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A Scary Place July 15, 2016

Posted by Tom in Thoughts.
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July 15, 2016 –  At times . . . the world can be a scary place, and at times, so can the markets.  Things just don’t feel or seem “right” and I’m thinking we may be in one of those places.  First let’s take a look at a chart that I’m sending to my clients this weekend.  It’s of the S&P 500 Index over the past +3 years.  (click on it to enlarge)

S&P 500 Perspective

Now the S&P 500Index has been one of the better markets in the world as of late.  It measures the 500 biggest US companies.  I’ve highlighted the fact that for nearly 1 1/2 years we’ve not gained anything . . . 0% return for all of that risk.  The red line shows a 10% change in price (either up or down), and we’ll call that volatility “risk”.  Also on this chart is the area last spring / summer where the market took a noticeable “change in character” (in purple).  No longer did we get higher highs and higher lows as the market stair steps upward.  Wyckoff warned of this “change in character” and the question is whether we’re in a large trading range of re-accumulation with higher highs returning, or in a big Distribution structure.  In any case things are NOT like they were in the pre-spring of 2015 period of steady gains.

The chart below is my trusty NASDAQ Composite chart.  A lesser known index, but much broader since it covers far more companies and not just the big guys.

NASDAQ

I’m still labeling the current move as a possible UTAD (Up Thrust After Distribution).  Prices above previous swing highs, (check) on lower volume / demand, (check).  Now this is not a slam dunk “got to move down” call.  It doesn’t have to play out as a Distribution structure but we should at least acknowledge that this is present and could continue to develop.  IF it does, next week we would see a sharp sell off on a wide range bar, with a Close at / near the bottom of the daily range (maybe a couple of days).  This would be a sign of weakness (SOW); volume could be light to average.  Then a weak move up on narrow bars (buying = selling), with volume increasing.  This would show a  significant liquidation of stock.  Then a continued, steady drop.  IF we don’t see this structure develop then a minor drop to around the 4905 level on light volume and then a snap back on increasing volume would take the UTAD off the boards.

I note the volume dropping off the last few days and the Money Flow indicator (top chart in red) weakening as well.  Also the narrow range bars this week don’t show a lot of buying commitment or interest.

The world is scary this week and so could be the stock market.  No time to be heroic, but a time for caution.   I’ll be traveling for the next few weeks so postings may be late and/or brief, but I’m make every effort to keep things going in a timely manner.  (Always check the date at the beginning of the post for the last data date.  Charts & comments are circa that time frame.)   Have a good week.    …….  Tom  ……..

charts by MetaStock; used with permission.

A Bounce . . . . and Then March 31, 2014

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OK, I’m late on this post but I have a signed excuse from other technical analysts.  🙂  (at a conference)  So let’s catch up here.

Looking at the chart of the NASDAQ Composite Index below I think we’re seeing a dichotomy of thinking.  The Money Flow indicator at the top shows Distribution, but note how the volume (lower window) is showing less activity (Supply).

NASDAQ

My thinking is that we’re oversold, in that the market has over reacted in the short term.  Thus a bounce (up) is likely.  What happens after that bounce / reaction will be important.  I doubt if it will make a “higher High” but it could just to fake out the Bears and force them to cover shorts.  I’ve also drawn in a parallel trend line to the predominate lower trend line off of the last swing low that penetrated the lower line.  Lo and behold . . . it stopped (so far) right at Fridays low (roughly 4130).  I’m thinking that 4130 level is going to be an important support level.  Breaking that lower trend line was not good, but going below 4130 (on a Close) is pretty damning.

It’s the end of the first quarter, so many folks would like to see a price bounce (to make them look less bad) and that may help it along.  Overall I still see more weakness than strength.  Taking a look at the Accumulation (buying) and Distribution (selling) pie chart below shows a deterioration strength . . . . more red than green.  Looks like 23% of the S&P 1500 stocks are in Accumulation, 29% Neutral and 48% is Distribution.

Accum Distrib

I also am seeing very few stocks that pass my “Buy Candidate” scan, so as my stops are hit, I’m staying in Cash to see just where the next trend will be.  This Bull market is old and could use a rest, the only question is when it will start.  I would not be surprised to see Spring as that season, but let’s not guess at this.  Follow your rules and don’t be to in a hurry to put money back into this market.  It may not be worthy.  Just say’in.

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

price chart by MetaStock; pie chart by http://www.HighGrowthStock.com.  Used with permission.

 

Reaction Back to Support March 14, 2014

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A wise (and experienced) fund manager once told me that “if the market is weak, it responds to bad news with weakness . . . if strong, it ignores it.”  It was one of those weeks.  Continued bad news out of the Ukraine and poor economic news out of China.  As I’ve said many times before, once we’re at the upper channel lines (purple) of this trend, we’re susceptible to corrections; the risk is at the top of the channel.  So not surprising, bad news near the top of this channel brought on selling.

We could see this coming with those narrow range bars toward the top.  This indicates selling (nearly) equal to buying, so price goes nowhere.  In context (i.e. at the top) the next move is likely down; and it did.

NASDAQ

We also note the generally higher volume as of late; supply coming into the market.  I’ve labeled the top bar as a possible “bc ?”, meaning a Buying Climax in a minor price structure (so far).  Also note the narrow range bar on this Friday, perhaps buying coming back into the market to match the selling at the important Support line?  If so, that could be our Automatic Reaction (ar ?) point . . . it would be a locally price level to do that.  🙂

And so what the market does from here will either confirm or deny this structure scenario.  We could see an Upthrust next with prices going back toward the highs but on very light volume.  That’s our chance to exit gracefully and sit back and wait it out.  High volume up bars would call that into question though.  The other possibility is that we just continue down.  And that could for tell a possible larger price structure (with capital letters).  A major top / Distribution structure will take longer to develop and confirm.  Something to be seen on weekly charts as well.

