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A Cautious Breakout Higher June 12, 2021

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June 11, 2021 – OK, on Monday we got the breakout above the 13836 level and continued higher. The next level to keep an eye on is the 14206 level which was the previous high level. Price support now moves to 13548. Everything is good; right? (click on chart to enlarge)

Sentiment (top window) is Bullish, as is Money & Volume Flow. Price Strength is very good as well. What’s there not to like? Well I note at the bottom of the chart how volume is falling off. I was hoping for at least an average level as prices push higher. But one can’t have everything line up perfectly.

The pie chart below is of the number of stocks in the broad S&P 1500 and where they are in relation to their 50 day simple Moving Average. Generally, when a stock is above it’s 50 MA that’s considered a positive / Bullish sign. The good news is that there are about 65% of them above their MA. IF that were to drop to say 40%, it would be a sign of narrowing market leadership and a sign of contraction and a price correction. Also of note is the color coding of just how much the stock is above / below its MA.

The last piece of information is that of the Short Term Sector Strength table. This is where I tend to “prospect” for candidates that are performing better than the general market.

I have highlighted the 20 Year Treasury (#7) and the S&P 500 Index (#14) to point out a caveat. Note that (in the short term) Treasury Bonds have out performed the S&P 500. Humm. A flight to safety or just concerns about inflation, etc. ? I also saw that Treasury bonds have been out performing (a.k.a. Relative Strength) Corporate bonds. That’s unusual. So everything is not lining up perfectly, but it rarely does.

I have been taking increased positions in instruments (stocks & ETF’s) in the strong sectors, but watchful of the overall strength. We’ve come a long way in an unusually short period of time. It would be quite appropriate for things to slow down or become volatile over the Summer. Keeping an open mind about the next move.

I should note the next 2 weeks will be short posts, not that they may be less important, but I will be extra busy over that time. Have a good week & Take Care. …………. Tom …………

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

Oh So Close . . . June 5, 2021

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June 4, 2021 – Last week I mentioned the possibility of “green shoots” and the market showing early signs of returning to a Bullish stance. A number of my market model indicators were showing recovery from a very mild drop and I just needed one more factor to “click”. And . . it almost happened on Friday. That factor is the closing price.

I’m looking for a closing price above the 13836 level to confirm a more Bullish direction. Interesting that all of the other indicators show in the chart above are in a Bullish position and interesting that my “Short Term Channel” trendlines (in purple) virtually overlay my Support and Resistance levels. (BTW, both are drawn automatically via an algorithm and not by hand.) I also note that trading volume has picked back up, another positive sign.

But not to get tooo carried away, we are entering the Summer months where thing typically slow down. Even if these markets push higher it’s likely to be slower and more subdued than the previous 6 months. That said we should remain selective in investment selection since it’s more and more likely that not everything will be moving the same.

The Short Term Sector table is shown below.

I find it interesting that the Oil complex is so strong, but much of that is the recovery of the economy and not necessarily a long term trend. Same goes with Real Estate and Latin America.

Have a good week. ………. Tom ………

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

Early Positive Signs May 29, 2021

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May 28, 2021 – I’m starting to see some return of positive short term market indicators. These are coming from the Russell 2000 Index (primarily small cap stocks), which tend to indicate “risk on” or “risk off”. The broad NASDAQ Composite Index (below) is showing some early signs as well. To soon to say the the coast is clear, but perhaps we can get to a “muddle through” summer and not go into the Summer Doldrums.

click to enlarge chart

From what I see above, Market Sentiment is slightly bullish, Money Flow remains bearish, Volume Flow is not determined (?) and Price Strength is now neutral. At least the steady down price channel was broken to the up side and volume has increased. I do note that Friday, the last bar, closed toward the lower range. Concern remains about inflation; not a surprise since the economy is awash with liquidity.

We also see early signs of returning strength in the SP 1500 stocks. The first pie chart is where they stand in relation to their individual 20 day moving averages. We’re seeing an increase in Strong and Neutral slices here.

Next are the same 1500 stocks and their 5 day percent price returns. Again, more greens and less red slices. Overall a good week for many stocks.

And finally a table of where the strength is coming from. The short term sector strength table is below.

Interesting to note that the Technology sectors are beginning to rise toward the top. Encouraging. So I’m looking at next week to confirm at least some of this strength. I doubt if the past long steady climb returns, but we may see indications that certain sectors and stocks in those sectors are gaining ground in a more predictable way. So the yellow flag is flying. Be careful and be skeptical but also don’t be afraid, since we can always back away IF conditions don’t follow through.

To those in the U.S., have a great holiday weekend (US markets are closed on Monday, but international markets are not . . hint). …………….. Tom ……………

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

Market on Pause May 22, 2021

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May 21, 2021 This market continues to be in “pause mode”, so there’s not much new to say. Note in the chart below the drop off in trading volume over the past 6 days (bars; blue arrow). That dashed blue line is the 20 day moving average of volume and the red is 30% above the average. Not many folks see the need to buy or sell.

click on chart to enlarge

OK, we’re well past the half way point of earnings announcements and they have been overall very good . . . but that was expected by this market. Since we’re at the high end of evaluations (earnings vs. stock price, P/E ratio) there’s not a whole lot of incentive to push things higher without some good reason to do so. Small businesses are coming back and the economy is gaining strength everyday. But that’s the concern; inflation and higher interest rates.

