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Hovering Near The Highs June 30, 2019

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June 28, 2019 – First a few housekeeping items:  If you want to enlarge any graph or table in this blog, please click (or double click) on it and it should open up for easier viewing.  Second, just a reminder that I update over the weekend; it could be Saturday or Sunday.  Lastly, let me know if you’d like to see or hear about something different.  I’ll try to oblige.

Not a whole lot of movement this past week.  A bunch of narrow bars seem to indicate indecision.  The big volume spike on Friday is nothing more than end of the quarter rebalancing, since it all happened in the last half hour on Friday and there was little price movement (i.e. it was reporting volume, not buying/selling volume).  Indicators are positive with the first level of support at 7812.  Since this is a holiday week there will likely not be a lot of activity.  Reports are that Trump & China have called a truce on tariffs; kind of neutral news.  The market was hoping for something more positive.

Looking at overall market health via stocks in the S&P 1500 Index below:

Price Strength –Accumulation / Distribution –

Overall, fairly positive with many stocks significantly above their 20 day moving average and good Accumulation without too much buying.

Sector Strength –

Again we see Tech sectors and Energy near the top with Precious Metals still showing strength.  I remind folks that this table is short term strength and not an indicator of long term movements or trends.

That’s it for this week.  I’m doing selective buys but not in a hurry to be completely invested.   ……..  Tom  …….

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

Trend Still Up, but Not Robust June 22, 2019

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June 21, 2019 – The trend of the overall market remains up / higher but the movement higher is slow and argusious.  Narrow bars continue and while that’s not absolutely negative it is more indecisive as far as a continued direction driven by new buyers.

I discount the high volume on Friday due to options expiration and note that the NASDAQ Composite Index is near it’s previous high.  Most of the indicators are positive or neutral, but the Money Flow (red line above) remains lethargic at best; it is a combination of price & volume movement.  There has been so much news to whip saw markets around that the good news is that the news really has not had a big effect on prices.

Something to keep an eye out for next week are earnings reports.  FedEx will report on Tuesday after the market close.  It is generally a bell weather for commerce in the US and it’s forward looking guidance estimate will be interesting as an economic indicator.

The chart below shows the 4 major stock market indexes in the US, on a year to date percentage basis.  The Dow Jones Industrials (white) is price weighted large companies, the S&P 500 (green) is capital weighted largest companies, the NASDQ Composite (red) is a very broad index of over 3400 stocks and the Russell 2000 (yellow) a combination of large, medium and small capital stocks.

Of note is the current prices relative to the previous peak (dotted line).  You’re note that the “big guys”, the Dow and S&P 500 are now above their previous high, the NASDAQ is close to, but still below and the small cap Russell is significantly below.

Interesting that the NASDAQ and Russell outperformed the big cap indexes from January through early May but now are falling behind.  The idea is that investors are now more risk averse since smaller companies are generally high growth, but also more risky.  This type of pulling back on risk assets are usually associated with market tops.  No alarm bell, but something to keep in mind going forward.  Perhaps the small caps will catch up; or not.  Investor’s antenna are up for signs of a slow or weakening economy.

The current short term sector strength table is shown below.

High growth sectors are doing well right now.

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

Price charts by MetaStock & Worden Brothers / TC2000; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

No Demand June 15, 2019

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June 14, 2019 – For those that are new to my blog, I update over the weekend (Saturday or Sunday).  I try not to miss a week, but if I’m on the road, postings will be a little briefer than “normal”.

OK, last week was interesting, especially the last 3 days.  Looking at the chart below I note very narrow bars that are in an unusually tight grouping.  This indicates that buyers equaled sellers; i.e. little net price movement.  That coupled with lower volume would indicate “No Demand”, at least in the short term.

It just looks like everyone is waiting for a sign to either go back to buying or to go back to selling.  Since so much of trading now is affected by computer algorithms it is interesting to see what the volume actually is when there is not a clear cut trend (up or down) or a “reversion to the mean” (over bought or over sold) condition.

