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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.

“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.

Expecting a Bounce Higher, Then . . . . October 27, 2018

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Oct. 26, 2018 – A very volatile week.  Many “percents” down, then up, then back down again.  This market is very oversold so I’m expecting a bounce higher early next week; likely to around the 7445 area on the NASDAQ Composite Index.  IF it closes above the 7520 level (green dashed line) I may have second thoughts that a V bottom could be in place.  But for now a good Wyckoff-ian would be looking for a Selling Climax; that final whoosh down on high volume.   Not seeing it yet.

Volume has been picking up on down bars but not that big capitulation move yet.  The next level down (of a significant bar) would be around the 6880 level (red dashed).  I had to go way back to late February to find that level.  There has been significant damage done, but I think many are looking to “buy the dips” and are not ready to admit that the character of this market may have changed.  Earnings, especially guidance going forward, has been mixed.  Perhaps this market is mature and the economy is in a slower growth period?  Folks may have to come to grips with this being a real correction.  That being said, we would expect that Selling Climax (where people give up & sell), then a rally, then a base being built before re-accumulation of stocks once again begins.

Here’s what I mean about damage in the market.  The pie charts below show the percentage of stocks in the S&P 1500 Index that are currently in what phase.

Price Strength –

Accumulation / Distribution –There is a lot of red in those pie charts and it will take some time to work that off.  The possibility of a net neutral (or close to it) for the year is a possibility.

Sector Strength (short term)Just to be clear, a strong sector just means that it may not be “as bad as” the market as a whole.  The point is that many of these sectors are defensive and not the high growth types that we’ve seen over the past 3-4 years.

Right now I’m a little net short on market indexes, short International and short Oil.  All of these could change quickly next week as they are in a mature moves right now; expecting things to change.

House Keeping:  I try to get this commentary out during the weekend, but since that time is precious to me (I don’t have to watch the markets), it can vary from Friday to Sunday night.  Always looking for comments & feedback.  Take Care & have a Good Week.        ……….  Tom  ……….

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

Not Much New; Maybe Next Week October 19, 2018

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Oct. 19, 2018 – As the headline reads, “Not Much New; Maybe Next Week”, pretty much sums up the past week ending just about where it began.  We’ve had a few earnings reports but the big ones start to roll in next week.  Those earnings and the forward guidance could very well likely tip this market one way or the other.  It sure seems like the momentum & feel indicate a move lower and there are many investors waiting for something to propel the market in one direction or the other.

We’re right at the infamous 200 day moving average on many US indexes and recent behavior would say that is a “buy the dips” place to jump in.  But this time things just feel “different”.  Small Cap(ital) stocks and Tech stocks are weak . . . very weak.  So where is the leadership coming to drive this market higher?  Not the Drugs or Financials.  Consumer stocks have already made a big move . . .  so where?

The answer must be some super blow off earnings that is totally unexpected; or a news item.  A China trade deal could do it, but that doesn’t seem to be happening soon.  Hence the “feel” of going lower.
The broad NASDAQ Composite Index chart above shows the weakness and a lack of commitment in any direction in the short term.  We can’t break above the 7700 level and fell back to the 7443 level.  The next target (lower) would be 7205.  All of the indicators on the chart remain bearish for now.

Let’s look at how the stocks in the S&P 1500 Index are holding up.  The pie charts graphically show the percent of those 1500 stocks that are in Accumulation (buying), Distribution (selling) and their Price Strength (over the past 20 days).  There’s a lot of red there, but that’s not surprising.

Accumulation / Distribution –Price Strength –What I found interesting is answering the question “So just what stocks are doing well?”.  “Well” is a matter of perspective, since it’s being compared to all other stocks in the index, “Well” could be just “Better Than” everything else.   But the sectors that are doing “Well” and holding their own are centered around Utilities and Consumer Foods; all defensive sectors.  Another sign perhaps that no one is buying this dip right now.

I have slowly sold off weak stocks and “Hedged Out” (with a bear fund) the rest of my holdings.  The only things looking relatively OK from a sector fund perspective are Rising (interest) Rates and Stronger Dollar.  We need to be patient right now.  The time to buy will come, we just don’t know when just yet.

Have a good week & let me know what you like me to cover (or not to cover).  Always happy to get feedback.  Cheers !  … Tom  …

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

Expecting a Bounce Higher, then . . . October 14, 2018

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Oct. 12, 2018 –  Well now, quite a week !  This was not a surprise but the speed that it unfolded was rather rapid to say the least.  With the number of “Algo Traders” (a.k.a. computers that trade without human intervention) we shouldn’t be surprised by how fast market can move now a days.  So what next?

We started to see potential issues with this market over a week ago when it struggled to make a new high; I’ve labeled that point “Failure” on the chart above.  All of the indicators on the chart are Bearish but let’s look at price levels.  Yes, we blew through the 7700 level and are now (possibly) stalling out in the 7443 area.  Friday had a good close, so it’s reasonable to expect a bounce higher soon.  Going back up to around 7700 would be a likely estimate for a bounce higher, and possibly all the way up to 7933 just to fake everybody out.

The real test will be what happens during that bounce.  Will sellers use that as an opportunity to sell into strength (watch volume), and then head back down again?  We won’t know until that shows itself but we shouldn’t have to wait long to find out.  My next (lowest) support level is 7205.  Folks are getting nervous about stocks being overvalued and the continued issue of high tariffs with China.  BTW, those 25% tariffs won’t click in until after the new year.  Will importers “front load” to beat them?  Watch for inventories and not shipping tonnage.

