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April 14, 2018

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April 13, 2018 – It was Friday the Thirteenth and just about everything was happening.  Political issues, trade issues and international saber rattling.  It will be interesting to see how the markets react on Monday (hint: watch the Asian markets on Sunday night).  But I really don’t think this market cares much about them right now, for next week the focus will be on earnings.  Yes, earnings are expected to be very good (how could they not with a big gift of a tax cut); but the interest will be on “forward guidance”.  The corporate equivalent of predicting what earnings will be next quarter.

So far we’ve hit the “spring” level and bounced off; just as a spring action should show.  We need to have a Show of Strength (SOW) with a nice wide boded bar on high volume closing above 7205, or better yet, above 7332 on the NASDAQ.  Indicators are mixed, but what concerns me is the low volume of last week.  This looks like a cautious wait and see stance.  It shouldn’t last very long though.

While “Price Strength” is modestly bullish, I’m working on a refinement of that indicator.  While not ready for “prime time”, it does indicate a bullish environment, but not that last final trigger.  That trigger is based off of “Volume Spread Analysis” (for those of you who are interested).  I’m kind of excited about it since it appears to be robust and fast reacting to market changes.

Here’s what’s happening on the sector front in the short term:

I’ve taken modest positions in Energy, Precious Metals and European sectors.  I will add to these next week IF the market shows some follow through.  I’ve also taken off my bear fund, which I held as a hedge.  Right now cash looks OK to me as I can go either way as needed.  There’s still a lot of unknown and volatility out there.

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

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

Volitility Returns; at Important Level March 30, 2018

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March 29, 2018 – A short week this week but at seen below, price volatility is back and we’re at / close to my “spring level”.  This “spring level” (6880) is important because that’s the nearest price where buyers “came into the market” on a weekly basis.  It’s the low price of a Wyckoff “significant bar”.  IF this is an Accumulation structure, this price level would be logical for the price to bounce off of and head higher.

That remains to be seen as next week is a holiday week and volumes are expected to be light.  If this level does not hold, then we could very likely be headed lower and the whole price structure scenario would have to change.  The big wild card is the news.  And with that, anything could happen to spook investors.  It would take much in this weak market environment.  The damage was done, now the market has to prove itself.  Earnings season is just around the corner.

Many major sectors remain “bearish”, but I’m playing it safe with only a small position short Latin America and short Japan.  It won’t take much on Monday to close these positions out; any hint of strength would do it.

Happy Easter & Happy Passover to all.  Have a good week.     ……….  Tom  ……….

Chart courtesy of MetaStock; used with permission.

A Weak Market Driven by News March 25, 2018

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March 23, 2018 – The old saying “A weak market reacts to bad news, while a strong market ignores it.”, holds true again.  This is not the same “go-go” market that ended in early February.  Reality is setting in, and the market is not happy with all of the unknowns that are floating around.  The reactions on Thursday and Friday of last week showed that investors prefer to “sell and ask questions later”; and they did.

Now, a good portion of those drops were driven my computer algos, which eccentrically “dog pile” on top of any move.  But someone had to get the direction down started.  The rest was amplified.

Our support levels (red & blue) were blown through.  OK, now what?  A possible scenario would be for the market to drop to around the 6880 level (my projected “spring area”) before finding a base.  IF this bullish price structure is to hold, it would then have to stabilize and go higher, at least bad into the “long term channel”.  IF the 6880 level is broken solidly on a close, I’m concerned that increased selling will enter into the market.  I note that the Volume & Money Flow indicators turned negative early last week.  Market Sentiment is now bearish as well.

Here’s a bit longer term view of the damage as indicated by the stock in the S&P 1500 Index:

Price Strength (above) is certainly negative.

And we see that selling (Distribution) has entered the market.

At this point I’ve “hedged” my positions by buying a “Bear Market” fund; one that goes up when the market goes down.  I’m using the NASDAQ 100 Index as my proxy for “The Market”, but the Dow or S&P 500 should work equally as well.  I’m watching that 6880 level and how my stocks are reacting vs. the market.  Selling the weak ones (selectively) won’t hurt; it’s nice to have cash at a market low.

Have a good week and be careful.       ………. Tom ……….

Market at New High March 11, 2018

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Mar. 9, 2019 – Friday was a very good day for the US stock markets.  We reached a new high on the NASDAQ Composite Index and the “Price Strength” indicator recorded a “Very Strong” reading.  While I feel that this market remains susceptible to news, we should recognize this strength.

During this past week I’ve increase exposure to the market with my Growth Stock model nearly fully invested and my Market Index model 90% invested.  It’s actually quite scary to be fully invested as the markets make new highs, because of the increased risk, but that doesn’t mean that we can’t change our minds if prices should weaken and volume picks up as well.

