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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.

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.

Market on “Hold” April 20, 2019

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April 18, 2019 – Another lack luster week.  The S&P 500 (large cap index) down 0.08% and the broad NASDAQ Composite Index up 0.17%; in other words a flat week (though only 4 days long).  It just appears that this market is on “Hold” . . waiting for more earnings data . .  waiting for the reaction to the Mueller Report . . . waiting for direction.  Next week we will begin to see some major corporate earnings coming out and that will likely provide some reason to move in one direction or the other.  A few major banks reported last week and though it was mixed, it was better than expected and banks rallied.

Of note is the sentiment indicator that turned down this week, while other indicators remain positive.  Prices remain within the Short Term Channel (purple lines) and above the 7777 Support level but below the 8107 Resistance level.  That 8107 level is important because it was the last significant high price way back in September.

Looking at sectors we see short term strength in Semiconductor stocks, Technology, Banks, etc.  I note (again) that China has slipped down to mid pack levels.  Concerns about the trade negotiations?  Also of note were the Healthcare and Pharma sectors stocks that took a major beating this week.

I remain nearly fully invested but getting a little concerned about the momentum slow down and the overall value of stocks in the US.  In order to move much higher there will need to be signs of profit or growth or both.  Until then I’m watching for signs of Distribution . . . none yet, but I’m watching.

Happy Easter & Happy Passover to those who celebrate them.  Take Care and Good Trading.        ………… Tom ……….

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

Continuation April 14, 2019

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April 13, 2019 – Not much to say this week as this market continues to grind higher.  All indicators remain positive, though Volume Flow is weakening somewhat.  We can see a slowing of trading volume in the lower volume bars as well.

Lower overall volume does not necessarily means lower prices, but IF “everyone is in” this market that is going to buy, the next direction is not up, but rather down.  Let’s keep an eye on volume when we get a down bar.  A wide spread bar on heavy volume would indicate strong selling.  But until then I show resistance at 8107 (previous market top) and support of prices at 7777 (last significant weekly bar).

Sector strength remains very similar to previous weeks.  Semiconductors, Consumer Services and Technology issues are ahead of other sector stocks in the US.  I note that China has weakened over the past week and Banks & Financials have move up.  (likely driven by JP Morgan’s positive earnings report)

Now we are headed into earnings season and any nasty surprises could upset the “apple cart”.. I sense that many traders are nervous as we approach the previous market high.  A slight pull back would be typical.

That’s if for now; a slowing of the upward momentum but the trend continues.  Have a good week.  …………..  Tom  ……………

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

Market Continuing Higher April 6, 2019

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April 5, 2019 – The train keeps rolling down the track.  While there is “excessive” optimism from many sources you just can’t ignore the steady drive higher.  We’re now fairly close to the previous high set back in September and that 8107 level (green dashed line) is now our next point of possible Resistance.
The 7777 level (red dashed line) is a point of possible Support.  Market Sentiment, Money & Volume Flow and Price Strength indicators are all Bullish.  This week the bullishness was fueled by China trade hopes, strong employment data and Trump seemingly backing down from shutting down the boarder with Mexico.  (Editorial:  Interesting how someone can create a problem, then “solve it” by not following through, and ask for “credit”.)

Overall the pie charts of the percent of stocks in the S&P 1500 Index (below) are very bullish as well.

Price Strength – Accumulation / Distribution –There is a fair amount of green in those charts, supporting the bullishness of this market.

The table below shows where the short term strength is in this market:

Let’s not get overwhelmed by this strength but rather continue to move with it and adjust positions as it matures.  Stocks and those sectors inevitably change and rotate, and so should we.  China, for example, was going sideways just a week ago.

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

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

Within Range March 31, 2019

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March 29, 2019 –  I’m pretty busy this weekend with family activities, so this will be short and to the point.  The chart below shows how this market is steadily strengthening and has broken above the 7643 level (NASDAQ Composite Index).  That’s where selling took place on a weekly basis the last time.  This is a good sign, but many under estimate the damage that was done in December of last year.  There was a ton of selling volume.  So while breaking above 7442 is bullish, it only is in the near term.

For this (and other) reasons, my thinking is that we’re in a longer term trading range between 7850 (past top) and 7442 (previous swing low); these are marked with blue dashed lines in the chart above.  Note Market Sentiment remains bearish and Money & Volume Flow indicators are fairly anemic.   Hence my gut feel that we’re likely in a trading range scenario right now.  We’ll just have to see if the only way traders can make money is to “sell the rips & buy the dips” in the coming days / weeks.  The strength in the Bond market (higher prices & lower rates) is another concerning factor.  The old saying that the bond market is wiser than the stock market has some validity.  What does the bond market know that the stock market doesn’t?

The table below shows what sectors are strong to weak in the short term.

Currently I’m modestly long this market, but have Cash to deploy if & when we get a solid turn in either direction.  Have a good week.  ….  Tom  …..