Market Sentiment has improved as well as Volume Flow, but Money Flow remains negative and Price Strength neutral.  My more advanced market model is giving similar signals; lightly net positive but far from being fully committed to the Long side.  A close above 7965 would be a positive and a close below 7292 would be negative.  It just seems like there is to much uncertainty out there + it’s summer time to boot.

Looking at a longer term view of the pie charts of the percent of stocks in the “investable” S&P 1500 Index . . . . . .

% of stocks in Accumulation / Distribution :
% of stocks with Strong / Weak prices (past 20 days):

The A/D is about evenly balanced; a normally healthy sign.  The strong/weak is biased toward Strong to Neutral.  No major warning sign yet.  The sector analysis table shows a little different picture (IMHO).

I note the rise in more defensive sectors of Utilities, Real Estate and Healthcare.  Something to monitor as concerns about growth both in the US and worldwide seem to have investors on edge.  Broadcom (internet & cell phone parts supplier) estimated down their earnings due to the China tariff war and semiconductor companies are doing the same.  If Technology earnings fall flat in the second quarter (reporting in July) that would be a significant blow to the entire US market.

I am modestly long, but will take some “off the table” early next week if markets continue to weaken or cannot show a clear sign.   Have a good week.  ……..  Tom  ……..

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

All Clear? Maybe Not June 8, 2019

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June 7, 2019 – My short term market model, that I use for trading (not shown), went to Cash on Friday after being 50% short.  The chart below shows Market Sentiment & Money Flow negative but improving.  Volume Flow and Price Strength did just kicked into positive Bullish mode.

So is this the ‘V’ bottom and the worst is over?  Not quite so fast.  Friday afternoon the Trump Whitehouse announced that the tariff threat was suspended and I doubt too many traders wanted to be in a short position over the weekend anyway.  This market was waaay oversold and due for a rebound; and that’s what we got.  The break on Friday above 7645 was a sign to remove the hedge (short) but not the “all clear” sign.  Maybe next week.  7965 is the level of Resistance to further upward prices.

The sector table (below) shows a shift from Government Bonds & Utilities back toward equities (Consumer Goods, Industrials, Healthcare.  Volume was modest of Thursday & Friday so it maybe premature to say that we’re back to a “risk on” status just yet.  I’ll be watching the Russell Small Cap Index for clues of strength.  Also seeing money flowing back into Technology would be a big positive sign.

So the word is be cautious in here and this is not showing the level of “Demand” that I’d like to see coming off of a “V” type bottom.  Early next week watch for price strength and the volume behind it, otherwise this may just be a shake out.  Have a good week.      ……….. Tom ………

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

Falling Through the Ice June 1, 2019

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May 31, 2019 – Richard Wyckoff had a saying the when a definite change of character happens it was like “Falling Through the Ice” (a frozen winter time analogy).  Wyckoff never gave a strict definition of the price level of the Ice, and one can argue that it actually happened at the 7965 level way above the current price.  That’s really more my preference.  But retrospect is clearly a more accurate analysis.  🙂

In any case the price weakness continued this week.  Again, driven by news, high stock evaluations and (of course) fear of even lower prices.  Will the FED lower rates because the economy is really not that strong?  Will the trade war with China last for many months?  Will the trade war expand?  The bottom-line is maybe and really . . . no one knows.  Will prices bounce around near this level over the summer, building a base for another run higher?  or  Will prices continue to fall?  Since we have an overall fairly valued market, the likelihood is that the biggest influence will be the news.  And who can predict that?

The NASDQ Composite Index end Friday right near the last “significant bar” low of 7447.  That’s a logical place to move higher after finding support there.  But this market is getting more emotional, so I’m not anticipating anything but going with the flow.  I’ve trimmed back stocks that are behaving weaker than the market, adding to cash.  I’ve also added to my “hedge” by purchasing “bear funds / ETF’s” to lessen the impact of failing prices on what is left.  I don’t mind having cash right now . . . .  keeping your powder dry so to speak.

The table below shows current short term sector strength.  Not much looks good as Treasury Bonds are likely over bought and don’t have much more room upward (IMHO).

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

Right at (price) Support Level May 25, 2019

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May 24, 2019 – Once again a up & down week, but of note is that we’re right at the 7645 price support level on the broad NASDAQ Composite Index.  This is a “logical” level to spring upward, but also a level to be concerned about if it closes below that.  That break below doesn’t mean a crash, but just validates market weakness and a likelihood of further decline.