Here are the Top Performing Sectors in this market, short term:

Have a good week.    …….. Tom  ……..

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

A Change of Character March 3, 2018

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Mar. 2, 2018 – Years ago I took a 6 week course in evaluating mutual funds from Michael Price; a very nice and knowledgeable fellow.  One thing (of many) that stood out during his instruction was the comment “markets will react poorly to news in weak markets, but shrug off bad news during strong markets.”  As Yogi Bera said, “You can tell a lot just by looking.”  What we’ve seen is the reaction to an event (the VIX rotation debacle) in an over bought market, but with a foundational shift.  That shift is (I believe) concern about this administration; what it is doing and what it has done.  Case in point is the +400 point drop in the Dow over Trump’s comments about tariffs.  Markets don’t like uncertainty, and now we’ve got it over a multitude of fronts; and it’s not likely to stop soon.

It appears that the reaction after the peak in late January signals a change in character for this market.  That doesn’t mean that we’re in a Bear market, but it could mean that we certainly can’t expect advances like we’ve had over the past year.  Corporate earnings will be strong; the tax cut has nearly assured that, but that’s “old news” now.  I think that any significant bad news will likely shake this market again.  The analogy is “2 steps forward & one step back”.  We’ll make progress, but it will be slow, selective and choppy.  We’re entering into a stock pickers market.

OK, enough editorializing. Sentiment has turned positive, Money and Volume Flow indicators are lethargic at best, so I’ll call them neutral.  We’re currently bouncing off that blue Resistance level around 7332, with the Price Strength indicator very lightly Bullish.

I’m selectively buying positions in Technology and leading Internet companies.  My sector model does not show enough strength to jump in with any more funds at the moment, so I’ll stay mainly in Cash in that model.

The pie chart below should give you an overall view of the health of this market:

Stocks in the broad S&P 1500 Index that are positioned in relation to their 52 Week High price.

Stocks in the S&P 1500 Index that are currently in Accumulation (buying), Distribution (selling) or Neutral.

That’s all for now.  I’m being careful and selective and “expecting the unexpected” in this environment.  Have a good week.   ….  Tom  ….

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

A Dull “Wait & See” Market February 24, 2018

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Feb. 23, 2018 – Not much overall movement this week.  Take a quick look at the chart below and you’ll see we’re at the top of the Support (blue line) price that was established previous to the abrupt correction (a.k.a. “the VIX correction”).  That’s where the buyers last entered the market.  If there is to be a retest of the lows (6880 red line) it should come shortly.

This price structure is goofy, so I personally don’t think we will get any where near the previous lows.  I note that Money and Volume Flow indicators are slowly recovering and the Market Sentiment is now “Bullish”.  There was a lot of damage done in the first week of February and while prices have improved, we’re not seeing a rush of folks eager to get back into this market.  Not Out of the Woods yet.

The pie chart below of the number of stocks in the very broad S&P 1500 Index continues to improve, but note the large yellow area; a sign of neutrality in price movement.

I have taken a few small bites in the areas of Bio-Tech, Internet, Latin America and Emerging Market sectors.  I believe the watch word is to be patient and wait for more of an “all clear” sign.  BTW, my new Price Strength” indicator is mildly positive, but has NOT confirmed any all clear yet.  So we’re at the top end of previous price support and we need a sign of strength to break above that.  Without it I think we’ll just bounce around and consolidate for awhile.

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

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

Markets Stabilizing February 18, 2018

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Feb. 16, 2018 – We now are fairly sure what the cause of the recent market swoon.  An over bought market in the background, many people in the “safe” selling volatility trade (i.e. short the VIX).  Couple this with the end of the month ETF VIX contract “roll forward” and all it took was 3 days of weakness, followed by panic.  It happened quickly with a spike down and will (likely) recover with a “V” shape back up.  (Note chart below)

Since this market was over brought, it will take time to recover back to those levels.  My continued concern is the susptability to “bad news”.  While the Money & Volume Flow indicators are recovering, but not back to positive, my very short term Price Strength indicator is back to a modest plus / long status.  For this reason I’ve removed my hedges and will slowly look for high potential stocks to buy.  I am happy that I never fully exited this market.

We can also see just how well the market has recovered in a week from the pie chart below, which shows the percent of stocks in the S&P 1500 index that have Strong or Weak price structures.

That it for this week.  Be patient for the right stock and the right sector, but it looks like they will be coming to you.  Have a good week.      ……….  Tom  ……….