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

Inversion, Slow Down or “The Report”? March 23, 2019

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March 22, 2019 – Was the sudden sell off Friday due to the interest rate inversion, the FED’s report of a slowing economy or advance notice of the Muller Report ?  Likely (IMHO) a combination of all three.  Thursday was a big up day, so these news items did cause a sudden down day.  The 2 year yield is now slightly above the 10 year yield and prophecies hold that a recession is due in 19 to 24 months . . . . OK, but that’s a ways away.  The FED came out with an estimate of 2% growth this year and 1.9% next year . . . . the “sugar high” of tax cuts are now behind us (so much for long lasting growth of +3%).  And the long awaited Muller Report was sent to the AG on Friday at about 5pm.  Funny, because the markets sold off hard in the last 15 minutes of trading on Friday . . . . did someone know something ahead of time?

But to put things in perspective, the close on Friday just put us back to around the close of the week before.  What I call attention to is the volume on Friday (red arrow).  It was about average, nothing big.  Some might call Friday a “key reversal day”, but I think not; not with just average volume, there was no big move to the exits.

This market was getting toppy with Sentiment bearish, Money Flow bearish and Price Strength weakening.  And so we’re back to the 7643 level, the last significant bar break out of resistance.  Let’s see how the stocks in the broad S&P 1500 Index are doing:

Price Strength –

Stocks in Accumulation / Distribution –

Price Strength shows significant weakness as does stocks in Distribution; more red.  My thoughts are that we’ll be in a congestion phase for the next couple of weeks as the markets digest the news on the economy and the Muller Report.  There is always the “Sell in May and Go Away” idea that could arrive early this year.  I have a feeling that we’ll see a continued sell off Monday morning as fear overrides logic, then some buying of “the dips”.  The key will be watching the volume on Up & Down bars for an indication of how strong the selling and buying are.

Just about every sector got hammered except precious metals, so I won’t belabor that topic.  This market is jittery and it’s reaction to any news items shows that.  If weakness continues into Monday afternoon it may be prudent to hedge by buying a bear fund.  Honor stops and monitor weakness is the call of the week, but don’t overreact.

Take Care and have a good week, it should be interesting and perhaps historic as well.      …………..  Tom  ……………

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

A Pause That Refreshes March 9, 2019

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March 8, 2019 – It appears that we’re in the midst of the long anticipated “pause” in the market recovery from the Fall correction.  I’m thinking that this is a “pause” because, so far, we haven’t seen a significant Distribution structure.  I’m thinking that a 7 to 10% drop from the recent highs could be likely.  Looking at the chart below the called out resistance level of 7643 held as a “rejection of price” point with 6931 being the next support level below.  That 6931 level would be approximately a 9% drop.

Now, IF volume picks up on down bars next week this “pause” could develop into something more, so let’s not get ahead of the price action here.  Also noted are the confirmation of price weakness in Market Sentiment, Money and Volume Flow indicators.  The Price Strength indicators have gone to mildly bearish as well.  Looking toward the stocks in the broad S&P 1500 Index gives us an idea just how weak the overall market is.

Price Strength –The last 3 days have hit a large number of stocks moving to the weak side (red); the strong (green) section has diminished quite a bit lately.  This indicates a fairly wide spread decline.

Accumulation / Distribution –The number of stocks in a Distribution (selling) phase is not as great and is generally about equal to those in Accumulation (buying) and Neutral.  Fairly even on all three areas.  (Note: accumulation & distribution are a combination of both price and volume; two dimensional so to speak.)

Sector Strength –The table above shows the sector strength on a relative short term basis.  Not as much “green” up there but so far the Tech areas are holding up the best.

Over the past week my (more) involved market model went from Bullish, to Cash and as of Thursday is lightly Bearish.  The purpose of this model is to indicate when it is appropriate to “hedge” and protect the overall portfolio.  Protection is in the form of buying “bear funds / ETF’s” which are inversely correlated to the market.  Since Small Cap stocks are the weakest, that’s the index I purchased (bearish wise).  IF weakness continues I will buy more protection and go to a theoretical neutral / synthetic cash position overall.  The idea is to “win by not loosing”.  🙂

Also the number of stocks that I hold has gradually been reduced; selling the weakest ones.  OK, that’s a bout it for this week.  I’m expecting more weakness, but so far, not a rout . . . . that could change especially via a news item.  Time to be careful.  Have a good week.       ………… Tom ……….

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

Market Treading Water March 2, 2019

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Mar. 1, 2019 – Before I begin, I’d like to note that the date at the beginning of all of my posts refers to the last data date when the text was complied and the data shown in all charts and tables.  This blog is typically updated over the weekend and the date is usually the Friday before (unless there is a holiday).

A quick look at the chart below shows that the market (NASDAQ Composite Index) basically did very little over the past week.  The Money Flow indicator has turned down but all of the other indicators remain positive / bullish.  This 7486 price area was the last time significant “buying” came into the market on a weekly basis; thus a possible resistance point.

Overall the market needs a rest so a pause is not unexpected and actually overdue.  Looking at the stocks in the broad S&P 1500 Index below we see a fair amount of green in both the Price Strength and Accumulation / Distribution pie charts.  (These charts tend to be more intermediate term as far as the time span is concerned.)  All positive for the time being.

Price Strength: % of stocks-

Accumulation/Distribution: % of stocks-
Sector Strength in the short term –

Note that there appears to be some sector rotation into Pharma and Biotech sectors; Tech, Industrials and Semiconductor stocks continue to do well.

That about it for this lack luster week.  I remain mostly invested and trying to go with the prevailing strengths that I see.  Have a good week.  …  Tom  …

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

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