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Market at Resistance Level=Caution April 17, 2021

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April 16, 2021 – This will be a short and to the point post since the current trend continues (i.e. Bullish). But . . . two items to consider: First, we are now at the previous high and so the 14107 level becomes a point of price resistance. If prices move confidently above that level then we’ll have a better feeling that the trend higher continues. Note chart below.

click on chart to enlarge

Second, we are now beginning to hit the major portion of the first quarter earnings. As mentioned before, this market is “priced for perfection” and any significant disappointments in major companies will have an effect on the overall trend. So in both cases it’s a good idea to watch earnings news carefully over the following 2-3 weeks.

I am also concerned (just a little) that volume is lower and the Sentiment indicator (at the top of the chart) is mildly Bearish.

The Short Term Sector Strength table is shown below –

Of note is the recent strength in Healthcare and Utilities. Both could be considered as defensive sectors for mutual funds that are required to be 100% invested. I am 65 to 80% invested and I’m seeing fewer nice “breakout” candidates to spark new investment. Let’s see how the market react next week. Do they blow through resistance or back off? That will give us an idea about overall strength.

Take Care and have a good week. …………. Tom …………

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

Better, but Still a Volatile Market April 10, 2021

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April 9, 2021 – This was a good week coming off of the Easter holiday, but there remains a few indications that this is (still) a volatile market. Case in point was on Friday; the indexes stayed flat for most of the day before finishing the last 45 minutes with a jump higher. Likely we’ll see more of this . . . in both directions.

click on chart to enlarge

And so the immediate trend is up: channel broken higher, Sentiment moderately Bullish as are the Volume and Money Flow indicators. The next level of resistance is the previous high at 14112 (NASDAQ Composite Index). One point to note is the low volume. The first quarter earnings season begins soon and the stock market is “priced for perfection”, any disappoint(s) could be hard on a Bull run. Let’s not get to euphoric just yet.

What we’re seeing now is strength in Large Cap growth stocks, primarily in Technology, Consumer and Industrial sectors. I’m a big fan of scaling into and out of positions to try and control risk. If next week continues to show strength I’ll add to my current positions but so far, so good.

Short Term Sector Strength –

What is interesting is that while some sectors are stronger than others, the strength in the market is fairly broad based. In order to do better than the Indexes, one has to be a good stock and/or sector picker.

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

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

Hopeful Signs April 3, 2021

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April 1, 2021 – First off “Happy Easter” to all that celebrate it. I hope that the bunny is good to you. 🙂

Spring is a season of hope and renewal and that’s what we might (just might) be seeing early signs of in the markets worldwide, but especially in the U.S. Looking at the chart below that are multiple indicators of returning strength of a Bullish trend.

click on chart to enlarge

The Market Sentiment is back to lightly Bullish as is Money and Volume Flow. Price Strength remains neutral but note the price bar color has returned to “green” and is above the near term price channel (purple lines). These are early signs of a return to a positive upward price trend. My only caveat is the low volume (lower bars on the chart), but hey, it was a holiday week so not a a big problem. We do need to see volume next week returning on up bars.

Stocks in the S&P 1500 Index –

The pie chart above shows just how broad the price strength is overall (1500 stocks). Again, early signs of a return to a positive market.

The jobs report was very positive and the vaccine roll out is very positive as well. Hopefully signs of renewal.

The table below shows the short term sector strength. Of note is the “Person Market” column which indicates the momentum of strength relative to the S&P 500 Index. ‘Outperforming’ and ‘Improving’ are early positive signs of strength. Also I note the re-strengthening of Technology sectors. Semiconductors are on fire.

I have started to “nibble” on select stocks and ETF’s and will increase positions next week as strength and volume return. “It” may not be over but “nobody rings a bell at the top” (or the bottom) so we need to be open to changes. My Moto is ‘scale in & scale out’; no need to be a hero. Right now I’m favoring “in”.

