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Go For It . . or Wait For It October 17, 2021

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Oct. 15, 2021 -I saw the play “Hamilton” yesterday and it was a “Wow” even thought I was prepared via Lin Manual Maranda’s book. Impressive through and through. OK. let’s move on.

Last week I talked about a “Change of Character” in this market, making the case that we’ve been overvalued and the 50 day moving average was NOT a support / buying the dips level. All well and good but the last 2 days have been a little impressive. How so? (reference the chart)

click on chart to enlarge

First off, higher “highs” and higher “lows”, i.e. swing 3 is higher than swing 1 and swing 4 is higher than swing 2.  Next, volume is beginning to return / increasing.  I call out two possible scenarios going forward:  in yellow, we stay in a trading range, in green, a breakout higher and a retest of the breakout before moving higher still.  A “Change of Character” would support a trading range between 15085 and 14182, this could likely be a period of re-accumulation before an eventual breakout higher.

In either case, this next week should give us a clue.  A diverse group of companies report earnings: JNJ, NetFlix, airlines, Tesla, financials and P&G; the broad waterfront is covered.  Good news drives us toward the green line, disappointing news drives us toward the yellow.

The Short Term Sector Strength table is below –

In particular, Financials and Technology sectors moving higher is a big plus. Keep an ear open for earnings reports and how the stock and markets react. That will provide some insight on whether to Go For It or Wait For It. Have a good week. … Tom …

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

Two Steps Backwards & One Forward October 9, 2021

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Oct. 8, 2021- The title sounds “bass ackwards” but that’s the point.  This time we’ve taken two steps backwards and we’re not anywhere near two steps forward.  Taking a look at the chart below, Sentiment, Dollar and Volume Flows and Price Strength are Bearish.  The Trend Channel is sloping down; not positive signs.  Take a look at the volume over the last 2-3 days during a “mild” rebound . . . very low, no commitment by traders.  Bottom line: it’s still a weak market.

click to enlarge

Richard Wyckoff would call this a “change of character”; that is the market is not responding in the way that it used to recently.  There are many signs of this, so if you’re interested just “Google” it.  But here’s one of my favorites.  The chart below shows how the S&P 500 responded to selling pressure by touching the 50 day moving average, then rebounding and continuing the stair steps higher.

click to enlarge

I’m not saying that we’re into a bear market or even a major correction, at least not yet, but traders are not rushing back into this market . . .  yet.  There are just too many issues challenging and too many unknowns for them to be comfortable.  Besides, third quarter earnings are just around the corner.  How companies report will be a big factor in how the market proceeds.  It is overvalued right now.  Two areas to look for are how Technology and Consumers Discretionary companies report and respond.  They were the previous market leaders.  Next comes Financials and Healthcare.  We need to regain leadership to move higher.

I’ve been raising some Cash, and if things get worse will raise some more.  But this could just be a pause and a re-accumulation phase.  Watch both bar strength and volume for clues.  Have a good week.  …  Tom  …

charts by MetaStock, table by http://www.HighGrowthStockInvestor. Used with permission.

Lions and Tigers and Bears, Oh My! October 2, 2021

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Oct. 1, 2021 – Apologies to The Wizard of Oz but this market got “spooked” this week.  Yes the overall market breath (the number of stocks leading the indexes higher) was getting narrower and narrower.  The old adage comes back: “When the market is weak, it reacts poorly to bad (or perceived bad) news, and if strong, it ignores it.”  This market is weak.

