weakness. We’re seeing glimpses of that with headline news stories. Whether it be concerns about inflation, Covid resurgence or political issues they all have some effect on the market. But for now, minor and short term; folks are nervous. The latest are fears of a second outbreak of Covid. To be super sure, that could be a very real and significant issue and have a major effect on the overall economy. It brings to mind a saying that I’m particularly fond of: “It’s not what happens, it’s what you do about it.” I don’t wish to be a victim of a complacent market.

So, is this market trying to tell us something? We’ve been on a very long run; to be sure, a recovery run. But are we getting ahead of ourselves and expecting too much for the current and near term conditions? The market is rich and priced for an economic come back. Here’s a chart from “Advisor Perspectives” and an old aquaintcy, Doug Short.

Now this chart goes back a waaay long time (1870) but it’s a reminder that “trees don’t grow all of the way to the sky . . . just toward it”. The red line is the normalize regression line (i.e. “average”) and the lower histogram shows the deviation from that line. You may have heard the term “regression to the mean”, well the “mean” is that red line. It’s like a rubber band that snaps back to it’s relaxed state. Anyway . . . . in historical terms, we’re extended.

As J.P. Morgan once said: “The markets can stay irrational longer than I can stay liquid.” (or something to that effect). Meaning that this can go on farther than anyone expects. But as mentioned previously, the leadership (the # of stocks) that are propelling the indexes higher are getting smaller and smaller. It looks like an “All Amazon & Apple, all of the time” type of market. (not that these are bad companies)

The chart below does start to show some areas of weakness:

click to enlarge chart

From top to bottom- Sentiment: beginning to weaken, Money Flow: Bearish, Volume Flow: close to a crossover, Price Strength: lightly Bearish, Trend Channel: Price breaking below, Trading Volume: light. I’m keeping an eye on the first 14371 level (NASDAQ Composite Index) for an indication to “lighten up”. IF we continue to correct, I’ll lighten up some more. This is the summer and things tend to slow down (volume wise), so a knee jerk reaction to news could send things down in short order. For now, I’m following the trend, but cautious about where we are in the typical cycle. Just a reminder, we are beginning the reporting cycle of second quarter earnings and much is expected.

Have a good week. ………. Tom ……… Price chart by MetaStock, used with permission.

A Weak (overall) Market Continues July 10, 2021

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July 9, 2021 – Few “old adages” hold true but I think this one is toward the top of the “believe it” list: ‘Weak Markets React Poorly to Bad News, While Strong Market Just Sluff It Off’. We saw evidence of that on Thursday when the market opened much lower, then recovered; concerns about Covid regeneration. By Friday we where generally back to the old highs. Just about anything could and will trigger the nervous holders in this market. We know why, the market is overvalued, margin debt is high and speculation (ROBO Call buyers) is near an all time high. Most ‘Buyers’ have already bought. Just a little selling triggers more selling.

click on chart to enlarge

But, other than the sensitive red price bars above, things remain positive. Note the low volume so there’s not much enthusisium in either direction; likely the reason why the selling was brief. But damage was done in the overall market.

The pie chart below shows the price weakness of stocks in the broad S&P 1500 Index.

Neutral means stocks are hovering near their 20 day simple moving average. Strong and Weak refer to where their prices are in relation to their Bollinger Bands (20 SMA +/- standard deviation volitivity). So no red flags, but no green ones either. Perhaps we’re in the Summer Doldrums where not much happens either way . . . unless a news item generates a move. Making money in this environment won’t be easy.

Let’s look at where the broad market indexes have been over the past year:

click to enlarge

Red = the S&P 500 (large cap); Blue = the Russell 2000 (small cap); Green = the broad NASDAQ Composite Index; and purple = the NASDAQ 100 index (tech heavy). Small cap’s where the place to be over the past year. But . . . .

click to enlarge

Small cap’s were NOT the place to be over the past 90 days. A good example of rotation in the market. Small cap’s are generally considered to be most speculative and it looks like the “smart money” is preferring the large cap and more well known stocks. This supports the idea that the breath of the market is narrowing, where fewer (big cap) stocks are driving the Index averages higher. Characteristic of a mature market.

