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Steady As She Goes, but On Watch January 26, 2019

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Jan. 25, 2019 – It’s sounding “old” but so far there’s no real indication of major market issues and so the phrase “Steady As She Goes” sounds appropriate.  Prices have recovered a lot and very quickly so some pause or minor correction is not out of the question.  Prices on the NASDAQ Composite Index closed Friday very near our 7225 resistance level (green) and this would be a “logical level” for that hesitation to begin, but nothing is a given at this point.

This market seems to shrug off most news events.  The one thing that could trigger a major move (in either direction) would be trade talk results with China.  Domestic politics and Brexit don’t seem to matter much.  Interesting that these have been discounted.  Sentiment, Money & Volume Flows are all positive and Price Strength is strong.  I am selectively long, picking stocks and sectors that appear to provide opportunity and that have not got ahead of themselves.

My new sector strength table is shown below.  Technology and Financial sectors are showing strength in the short term.  Mid-Cap indexes are also doing well.

And so it goes.  We just have to go with this trend and so far this trend continues to be up, though I’m pretty uneasy about it.  Have a good week.  ………..  Tom  ……….

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

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Market Continues Higher January 19, 2019

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Jan. 18, 2019 – My first level of price resistance at 6930 was blown through, but the next level at 7225 is not far away.  Earnings coming out are mixed, some good and others rather poor.  This rally seems to be a “Fear of Missing Out” rally which is typical after the severe oversold condition on Christmas eve.  Money & Volume Flow indicators are positive as is Market Sentiment.  At least a minor pullback is overdue and that will give us an idea if the “smart money” is trying to get whole from the late Fall market correction, or if it is just a pause that refreshes a re-accumulation phase.  The key will be volume.  Light to average volume on a sell off means it will be shallow and short lived.  Heavy volume = heavy selling and the recent lows could be re-tested.

For now we just have to ride this trend and in the immediate term the trend is higher.

The table below is different.  I’ve changed it to condense the sectors but also to add the indexes and some key international market indexes.  I’m thinking that this simplifies things while broadening the scope to international sectors.  The idea is to make this more meaningful and “actionable”.  Comments are Welcome.

That’s it for now.  I’ve got a feeling that the first quarter will be a bumpy ride, since there is so much undecided that could have a major effect on the markets.  Have a good week.       ………….  Tom  …………

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

At The Point (level) . . . . January 12, 2019

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Jan. 10, 2019 – The market (NASDAQ Composite Index) has risen to the level (6930) where we likely will see at least a pause if not a rejection on the move.  This is the level on a weekly time frame where we last saw selling / weakness come into the market.  The short name is price resistance.  It will either break through and go higher after a short pause or selling will enter and the price will retreat.  (OK, no kidding.)  So our attention has increased looking for signs.

One thing I note on the volume bars below the price bars is a steady drop off in volume.  I can make a case for “No Demand” and in that situation, without buyer, prices will fall back towards support.  The yellow Zig-Zag line paints that scenario  of a back and forth structure that stays in a trading range.  I think that’s what will happen.  If I’m wrong an the market takes off the dashed green line shows a break of resistance with prices headed back toward 7500.  We shouldn’t have to wait very long to see which story plays out.  In any case this market is being whipped around by news and fear; not a sign of strength.

The overall market of stocks in the S&P 1500 has improved.  Price Strength (below) shows most stocks moving above their 20 day moving average.  With a lot of green showing and very little red; bullish in the short run.

The pie chart of the same 1500 stocks paints a more cautious picture.  Fewer stocks are in the Accumulation phase (strong price AND volume).

I refer again to the volume coming into this market during the past couple of weeks.  Many investors will be watching for more participation before committing more funds and buying more stock; I think that’s what we’re seeing right now.  Wyckoff price structure would say that we’re in a base building / Re-Accumulation phase before going higher.  That can always change to a re-Distribution phase IF the market breaks below 6130 for any length on time, especially on high volume.  A “Constitutional Crisis” could provide that scenario.  And that is likely why the interest / volume is low right now . . .  wait & see.

I am “lightly long” right now, unwilling to jump back in with both feet.  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 . . . December 23, 2018

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Dec. 21, 2018 – First off let me wish everyone a Merry Christmas (for those that celebrate it of course).  Next week will be a slow trading session so I’m hesitate to read much into price and volume indicators.  Let’s start by looking at a bigger picture for perspective, namely the NASDAQ Composite Index on a weekly bar time frame, back 3+ years.
We’re currently back to the Fall of 2017 price levels . . . . yes, the “Trump Bump” has been wiped out.  Support at the 6375 level has been hit and the next level down is about 5425.  But I don’t expect this market to get there in a straight (falling) line.  Let’s switch back to a daily chart.

This market is extremely “over sold” in that it went down too much, too fast.  A possible scenario is a short continuation sell off on Monday (12-24-18) then a bounce back up to about the 7000 level before heading back toward a new low at 6375’ish level.  During any rally higher we’ll watch the price action and us volume to confirm it.  The tricky part is the volume analysis during a holiday period.  The bottom line is: are traders and institutions using a rally to lighten up even more by selling into a rally.  The news is not great world wide and any match toward the powder keg could mess things up without warning.  This is NOT a time to buy and forget; wait for a confirmation of a new trend because this one is lower.

A quick look at what a bear market looks like (% of stocks in the S&P 1500 Index):

Price Strength –

Accumulation / Distribution –

The lack of green in these pie charts is not an error, there is very little to see.

There really is no need to talk about sector strength because there is very little.  Think “Defensive” (Utilities, short term Bonds) and you’ve got it.  If you must expand that add Real Estate and Aerospace (military wise) to the short list.  I’m heavy in Cash and net short the indexes.  Looking for a “sign” if & when we get a rally.  Have a good holiday.          ………….  Tom  …………

Within The Range December 15, 2018

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Dec. 14, 2018 –  I’ve removed a few lines on the NASDAQ Composite Index chart this week, kind of getting back to basics, to make a point.  First this market structure is pretty much in a defined trading range. At the top is the 7520 green dashed line and at the lower edge is 6920 with the red dashed line.  Now these levels are not chiseled in stone but rather rough benchmarks to alert us when there is a change of character in either direction.

Also I note that the last 3 days of this past week have had volume falling off; Low Demand to Buy and Low Supply to Sell = lower prices on low volume.  For the time being that shows there is no rush for the exits, but also no rush to get onboard either.  The typical scenario for a trading range.  It just feels like everyone is waiting for either some news (trade talks or BREXIT) or for the end of the year.  The price levels that we’re at go back to February of this year . . . . we’ve lost the “Trump Bump” as reality sets in.  Reality is that stocks were expensive and the sugar high of corporate tax cuts have worn off.  It’s back to “what have you done lately!”.

The pie chart below is a new idea.  I took the stocks in the broad S&P 1500 Index that were within 5% of there 52 week high price.  Then put them in a pie chart by their industry groups / sectors.  You can follow the list down by going counter clockwise around the chart.

No surprise that Utilities, Real Estate and Consumer Products are holding up better than other sectors.  Another way to look at this is via my regular table which is ranking sector by there short term strength.  This style ranking will be valuable when an up trend develops, but for now it sure looks like being defensive or in Cash is a good idea.

The best news is that Christmas is coming, no matter what !  🙂  Have a good week.     ……….. Tom  ………..

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

 

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.

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