There is plenty to worry about: FED tapering, Inflation, Supply Chain issues, Debt Ceiling and the Pandemic.  While all of this could become serious to economic growth the current economy is doing pretty darn good.  But, the stock market lives in the future and is looking out 6 to 12 months ahead.

click on chart to enlarge

Thursday the NASDAQ Composite Index dropped below the 14530 support level but recovered on Friday.  That puts us back to mid-August and mid-July levels.  14178 is the next support level, and I need to see strength above 15380 (resistance) before I’m comfortable with an “all clear”.  Putting it into perspective, the NASDAQ has dropped 5.19% and the S&P 500 3.93% since the (about) 9/3/21 peak.  A 4% to 5% correction is pretty minor; at least so far.  I’m sounding optimistic because late this week ETF’s saw a net inflow of dollars, and the biggest increases went to small cap and the leveraged “Q’s” (tech index).  Sounds like some folks are also optimistic and “buying the dips”.  But not so fast investors.  The Money and Volume Flow indexes are still pretty negative.  Let’s wait for confirmation; it shouldn’t take very long.  Look for volume increases on up bars.

The Short Term Sector table is shown below –

That’s about it for now, be careful and observant.  Plus, scale into positions as conditions warrant.  Have a good week.   ………..  Tom  ………….

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

A Slow Recovery . . . (?) September 25, 2021

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Sept. 24, 2021 – Last Monday the bottom feel out and the NASDAQ Composite Index (chart below) dropped below my first level of Support at 14896. My general rule is to use the low of the bar that closes below that first level of support as my guide to hedge / close positions going forward . . . unless the volume of that day is very high (folks rushing toward the exit). This drop has been generally expected for weeks now and all it took was for the Chinese real estate developer Evergrande to rumor a series of loan defaults. That “lit the fuse”. But notice that the volume was not excessive, a little above average (dashed blue line) but not up into the red line (average + 30%). In short, “orderly”.

At this time this just looks like a slow recovery, but make no mistake, this IS a different market than the previous 9 months.

I came across an interesting presentation. Here’s the short of it. The US economy is made up of 74% consumer spending activity. This drives the potential for corporate profits; i.e. spending = profits. Next, who (& what) drives spending? Well the segment that has the highest income and needs / desires. That age segment are those between the ages of 35 and 55; the ages where they have the most income & needs. Right now we’re seeing the biggest population / age segment are the Millennials. They are the ones currently between ages 35 and 55. The bottom line is their consumption / spending will continue through the year 2034 (roughly). The theory is that the behavior of those between 35 and 55 . . and if that segment is large enough, will drive a secular Bull market.

Now, that does not mean or even imply that there will not be volatile corrections that are significant. It only implies a recovery from a short term drawdown in the markets. OK, it’s an interesting theory and only a theory. Back to “what’s happening”.

Let’s look at manufacturing as a gage of this economy. The chart below shows recovery; it’s not a straight line but it never has been either.

I guess one could say, “so far, so good”, even with that recent dip lower. Likely driven by supply and semiconductor shortages and not by lack of demand. (my Thanks to Doug Short & Advisor Perspectives for this chart)

The Short Term Sector Strength table below shows the initial recovery of Technology sectors late last week. That must continue plus adding Financials and Small Caps would be a big plus too.

That’s about it for this week. Continue to Take Care and keep an open mind on what this market is telling you. ………… Tom ………….

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

Mixed Signals = Volatility September 12, 2021

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Sept 10, 2021 – I’m seeing some mixed signals so I’m thinking ‘volatility ahead’. Up until Friday, we had strong price action and improving market breath. All good signs. But we can get too much of a good thing too. Actually the market breath improved so much that one could call it a ‘thrust upward’. Those typically occur at market tops and not in a well developed bull market. Nothing “magical” about a thrust and I think it is more an indication of a “FOMO” (Fear Of Missing Out). Nobody wants to be left behind especially as the 3rd quarter end is only a few weeks away.

click on chart to enlarge

I note Sentiment remains positive, Money Flow negative, Volume Flow slightly positive and Price Strength neutral. Since we hit all time highs this week there are not resistance levels as such; the support level is 14896 on the NASDAQ Composite Index. Friday was weak and volume increased. We’ll need to wait on Monday / Tuesday to see if that weakness (i.e. volatility) follows through. One of my “early warning” signals fired on Friday, so that’s got my attention . . . a “yellow flag”. But we’re still within the up sloping channel, so let’s not over react and get whip sawed here.