Selling Begets Selling February 10, 2018

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Feb. 9, 2018 – A week ago Friday was just the beginning, and then came this past week.  That’s when the wheels came off and the computer “algo” selling programs kicked in.  The swiftness of all of this was the surprise, and not that it happened.  This market was well over bought.  Note the chart below that the short term trend channel is standing up compared to the long term channel.  Now we’ve corrected back to the bottom of the long term channel, and that may be a good place to pause and consolidate.

Both price support level were violated as were both the Money Flow and Volume Flow indicators.  I’ve added one additional indicator, that of (short term) Price Strength.  My goal was to provide an early warning indicator.  It oscillates from neutral, moderate, to very strong status.  Something to watch in the future; since this is new, I’ll do some back testing with it.

No surprises about the overall market strength.  The percentage of stocks in the S&P 1500 Index are shown in the pie charts below.

Price Strength –

Accumulation / Distribution –

There’s a lot of red up there, the damage has been done.  I’ll wait for a base to form and then a show of strength before I drop my hedged position (i.e. cash neutral).  I’ve liquidated 90% of my sector rotation positions (only high risk shorts are showing now; I’ll pass).  Truly weak stocks were sold and the remaining positions are hedged out.  Watch out for Monday morning retail selling though.  We need buyer not seller in the coming days, and the pro will lead the way.

I really thing that volatility is back and the time frames are shortened by computer trading.  It’s getting hard to NOT to get caught with your “pants down”, but we try.  Have a good week.        ………..  Tom  ……….

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

Along The Watch Tower February 3, 2018

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Feb. 2, 2018 – The big question on everyone’s mind this weekend is whether or not “this” is the beginning of the long awaited correction.  I’ll cut to the bottom line:  Yes, it certainly could be.  First let’s look at how weak this market is:

SP 1500 Price Strength

The pie chart above shows the percent of stocks within the broad S&P 1500 Index (1500 of them) that are in a short term (20 day) trend.  Obviously, more than half are “weak” with only a small amount that are considered “strong” (i.e. green).

The chart of the NASDAQ Composite Index (another broad index) is shown below:

NSADAQ

I note that the first level of price support at 7332 has been broken and the next level is 7111.  The significance of these price levels is derived from what Wyckoff called “significant weekly bars”.  That is the low price of the week where significant buying came into the market.  The other way to look at it is this is where money started to flow into the market, thus it’s low price is important.  Also in the chart above are the Money and Volume Flow indicators, which confirm price and volume “outflows”.  Sentiment is neutral.

OK, back to the correction question.  Is this the start?  We’ll know more early next week.  Will buyers come in and “buy the dip” or will additional selling happen?  Right now, no one knows.  But we do know that investors cash levels are at an all time low; and who will be the next incremental buyer to push prices higher?  The market has been over extended by being at the upper trend channel, so a pause / minor correction is not unusual.  Time to shake the market out?  Looks like it.

What is “the cause”?  Fear of higher interest rates?  Problems at the Trump Whitehouse?  Does it really matter?  Since the volume on Friday was only slightly higher, it really looks like “lack of buyers” and “extra sellers”.  That is a position of caution, thus not to get overly concerned about it just yet.

Overall, the S&P 1500 stocks look more like this:

SP 1500 A-D

With those in Accumulation and Distribution about equal (though this indicator is a slow to react one).

Let’s watch both the price and volume action on Monday and perhaps on Tuesday for indications about the seriousness of this (so far) 3 day event.  Corrections are OK, as long as we don’t get whip sawed by them.  I lighted up on just about everything on Friday afternoon, but if it gets ugly, I’ll buy a Bear Fund to hedge positions.  That gives me time to make an orderly withdrawal should that become necessary.

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

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

In a Continuation Pattern January 28, 2018

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Jan. 26, 2018 – This will be short because not a whole lot has changed.  The international markets continue to be in an economic recovery mode and the US markets continue to be quite pleased with the tax cuts (about 1/3 off corporate and nearly half off repatriated cash).  With all of that financial tail wind behind them nearly all worldwide stock markets are headed higher.

The chart above shows all bullish signs.  I’ve moved the first level of price support up to 7332 and the next (lower) level to 7111.  A pause or a minor pull back would be normal here, but that would likely draw in more “buying of the dips”.

I do like international stocks in here.  Latin America, Emerging Markets and China are strong.  Consumer Services, Internet and Biotech US sectors are also doing well.  The NASDAQ 100 Index appears to be the strongest followed by the Dow Jones Industrials.  The only “wild card” out there is the Trump Russia Investigation.  I think there are many who will jump ship to lock in these profits IF they perceive bad news on the horizon.  Until then, we ride the wave.

Have a good week.  ……… Tom ……..

Price chart by MetaStock. Used with permission.

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