Sector wise there’s not anything worth talking about except for Rising Rates and perhaps Rising Dollar funds.  I’m still watching Latin America; it is volitile.  Right now I’ve cut back on stocks and have a fairly substantial hedge on the rest of the portfolios.  “Hedge” meaning short the Russell Small Cap index and the NASDAQ 100 Index.  Both small caps and technology got hammered; it’s the value thing again.

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

chart by MetaStock; used with permission

October Swoon October 7, 2018

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Oct. 5, 2018 – The “September Swoon” came a little late this year.  I guess they had to wait for the 3rd quarter to end and report, but this was not unexpected.  The only question was when.  The next question is “how far”.  I’m sticking with my 7700 target on the NASDAQ but also added the next level down at 7604.

What happens on Monday (10-8) will be a big indicator of where this market is headed.  I’d anticipate retail investors to sell on Monday morning; what happens after that will be key.  Do the “big guys” come in after the selling slows to buy the dip or do they also sell or just sit on their hands?  Friday was a average volume day closing off the lows after two high volume days on Wednesday & Thursday.  Indicating that in the short term perhaps the selling is over.  But that doesn’t mean buying will replace it.  The market can fall on low volume . . . . because nobody is buying (no one to hit the “ask”).

No surprise that all indicators on the chart above are bearish, but lets look at what lead up to this point.  For over a month now the price of the S&P 500 Index has been going higher, but the number of stocks making new highs has declined, while the number making new lows has increased.
This is just one of the many “market breath” indicators, but it does point out that the market index was being held up by fewer and fewer stocks; not a good sign.

Looking at the number of stocks in the very broad S&P 1500 Index we see a confirmation of that broad weakness.

# of Stocks in Accumulation / Distribution –# of Stocks in a Strong or Weak phase –There is a fair amount of red in both pie charts, maybe indicating that this time is different and “buying the dips” may have to wait a while.

Last thing I wanted to show is a price chart of Bitcoin, the Crypto currency.  These and other pseudo currencies have been the rage over the past year with hyperbolic rises and falls.  No judgement, just showing what can happen when everyone wants to jump aboard and then fade out.  Reminds me of the old J.P. Morgan comment that “when the barber and the shoeshine boy ask about buying, that’s a sign of a top”.
I am partially hedged as “insurance”; will add more or reduce as necessary.  Time to honor stops and trim out holdings that are weaker than the market.  That’s it for now, be careful out there.  ……  Tom  …..

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

 

Watching & Waiting for Something September 29, 2018

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Sept. 28, 2018 – We’re in a classical trading / consolidation range and the market seems to be just “watching & waiting” for a reason to go up or down.  There is plenty of news to spark things, but we just haven’t seen “The Big One” yet.

8105 is my resistance level (green) and 7976 my support level (red); these are (my version) of Wyckoff “significant bars”.  I’ve mentioned before that the low price of a weekly bar that closes much higher on volume is a significant price level of support.  That’s where “buying” last came into the market.  As is the high price of a weekly bar that closes much lower on volume is a significant resistance level; where “selling” came in.  The tricky part is in a consolidation phase where these two levels tighten up and get close to each other.  But, my feeling is that we may be in an Up Thrust phase of a Distribution structure; that remains to be confirmed.  Let’s not get tooo bearish just yet though.
I note market sentiment remains negative, Money Flow a little bearish, Volume Flow just sideways, not saying much.  (Short term) Price Strength just kicked up to slightly bullish.  Long term trend line channel is up and Short term channel shows a price break above the upper line, which is bullish.  The problem with (my) automatic Trend Channel lines is that they need price pivots (swing highs & lows) to reference and draw off of, and in a consolidation, that can take a while to develop.  I’m still thinking we could head lower to around 7700 on the NASDAQ Composite Index.

Let’s look at where strength is in the market in the short term –
Biotech, HealthCare, Energy (oil) and a very few Technology companies are showing up in my stock scans.  Japan has been doing well and I’m watching Latin America as well.  China is a rollercoaster for the time being.  Well, there’s not much else to cover.  I do have positions on but also a light hedge” just in case.  I’ll put more hedge on or remove it when this market gives me a better indication of direction.  One thing to gauge the market strength is how it reacts to news (either good or bad).  I learned that a long time ago taking a course from Michael Price.  (“Strong markets don’t react much to bad news, where Weak markets fall hard”.)  It will be interesting to see how this market reacts in the coming weeks.

Take Care, Good Trading and have a good week.  ….  Tom  …..

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

Consolidating in a Trading Range September 22, 2018

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Sept. 21, 2018 – With all of the talk about “all time highs” let’s keep in mind that we’ve not gotten above the late August levels (NASDAQ Composite Index wise).  So let’s not get too carried away with the strength of the market.  Money and Volume Flow is holding steady but no one is rushing into this market right now.  The Long Term Channel is still pointing up but we’re hovering around the 8000 level of price support (red line).

I am about 80% invested with a small “hedge” on as “insurance”.  My hedge is short the Q’s, a.k.a. technology which has not been able to get much going as of late.  What I do see is strength in Japan, Industrials, Rising (interest) rates and Healthcare.  China and Latin America are beginning to draw my attention, as well as some select energy stocks.

We haven’t looked at the broad S&P 1500 stocks very much so it’s time to see if there is any underlying strength or weakness indicated.  Below are pie charts of the number / percentage of stocks within that index that fall into three categories.

Price Strength –Those in Accumulation / Distribution –

Overall it’s looking like a relatively even split between the three categories.  That generally is healthy and status quo as far as trends are concerned.  My current thinking is that we’re in a price consolidation zone right now.  There may be some sector shifting and repositioning for the next move, which is likely higher unless bad news stops the trend.  And . .  that could happen in this environment.

That’s about it for now.  Looks like a heavy news week next week and how the market reacts (or doesn’t react) will give us a clue as to its strength.  Have a good week.      ………..  Tom  …………

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

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