This Bull market is in its 5th anniversary and is the 6th longest in history, being the 4th largest (in % gains) of all time.  Thus seeing a larger price structure develop would not be a surprise for us . . . . would it?  For now, we “Stay in the Now” and only trade what we see, not falling into the trap of predictions.  As it is said: “Even a broken clock is right twice a day.” and those that predict are only sometimes right (but that’s all we hear about).

Is there anything doing at least OK now?  Yeah a few.  Top sector table is below.

Top Sectors

Watch the support level next week and observe how this market reacts.  Price “leads” but volume will confirm that direction (or disprove it).  Have a good week.    ………….  Tom  ………………

chart by MetaStock; table by www.HighGrowthStock.com; used with permission:  click on graphics to enlarge

Market Correction, but is That It ? February 23, 2013

Posted by Tom in Thoughts.
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Greetings.  Last week I talked about the market possibly forming an UpThrust bar, that is in Wyckoff terms a sudden move up right before a sudden drop.  Now many folks would say I was spot on, but not so fast.  This (possible) formation has not been confirmed yet.

A few things bother me.  First there is not much of a “cause” in the background.  The “cause” would be a sideways movement going back awhile.  IF one were to think of the “cause” going allll the way back to the previous high of mid-September, 2012, then that would be a major “cause”.  That could be and would foretell a major drop.  So . . . I’ll wait for confirmation.

Three things are needed for confirmation of a change in trend (distribution in this case).  1)  A broken (significant) Trend Line (preferably with a Close below it).  That has not happened yet.   2)  A failed upward swing (higher) after the UpThrust.  That might be starting on Friday with a move up but we’ll need to see more of a continuation of that move up without exceeding the High of the UpThrust.  Note: watch the volume if that happens, average or increasing volume is Bearish indicating folks are bailing out even as prices rise.   3)  A Major Sign of Weakness (like a failed up bar on higher volume that closes near the Low of the day), would be Bearish as well.

NASDAQ Composite

If we don’t get confirmation one must assume that this formation is just a Re-Accumulation formation and not Distribution.  That would be a minor correction in an overall up ward moving market.  We’ll see.  Right now nothing is that terribly obvious.

The FED news generated the correction so far.  That shows (in my mind) that this market is very nervous about the future and traders are quick to take profits.  With the sequester budget issues hitting us on Friday you’d think that there was plenty to be worried about.  But maybe (just maybe) not.  This market does not see this as an impending problem.  I’m surprised.

The next two pie charts show (I believe) relative strength in the market right now.  I don’t see a rush of the exits just yet.

S&P 1500 Price Strength

The chart above is the price strength of all stocks in the broad S&P 1500 index.  This “strength” is in reference to a price band or envelope.  Green is strong, Red weak, Yellow neutral.

S&P 1500 Accum-Distrib

This chart is also of the S&P 1500 stocks but refers to Accumulation (money flowing in) and Distribution (money flowing out).  The standard Green, Red and Yellow colors apply here as well.

Market Correction . . Is That It?  Yes, that could be it but a small rally up in the next few days on higher volume could be a problem, especially next week with all of the political issues getting traders nervous.  Definitely a time to be extra watchful, perhaps a time to hedge out positions (?) just in case.

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

charts courtesy of MetaStock and www.HighGrowthStock.com ; used with permission

 

A Dull, Waiting Market . . . December 7, 2012

Posted by Tom in Thoughts.
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This past week was actually pretty dull.  As the chart below shows we saw “supply coming in” (volume increasing) on a strong move up the week before.  That’s usually a sign of weakness and selling is around the corner.  Sure enough this week opened high then sold off on Monday.    (click on chart to enlarge)

NASDAQ Index

This market appears to be bouncing between the 3040 and the 2965 levels.  Of note is the modest, average volume.  Hence it looks like this market is waiting for news; yes . . . Congress and that darn “Fiscal Cliff”.  IMHO the Fiscal Cliff issue will be resolved since no party wants to be labeled as the cause.  So the real question is not “if” but what the solution will look like.  And that’s what I think the market is waiting on.  The holidays don’t help either, we’ll start to see trading volume drop off next week with it realllly dropping the following week.   So news will move this market, we just have to wait for it.

Apple had another terrible week and that rolled through the Technology sector.  Since the NASDAQ 100 is capital weighted Apple had a unrulely effect on it (about 20% of the “Q’s” is Apple movement).  Finance has shows bursts of strength followed by dullness, with little follow through.  The market would like Finance &/or Technology to show some leadership but we’re not seeing it just yet.

What sectors are moving now:  the chart below gives us that answer.  No surprise that Pharma and Bio-Tech issues are in the top 10 along with Construction and a few basic consumer sectors.  It’s interesting to note that the R/S Ranking (1-100), that compares sector strength to the S&P 500 Index, is very modest and at mid-range, while Accumulation/Distribution (money flow, ranked A-E) is fairly strong.   Not much price action but it looks like stock is in “strong hands” in these sectors (little selling and steady accumulation).

Top Sectors

And so it goes.  Not much else to say since the market is not giving us much of a clue for what may happen next week.  I suggest that you take your significant other out to a Holiday Party and just put the market and the “Cliff” on hold untill something actually develops.  Have a Good Week !        ……..  Tom  ……….

chart courtesy of MetaStock; table from www.HighGrowthStock.com ; used with permission (of course).

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