Technology sectors have eased off a bit and Bonds have shown some strength. China and Japan are kicking up their heels too. The Short Term Sector table is shown below:

That’s about it for now. Markets rarely go in a straight line so an orderly ease back would be “normal”.. Have a good week. …. Tom ….

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

“Steady As She Goes” September 4, 2021

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Sept. 3, 2021 – First off ‘Happy Labor Day’ (for those in the USA). The US markets will be closed on Monday but keep in mind the rest of the world exchanges will be open. Note: I like to peek at the Asian market before I turn in for the night and the European as I get up, they give me an idea of the overall feelings before the US opens . . . not to mention the near 24/6 trading of S&P 500 futures.

The chart below shows a steady rising market. “What’s there not to like?”

click on chart to enlarge

We saw again that this market is nearly addicted to low interest rates. Jay Powell indicated that the FED will not be aggressively tapering soon, hence interest rates will remain fairly low for awhile at least. The market loved it ! And so it goes. Here’s the recovery of the stocks in the S&P 1500 Index as they relate to the 20 day Bollinger Bands:

Fairly steady and benign, but positive. The short term sector table below shows Tech (which makes up a BIG part of the S&P 500 and NASDAQ 100 Indexes) is back in the lead. Note the sudden strength of Japan though. Let’s see just how long that lasts. Also Real Estate.

I have continued to make some minor changes in my holdings, obviously favoring the strong sectors. As stocks or ETF’s fail to keep up with the others in the group they will be sold and replaced. I’m close to being fully invested, but not quite yet.

Have a great week & Take Care. …………. Tom …………….

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

Getting By With A Little Help From The FED August 28, 2021

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Aug 27, 2021

With apologies to the (old) Beatles song, this market is getting by with help from the FED. The tone from the Jackson Hole annual FED forum was “dovish”, i.e continued accommodation. No doubt that the markets are addicted to low interest rates; that’s very clear. And so it appears that the positive environment continues for a while.

click to enlarge chart

Now then . . the market breath remains narrow, meaning there are fewer stocks that lead the indexes higher, not a good sign. But other indicators like up/down volume and new highs / lows remain more positive. We’ll take it. Looking at the short term sector strength table below we see the narrow focus is accentually on the Technology based sectors. That’s kind of OK, but it sure would be better to see Financials, Industrials and Consumer Discretionary improve as well. Since the US economy is consumer driven, that strength will be important if we are to move forward for any length of time. Also note below that Defensive sectors are toward the bottom of the list; that’s positive.

That’s about the long & short of it for now. I haven’t left the market, but I do have some Cash to deploy next week if things continue to improve. Take Care and have a good week. ……….. Tom …………

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

A “Line in the Sand” August 21, 2021

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Aug. 20, 2021 – I feel that the markets are near / at an important support level, a “line in the sand” so to speak. This week price came down to the first support level at 14584 and closed just below it on Wednesday. That close below triggered a yellow flag for me to pay particular attention to the following bars (days). Thursday also closed just barely below, but the close was near the high of the day (possible strength, so no hedging / selling was justified). Friday was a strong up day, back above the support level.

click on chart to enlarge

Now next week will be important. Does the “buy the dips” folks come back or does the “sell the strength” folks come into play. The market “breath” (advance decline ratios) has been looking very weak for over a month; less and less stocks were holding the market indexes up. When I look further at other Breath indicators (Up/Down Volume, New Hi’s/Lo’s) I see a potential that this would be more of a Re-Accumulation structure rather than Distribution. In either case I think that we’re at or near an important price level that will confirm or reject one structure or the other. With the FED Jackson Hole meeting next week that may be a news catalyst in either direction. (You can almost taste the hesitancy in this market; no one wants to miss the next move for sure.) And of course the continuing saga of Covid is yet another wild card. So far the market has discounted much of the virus since the economy and earnings are doing pretty well, at least for now. One last observation: Volume last week on those red bars was at best average. There doesn’t appear to be a rush to the exit right now.