Lastly the Short Term Sector Strength table:

Technology sectors in general still are near the top. Note the returns over the past 5, 10, 15 and 21 days are pretty positive. I do note again that the stogy Treasury Bonds are fairly high on the list with interest rates falling. Interesting that now inflation is not a concern . . . . is this a flight to a safe haven? Not sure why interest rates are falling in a strong economic recovery. Something to monitor.

So, if you’d like to see other topics covered, let me know via a response to this post. That’s it for now, have a good week. …………. Tom ………….

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

Mixed Signals Continue July 3, 2021

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July 2, 2021 – First off, Happy 4th of July to all of those in the USA. (Be Safe Y’all !)

I continue to see mixed signals as to the overall market strength. From a macro perspective this market is richly overvalued. Case in point, the P/E (price to earnings ratio) of the stocks in the S&P 500 is 38; typically anything above 23 to 25 is considered “overvalued”. “Overvalued” is from a historical view since stocks have been below 10 during a recession and more “typically” hang out in the upper teens to low twenties. 38 is rich; very.

Yes, we are at record highs but leadership continues to be held in a smaller group of stocks. 48% of stocks in the S&P 500 are below their 50 day moving average, and only 30% of stocks outperformed the S&P 500 Index. Narrowing participation is a precursor to a market correction. Next, small retail option traders (called ROBO traders) continue to buy naked calls to open, while hedge funds are . . well hedging.

In pending doom? No, because the price trend remains up / higher, but caution is advised. I’m a trend follower so I’ll stay the course, but no one gives me “brownie points” for being patient when (not IF) a corrections does come.

click on chart to enlarge

The chart above shows the trend. Everything looks good right now. What I think we’re seeing is primarily a slow down in the overall market and summer time is the perfect time (seasonally) to slow down. Having the market catch up to itself is a good thing, so I’m thinking we’re just in those summer doldrums and may not be headed for anything serious. But a major news flash could change that. The market is vonerable to bad news in here.

The good news is that we’re back to a more reasonable state where stocks out perform Treasury Bonds. Note that Technology sectors are back near the top of short term sector strength. A positive sign.

That’s about it for now. Have a good week. …………. Tom …………

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

Not Much More Than “OK” June 26, 2021

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June 25, 2021 – I’ve got limited wi-fi so this will be VERY brief.

click on graphic to enlarge

For the time being, things have stabilized, but significant strength has not returned. We’re in a trading range / holding pattern. I’ve changed the Support & Resistance levels and the major indicators are still bullish / positive but not like before. I note the very high volume on Friday, let’s see if there is follow though in either direction next week.

I’ve place the number of stock in reference to their 50 day moving average above. It does show an improvement from last week, so that’s encouraging but not “exciting” just yet.

The Short Term Sector Strength table is below.

At least Technology sectors have regained their strength which is encouraging as well. For now I’ about 80% invested and keeping a close eye on potential moves in either direction. It’s just unsettled.

Have a good week. ……… Tom ………..

A Mixed Bag of Indicators June 19, 2021

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June 18, 2021 – An interesting week since there are bullish & bearish indicators on both sides. First, Small Cap stocks were hit far worse than larger company stocks (NASDAQ & S&P Indexes). Small Cap stocks are usually considered to be an indicator of more bullish “speculation”. Another negative is that Treasury Bonds continued to outperform stock indexes (see table below).

The indexes to a significant hit on Friday, but . . . keep in mind that Friday was option expiration, so big moves in either direction (and the volume) need to be taken with a “grain of salt”. I’m told that 53% of speculative call buying is by small traders (i.e. buying < 10 contracts). So Friday may just have been a “flush day” to drive as many options as possible out of the money. Lastly, equity hedging, i.e. option contracts set up to limit exposure, are at a near term low. So the “pros are not looking for a major pullback.

click on chart to enlarge

We’ve bounced off of that previous high at around the 14200 level and Money & Volume Flow look OK. Price Strength is neutral. (Sorry, my Market Sentiment indicator is not cooperating due to a problem with TeamViewer.) I any case a minor blip down on Monday to around 13840 is not out of the question, but I doubt we’ll see much more than that.