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

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

A “Wait & See” Market March 20, 2021

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March 19, 2021 – One could say that this market (depending on which index you benchmark) hasn’t done much over the past week and a half. Heck, you could go back even farther to mid to late February and say the same thing. That’s something that takes some getting used to but it’s not unusual. This past week trading volume was fairly low; that is below average. It just seemed like there is a “wait & see” perspective right now. Concerns about interest rates rising continue and add volatility to the day to day moves, but it’s more of a back and forth movement with a net result of not much overall movement.

click to enlarge chart

The chart above shows Sentiment, Money Flow and Volume Flow to be “Bearish” but just mildly so. Price Strength moderately Bullish. Resistance to any upward movement is around 1360 (green line) and support at 12985 (red line) in the near term. The price channel points downward.

So the end of the first quarter is close by and maybe investors just want to “run out the clock” and wait for something to inspire them one way or the other. We’ve come quite far very quickly since November and a pause is appropriate. The question is this “Re-Accumulation” or something more concerning? Since the bar color remain red I tend to be more cautious, though my major market model is still positive.

Short Term Sector Strength:

The only areas that did well last week were shorting Treasury Bonds (rates higher) and Japan. The “go-go” tech sectors were well off the high end on the strength table. And so, we join the “wait & see” crowd. Waiting for some sector to breakout and either break new ground or resume a previous move higher. And no one knows how soon that will happen or what will occur in the mean time. Right now I’m “lightly Bullish” but Cautious. Nuff said.

Have a good week and Stay Safe. …………. Tom ………….

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

Better, But Not an “All Clear” Just Yet March 13, 2021

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March 12, 2021 – A good week for the markets (both foreign & domestic) but I hesitate to call an all clear. I just don’t want to let my guard down and relax just yet. Let’s look at ‘why’ on the chart below.

click to enlarge chart

You’ll note that the Money Flow and Volume Flow indicators are better, but remain “bearish”. Sentiment and Price Strength are “Neutral”; plus the price bars are red. I’ll feel much better when the close is above the 13601 level on the NASDAQ Composite Index, and the channel lines flip. What is also telling is the low volume last week. OK, but folks are not rushing back into this market either. Let’s look at some of the major market indexes and see what we can learn.

There has been a lot of talk that investors are shying away from growth and moving into value stocks. The chart below is a ‘relative strength’ chart of the indexes over the past 90 days. All start from the same 0% point and the scale to the right is percent change

click to enlarge

Obviously Small Cap (small sized companies) were the place to be. Small caps are generally considered to be more speculative, but also an area to find growth. The NASDAQ 100 is a subset of the NASDAQ Composite of the largest 100 stocks. These generally are considered to be growth and typically technology based. The Dow Jones (30) Industries are a cross section of large, established American companies. And the S&P 500 is a set of the 500 largest companies; generally big cap and established.

The chart below is of the same indexes, but covers the last 27 days shown in the bracketed area on the chart above; i.e. that area “blown up”. It covers the time frame from the previous market peak to now.

So . . a little different story. Small Cap is holding it’s own but the stodgy Dow is doing much better and the NASDAQ 100 is now the lagger. This is a mixed bag. Speculative Small Cap is OK, low growth Dow has picked up and the “go-go” Nasdaq 100 is behind. I’m thinking that the market just has not yet determined what the next trend will be. True, the Dow could be effected more by the recent strength in the Oil sector and the concern over interest rates rising is spooking growth investors. Again, we’ll need to remain cautious over the next couple of weeks and watch for a “head fake”.

The table below shows the short term strength of the major sectors .

I have started to slowly return capital to the market but some Cash remains outstanding. I’ll wait for additional signs of strength. Have a good week. ………… Tom …………

Price chart by MetaStock; RS charts by StockCharts.com; table by http://www.HighGrowthStock.com. Used with permission.