Looking at all of the stocks in the very broad S&P 1500 Index we see that most are Weak or Neutral right now. If this market deteriorates the price erosion will be reflected here very quickly. For now it looks like a typical mild correction.

The Technology sectors are what made a big come back late Thursday and Friday. Those sectors will be important IF a market rebound will continue. I’ll be watching for signs of weakness and increasing volume here as a major trouble sign.

Short Term Sector Strength

I’ve got some Cash to invest but I’ll wait for a confirmation before nobbling; not hedging at this point though. Current holdings (most tech based) are holding up in the mean time. An interesting market that right now is indecisive. Have a good week. …. Tom ….

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

Summer Doldrums: Rev. 2.0 August 14, 2021

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Aug. 13, 2021 -Just as a reminder . . I update this blog every weekend. That might be Friday evening up to Sunday evening, it all depends on what’s happening “in house”. 🙂

A quick look at the chart below shows not a bunch of stuff happening. Conditions have improve just a little over the week and I’ve updated the Support & Resistance levels to reflect that, but really not much.

click on chart to enlarge

With that I’ll say that I’m “invested” but not enthusiastic about it; it’s been a slow period in here, hence “summer doldrums” . . . not much wind to our back. Let’s look at where the stocks are in the S&P 1500 Index.

Overall they look to be in good shape with the “green” are covering nearly half of the pie chart and the “weak” area about a third. Fairly typical of a steady market. (BTW, the colors refer to where the stock price is in relation to their Bollinger Band “buckets”; +/- 2 standard deviations from the stocks 20 day moving average.) Next let’s take a longer term look at the major indexes of stocks in the USA:

chart courtesy of Stock Charts.com Click to enlarge

This chart is the indexes year to date. Early in the year I note that Small Cap stocks were outperforming. Lately the Large Cap S&P 500 Index has been out performing, and to take it a step further, the NASDAQ 100 stocks are out performing the broad NASDAQ Composite Index. Once again it sure appears that big cap Technology stocks are back in the lead. Small Cap strength is consider to be “risk on” indicator, so it looks like money is moving to the more “well healed” Big Cap stocks. More typical of a maturing market.

Lastly, the Short Term Sector Strength table below:

I note some Financials in the lead group, but the broad Technology sectors seem to be the place for the time being. The lack of movement has me wishing for Labor Day, when the Wall Street traders (of size) return. Have a good week. ….. Tom …..

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

“Not a Whole Lot-a” August 7, 2021

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Aug. 6, 2021 – When I’d ask my daughter “What’s new?” she would (sometimes) respond: “Not a Whole Lot-a”, and it looks like the Summer slow down is in force. Without new news or astonishing corporate earnings surprises it appears that both positive and negative force are neutralizing price movement in the markets. COVID Delta on the negative side and good earnings and a rebounding economy on the positive side. Couple that with many traders being on vacation and we see a pretty much range bound market.

I’ve changed the typical chart by drawing in a “box” that encapsulates the range. It’s somewhat inspired by Nickolas Daris and referred to as a “Darvis Box”. Yes, there is a slight slope upwards, but the point is things have slowed down considerably. And, I’m thinking, because of counteracting forces. Investors don’t want to commit any more, at least for the time being.

click on chart to enlarge

Money Flow has turned down and Volume Flow is lethargic at best. We do see prices moving higher in the short term, hence Price Strength is positive. I remain “moderately invested” for the time being. The strongest sectors are positive, but not by much, thus I don’t see the “risk / reward” as being compelling to be there 100% for the time being. (I guess I’m like many others then too.) 🙂

The Short Term Sector Strength table is shown below.

We see a fair amount of Technology sectors in the lead . . . again. and that’s positive. It would be nice to see some Financials and Consumer sectors moving higher though. All in all things are “OK” some we keep tabs on things and try to enjoy the rest of the Summer. It seems like Wall Street is on vacation too.

Have a good week and please stay safe. ……….. Tom ………..

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

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