It’s rough to keep up with the quick moves; mostly driven by news & “tweets”.  Looking at a longer term perspective the McClellan (volume) Summation Index shows that over the past months there has been roughly 5.5% more downside volume than upside volume.  Also the chart above shows most indicators are negative or at best, neutral.  It’s looking like the “Sell in May & Go Away” idea has caught on this year.  It could be a long summer of back and forth.

Earnings season is wrapping up and it has been generally “OK”, with a few cautions going forward.  The trade war with China is beginning to weigh on an increasing number of businesses, and that will likely affect the next earnings reports over the summer.  I haven’t shown the SP 1500 Index pie charts for awhile so let’s take a look:

Price Strength – % of Stocks in S&P 1500 Index:

No surprise that most stocks in significantly below their 20 day moving averages (red shades above).

Accumulation / Distribution – % of stocks in S&P 1500 Index –
The 3 sections above are about equal (roughly 1/3 each), so not a whole lot of selling just yet.

As far as sector strength (in the short term), there is strength in defensive issues; Telecom, Wireless, Government Bonds, Utilities, Real Estate.  Weakness in Emerging Markets, especially China.  Semiconductors continue their weakness with Technology not far behind.  I remain modestly invested and modestly “hedged” to protect the portfolio.  Since the economy is fairly strong, a rebound in prices could happen at any time depending on news.  A time for caution and to keep an eye on the exit door, but not to run toward it.  (IMHO)

Have a Good memorial Day (in the U.S.) and a great week.     …………  Tom  ………..

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

Between a Rock and a Hard Place May 18, 2019

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May 17, 2019 – I was temped to title this “Between Iraq and China”, but decided to drop the idea of a pun.  This market continues to be majorly influenced by news.  To be bouncing between a trade war and a fighting war is not a recipe for a stable investing environment.  Nuff said.  But the real “Rock” is the 7645 level (green dashed line; price support) and the “Hard Place” is 7965 (red dashed line; price resistance); note chart below (NASDAQ Composite Index).

The indicators are mixed: Money & Volume Flow are negative, Price Strength positive and Sentiment negative.  I find it interesting that prices did stop near the 7645 area, that’s where the last “buying” occurred, and that was drawn in quite awhile ago.  The same for the 7965 level, where selling came into the market.  These are “weekly significant bars”; not true Wyckoff, but inspired by his work.  This is a fairly narrow range in between these levels so we won’t have to wait very long for something to happen.  I should point out that on an intraday basis, we should be on the lookout for a “shake out” if market makers try to do a “head fake” at either level and then head the other way.

The table below shows where the market is strongest in the short term.  Namely Telecom, Wireless, US Treasurer Bonds, Real Estate Utilities, etc.  The trend I see here is that these are generally speaking, defensive sectors.  Sure, Tech and Internet stocks have recovered, but so far they are not registering.  Note how low the Semiconductor sector ranks.  Major weakness continues in Latin America, China and Emerging Markets.

Currently I have a light hedge on portfolios as a defensive tactic, but that will come off if I see a strong close above 7965 & then go to Cash while I wait for an “all clear” signal.  Time to get ready for a possible break, the question is which way, but it seems most are thinking defensive right now.

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

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

At an Important Level May 11, 2019

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May 19, 2019 –  This will be rather short, but that’s O.K. since we’re at an important level.  That support level being 7965 (close to it).  Note on the chart below that every “heads up” indicator has turned negative in the short term, and we’re resting just a small bit below the 7965 level.

While it sounds like we’re in bad shape from news reports, the price action has really not been that bad.  Volume is up just a little, so people are not rushing for the exits and the lows for many bars (days) were made in the morning with a strong close at the end of the day.  People are on edge with all of this trade talk but so far no panic.

Looking at the stocks in the broad S&P 1500 Index we note that there remains a health, near equal, split between the number in Accumulation, Distribution and Neutral.