Close Call March 6, 2021

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March 5, 2021 – Wow, that was a close call ! I put out a rare “heads up” post about “Getting Concerned” and suggested to wait for a close below the low of the Thursday bar that closed below the 12985 level (in red below). The volume level on Thursday was high and that was another clue that traders were anxious. On Friday (the last bar) the open was higher but quickly dropped; in the afternoon it came back near the open and above the low of the previous bar (12553). Thus, a close call . . . . at least for now.

click on chart to enlarge

The bar on Friday many would cal a “High Close Doji” which is a short term reversal pattern via Japanese candlestick jargon. In term of Wyckoff analysis it was a “test” of demand, which was found. Those red arrows draw my attention to pay attention in these situations. Even with Market Sentiment weak and Volume Flow bearish Money Flow remained strong. The number of 52 week New Lows increased but not to the point of raising any flags. For now I am suggesting that this is a mild correction, driven by a reaction to news (the FED) but continue to watch extra carefully next week. I also expect a lot of this stimulus money will find it’s way into the markets and that will help buoy prices.

Looking at the stocks in the very broad S&P 1500 Index we see that this has not hurt prices very much overall. The theory is that “growth” stocks got hit much more than the “value” stocks; this pie chart tends to confirm that.

Another possible explanation is the rotation out of the “growth / high flyers” as opposed to a significant correction where nearly everything gets sold off. The table below shows the short term sector strength. Note the confirmation of Treasury Bonds taking a hit (last on the list) while Energy and Financials rose toward the top. Technology dropped down significantly.

That’s about it for now. I’m watching the market overall closely, but also for signs that money is just flowing into different sectors too. Mostly invested with about 20% of my “powder dry” for opportunities. Have a good week. …. Tom ….

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

Interest Rate Freak-Out February 27, 2021

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Feb 26, 2021 – A rough week for the stock markets (worldwide). We knew that stocks were over valued and we knew that (in the USA) many accounts were over leveraged using Call options and margin (borrowed money), so the stage was set for a quick “dump”. And we got it. The catalyst was the rather quick jump in the 10 year Treasury Bond rates. Going up over 1/2% in a week is a lot in that short a time. Many read this as “inflation ahead !”, so they got out.

The question is are we done yet. I’m thinking that we are, or very close. Two things: 1) The number of new lows in the stock market is higher, but not that or very high. 2) The volume (note chart below) was very low late in the week. Activity is drying up; not much buying but not much selling either. Monday morning may see a bunch of selling as weekend investors note the drop in prices, especially in Technology and Growth stocks. In the afternoon or Tuesday, we may (just may) start to see some bargain hunting buying coming in. The key thing is to “Wait for it”. Volume will confirm price in this case. Otherwise, we will likely be in for some back and forth price movement that really doesn’t go much of anywhere.

click to enlarge chart

We’re very near a key support level of 12985, so next week will be important for where the markets may head off to next. We can see in the table below the short term sector strength:

Note at the top of the list the inverse / Bearish Treasury fund and where some of the Tech sectors ended up at. I highlighted the 5 & 10 day return column and for comparison to the 15 and 21 day columns. Just by colors you can see how things have changed over the past month.

I have taken the opportunity to close out some lagging positions and am about 40-50% invested now. Next week that amount will likely change either up or down as the down trend is either confirmed or rebuked by investors. But interestingly I have not put a hedge on just let; close, but not quite there yet.

Have a good week. ………. Tom ……….

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

A Fallback to Center Channel: OK February 21, 2021

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Feb. 19, 2021 – This week the market pulled away from the upper trend channel (purple parallel lines) and is hovering around the center. And that’s OK. A continued drop to the lower line would not be surprising in view of how far we’ve come and so quickly.

click on chart to enlarge

As long as we stay above 12895 there may be concern, but not danger. Also of note is the drop in volume; lack of demand. And that’s OK too. What is interesting is the previous leaders, Technology sectors, are now just doing OK. The short term leaders are Material, Financial and Oil sectors. It’s to soon to say this is a significant sector rotation, but it’s something to keep an eye on. At least Semiconductors continue to be strong under the Tech umbrella.

A chart of a wide selection of industry sectors (46 of them) and how they performed over the past 5 days is shown below.