The Short Term Sector Strength table is shown below –

But, one last cause of near term concern is the yellow flag of stocks above / below their 50 day moving average. The pie chart below shows that on Friday we dropped well below the 50% mark.

My general rule of thumb is to start looking for what could be a problem when the % of stocks drop below 35% (those > 50 MA). Now the S&P 1500 Index is very broad and has a lot of Small Cap stocks in there. The question is: is this market leadership narrowing down? If so, that narrowing could be a precursor to a more significant correction. IF the general investor population is now fully invested . . . who will buy and drive prices higher?

I’m not getting excited just yet, but next week should be something that confirms or rejects a market correction theory. Have a good week. …………………. Tom ……………………..

A Cautious Breakout Higher June 12, 2021

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June 11, 2021 – OK, on Monday we got the breakout above the 13836 level and continued higher. The next level to keep an eye on is the 14206 level which was the previous high level. Price support now moves to 13548. Everything is good; right? (click on chart to enlarge)

Sentiment (top window) is Bullish, as is Money & Volume Flow. Price Strength is very good as well. What’s there not to like? Well I note at the bottom of the chart how volume is falling off. I was hoping for at least an average level as prices push higher. But one can’t have everything line up perfectly.

The pie chart below is of the number of stocks in the broad S&P 1500 and where they are in relation to their 50 day simple Moving Average. Generally, when a stock is above it’s 50 MA that’s considered a positive / Bullish sign. The good news is that there are about 65% of them above their MA. IF that were to drop to say 40%, it would be a sign of narrowing market leadership and a sign of contraction and a price correction. Also of note is the color coding of just how much the stock is above / below its MA.

The last piece of information is that of the Short Term Sector Strength table. This is where I tend to “prospect” for candidates that are performing better than the general market.

I have highlighted the 20 Year Treasury (#7) and the S&P 500 Index (#14) to point out a caveat. Note that (in the short term) Treasury Bonds have out performed the S&P 500. Humm. A flight to safety or just concerns about inflation, etc. ? I also saw that Treasury bonds have been out performing (a.k.a. Relative Strength) Corporate bonds. That’s unusual. So everything is not lining up perfectly, but it rarely does.

I have been taking increased positions in instruments (stocks & ETF’s) in the strong sectors, but watchful of the overall strength. We’ve come a long way in an unusually short period of time. It would be quite appropriate for things to slow down or become volatile over the Summer. Keeping an open mind about the next move.

I should note the next 2 weeks will be short posts, not that they may be less important, but I will be extra busy over that time. Have a good week & Take Care. …………. Tom …………

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

Oh So Close . . . June 5, 2021

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June 4, 2021 – Last week I mentioned the possibility of “green shoots” and the market showing early signs of returning to a Bullish stance. A number of my market model indicators were showing recovery from a very mild drop and I just needed one more factor to “click”. And . . it almost happened on Friday. That factor is the closing price.

I’m looking for a closing price above the 13836 level to confirm a more Bullish direction. Interesting that all of the other indicators show in the chart above are in a Bullish position and interesting that my “Short Term Channel” trendlines (in purple) virtually overlay my Support and Resistance levels. (BTW, both are drawn automatically via an algorithm and not by hand.) I also note that trading volume has picked back up, another positive sign.

But not to get tooo carried away, we are entering the Summer months where thing typically slow down. Even if these markets push higher it’s likely to be slower and more subdued than the previous 6 months. That said we should remain selective in investment selection since it’s more and more likely that not everything will be moving the same.

The Short Term Sector table is shown below.

I find it interesting that the Oil complex is so strong, but much of that is the recovery of the economy and not necessarily a long term trend. Same goes with Real Estate and Latin America.

Have a good week. ………. Tom ………

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

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