But I have seen a shift in the sector strength table (below).  The technology stocks have been hit hard while the rotation has been toward “safer” Treasury Bonds, Real Estate, Healthcare and Pharmaceutical sectors.

Of note is that Banks and Financials are hanging in there for now.  Gas/Oil, China and Emerging Markets join Tech at the bottom.

Right now I’m moderately “hedged” via purchase of a “Bear Fund” that will go up when the market goes down.  I look at this as a synthetic Cash position / portfolio insurance that can be added or removed quickly.  Next week will be interesting to see who or what will push this market in one direction or another.  I’m watching bar price action and volume for clues, but right now things look OK for the time being.

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

The Grind Higher May 4, 2019

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May 3, 2019 – With all the news about the (US) economy, jobs and new market highs, it’s easy to get caught up in a near euphoric state of mind.  But as some have pointed out, a market correction starts at the top, not the bottom.  This week started slow then got hit on Thursday only to recover on Friday.  Not much movement really.

We see on the chart above how we were about to get indicators to rollover in sync and then they recovered.  Money Flow and Market Sentiment showed weakness only to barely recover.  I note that Price Strength did go from “strong” to “neutral”.  Earnings have been pretty good but stocks are fairly well valued.  We’ll need added buyers coming into this market to drive prices higher; earnings alone won’t do it at these prices.  I’m looking at the 7965 level on the NASDAQ Composite Index as a near term support level.  So where does the incremental buyer come from?  The chart below shows that “Dumb Money” (small retail buyers) are approaching a high and “Smart Money” buyers (intuitions) are getting cautious & less confident.

This data along with the number of stocks advancing vs. declining and the number of new highs vs. new lows shows that the upward momentum is slowing and the participation in the moves is getting smaller.  (my Thanks to SentimentTrader.com for this chart)

Another factor is the issue of sector rotation.  We’re seeing Tech slow down and Internet stocks really slowing, while Banks and Financials are finally showing leadership.  Healthcare and Pharmaceutical are recovering from the “social medicine” scare a few weeks ago.  The table below shows the current strength of the major sectors.

That’s about it for this week.  The market loves low interest rates and high consumer confidence so the grind higher continues, but it’s beginning to shows signs of being tired.  Bad news could be a trigger and if it comes (when it comes) it will be quick.  Have a good week.        ………….  Tom  …………

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

Rally Continues, but Narrows April 28, 2019

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April 26, 2109 – The march higher for this market continues, but it’s beginning to narrow down to fewer and fewer stocks.  More on that shortly.  Looking at the chart below it’s clear that all basic indicators are positive and now we’ve broken to new highs.  Earnings drive the market and generally they have been fairly good so far.  Next week will bring more reports, especially from the big name companies.

So . . . what’s to worry about?  Well, not to worry so much as to be concerned.  I thought it would be interesting to see just how many stocks (in the S&P 1500 Index) are at or near their 52 week high (price).  After all, most should be up there since the market indexes are . .  right?

The pie chart above shows that nearly half of the stocks in the index are actually more than 20% below their previous 52 week high (pink).  And, only about 25% are within 5% of their high (darker green colors).  What this means is that the climb in the index value is being fueled by fewer and fewer stocks.  The general term for this is “market breath”; i.e. how broad is the actual market and how many are participating in the rally.

Since many indexes are weighted by either the size of the company (S&P 500) or the stock price (Dow Jones Industrials) or by industry (NASDAQ 100 – technology) we sometimes forget about the “other guys”.  This doesn’t mean that “all Hell is breaking loose”, but it does bear watching.  If this narrowing continues into the major indexes and only the “big guys” (Apple, Amazon, Google, etc.) are participating, then we have a problem.  For the time being we just have to go where the price strength is and monitor the rest.

Speaking of price strength, here are the sectors that show it (in the short term):
In the same vein, no surprise that Tech, Internet, Consumer Services continue their leadership roles while Banks and Financials are catching up now. I continue to be long this market but I’m seeing fewer good opportunities.  Is it time for “Sell in May & Go Away”?  Could be, but in this 4 year election cycle it probably will be a minor correction that will be short lived.  We’ll see.  Nothing is promised, that’s for sure.

Have a good week.    ………  Tom  ……….

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

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