5 Day % Return: of 46 Major Industries

Looking at the over sum of “green” and “yellow” performance compared to the “red” actually confirms the idea of a pause to refresh right now. Everyday can’t be a rip roaring “Up Day” for everything . . . it just can’t last very long.

So I remain invested and doing minor changes to go with the current trend. If this trend toward a more defined move continues we’ll just naturally go there too. But this could be a concern driven by rising interest rates & inflation, it which case Materials and Financials could just be a short term blip. Stay Tuned as they say.

Have a good week. ……….. Tom …………

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

Upward, but expect Volatility February 13, 2021

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Feb. 12, 2021 – First, a little “house keeping”. I’ve done weekly entries on this blog site for over 4 years, and to my knowledge, have not missed a week. New entries are made over each weekend and the date displayed at the beginning shows the most current data. Thus don’t expect comments during the week. The one possible exception would be IF I see a major change in my model during mid-week. In the case I’ll do a short post.

Next, I’ve made some changes to the weekly chart of the NASDAQ Composite Index (see below). The idea is to make it a little easier on the eye and easier to read. Just use common sense to interrupt it; arrows up are Bullish, down are Bearish, red is a Bearish color, Green is Bullish. The bottom line is we’re looking for a confluence or a propensity of indicators to show the same thing. A “one off” is just a warning to pay more attention. I’m happy to receive comments about what is helpful to readers.

click on chart to enlarge for easy viewing

Now back to the markets. Overall, I’d expect this year to be fairly good and positive. COVID will likely get under control and more people will start working and spending money (like normal) again. The markets see that likelihood by way of continued higher prices and a recovering economy. Add to that the possible increase in the minimum wage and that spells more expansion for the economy. Why? Because +70% of the U.S. economy is fueled by consumer spending. It’s simple. The more money consumers have, the more they spend thus creating demand/expansion. (Putting more money in the hands of the top 1-2% won’t make a difference; there’s only so much stuff an rich individual can buy. Just say’in.)

So the trend is up and higher but please remember that we can also expect a volatile market. The cause is speculation and right now there are a lot of people thinking the markets only go up. They don’t. Case in point is the amount of margin loans that are outstanding. This is fuel for a shake out.

Many don’t realize that then their stock holdings go down and they are on margin, they may be told about a “margin call” in their portfolio. That means come up with addition cash NOW to cover loses or the broker will automatically sell your stock. (And Yes, you have agreed to that; read the fine print.) This force or automatic selling drives weak prices even lower and quickly. But if the economy remains positive, it’s a great time to go bargain hunting. The moral is, be careful. Sometimes it’s not a good idea to react quickly to falling prices. Most recently the Game Stop fiasco. We’ll try hard to look for signs of a long term decline before severe damage sets in (a.k.a. intuitional / “smart money” liquidating near the “top”.)

Stocks in the S&P 1500 Price Strength:

About 60% are “green”, 30% Neutral and roughly 10% “red”. A pretty strong market.

Short Term Sector Strength:

So that’s about it for this week. Take Care & have a good week. ………… Tom ………..

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

Steady but Volatile Markets Excepted February 6, 2021

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Feb. 5, 2021 – Not much new to say this week. The market continued a steady climb, but indicators show that while the climb may continue it will likely be volatile. Overall I continue not to see any near term problems with a major correction or pull back.

click on chart to enlarge

Of note is the trend channel lines (purple) that point upward. On the negative side Money Flow remains lethargic. I am debating whether to change this weekly chart to add what I think is an improved market timing graphic. More to come, it just takes extra time.

Let’s take a quick look at near term sector strength below:

Looking at the 5 day price change column (“% Pr Ch 5-“) it was a very good week for just about everything. I note that the previous leaders, namely Technology based sectors, were good, but not in the lead. We could be rotating to more of a “value” sector play; keeping an eye on that. It’s looking more and more to be a “stock pickers market” where being in the right sector and stock are the more important thing than just being invested.

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

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

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