And so the market is on a “pause” for now. My only concern is that it is vulnerable to bad news. But one can’t predict these things. In the mean time let’s look at the stocks in the broad S&P 1500 Index. The pie chart below shows how many are above their 20 day moving average adjusted for volatility (i.e. Bollinger Band strength). Pretty neutral right now.

Next the short term sector strength table.

Of note is the strength of Precious Metals (gold & silver), plus the weakening of Oil related sectors. The number of “green” sectors (top 20%) has shrunk down lately.

I’ve raised some cash mostly because there’s not much sense in being exposed to sudden news items and there is little compelling need to be totally invested right now. Have a good week. ………… Tom …………

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

A Good Place to Stop, but . . . May 14, 2021

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May 14, 2021 -We’ve known that the markets are “overvalued” and certainly nervous about interest rates and inflation, so this drop is not much of a surprise. Looking at the chart below, the 12985 level would be a “logical” / nice place to stop a correction, but . . .

click on chart to enlarge

But . . . the low volume ‘up bar’ on Friday (note arrow on the volume portion) gives me pause. A nice move higher on low volume . . . not much commitment to stopping at least not yet. The other indicators remain bearish so let’s wait and see what Monday / Tuesday of next week brings.

The pie chart below shows the 5 day % return of 48 major industries. Only one (recreational) managed a decent week and there is a lot of weakness out there.

Earnings continue but are now slowing. There are a few ‘darlings” but nothing really that surprising. It just seems like the market is looking for leadership and a excuse to resume the steady upward trek. Retail sales were good but the street was expecting a lot more. The Consumer Confidence indicator will be coming out May 25th but that’s over a week away. We need some bullish news coming out of somewhere.

The Short Term Sector Strength table is below –

Banks and Materials continue to do well. Oil / Energy as well, but how long can that continue? All of these are basing off of the increase in economic activity . . . . as pretty much expected. Where is the new growth?

I’ve pulled in some positions for Cash but remain about 70% invested. Waiting for the next move in either direction as the signs are rather mixed as of Friday afternoon. Have a good week. ………… Tom ………..

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

Ho – Hum Market April 30, 2021

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April 30, 2021 – As April closes and we’re in the midst of earnings season the market last week didn’t really seemed motivated to move much at all. Over the past 3 weeks not much movement. Some Tech stocks (like Amazon) blew the doors off earnings (not surprisingly) and Financials are doing well, but others were just “good” (i.e. expected in any case). I’m thinking cross currents both positive and negative that basically balancing each other out. Thus not much overall movement.

Many companies see strong earnings and a stronger economy, but they also see higher taxes. Covid seems to be a waning problem in the US, but much of the rest of the world is in turmoil. The Yen & Yang of forces are encouraging a pause. But a pause in not necessarily a bad thing right now.

click to enlarge chart

And so the chart above paints a similar picture. Mildly bearish sentiment, mildly negative Money Flow, barely positive Volume Flow, neutral Price Strength and a price structure at the top of an upward sloping channel; good & bad in check. The price range is tightening and so the foundation is set for a breakout in the future. Right now it looks like a re-accumulation scenario.

A little bit different analysis below. I took the stocks in the S&P 1500 Index and plotted out a pie chart with the 5 day percentage return. I note nearly equal greens, yellow and red shades. Generally indicating a balanced market, but this is over only 5 days.

The Short Term Sector Strength table is shown below.

One curious thing to note is the revival of Oil and Energy stocks. Under valued in the short term but perhaps and “iffy” future. Earnings continue over the next 2 weeks for the bigger companies so the watch continues. Have a good week. ……………… Tom ……………

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

Hot and Bothered Market April 24, 2021

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April 23, 2021 -I sound like a “broken record” but this week showed how vulnerable this market is to even the potential of (select) bad news. Case in point was the drop on Tuesday because Biden might (just might) raise the capital gains tax on those making over $400,000 / year. (yeah, I feel bad for them too)

click on chart to enlarge it

The market valuation and expectations are high. Anything less than blow out great news is met with OMG reactions. Add to that margin debt (i.e. borrowed money to buy stock) is very high, flows into leveraged ETF “bullish” funds are at all time highs and corporate insiders are not participating in the buying. Thus volatility, but I’m more concerned about a chain reaction where stocks go into forced liquidation and the snow ball rolls down the hill (and quickly). The larger question is “when” and not necessarily “if”. The ‘when’ point is unknown and again, my concern is we won’t have much time to protect ourselves. In the mean time, the march higher continues.

Of note is an interesting statistic: Roughly 80% of the stocks in the S&P 500 (large cap) are above their 50 day moving average (i.e. appear to be going higher). Only 40% on the stocks in the Russell 2000 (small cap) are above their 50 day average, and 30% of those in the broad NASDAQ Composite index are above. Perhaps signs of narrowing participation; generally not a positive indicator.

Getting back to the chart above. We see Volume and Money Flow are positive, Price Strength is positive, but Market Sentiment is slightly bearish; it just has not recovered from the previous highs in mid-February. The Price Channel (purple line) is sloping up and we have recovered from the recent dip in prices. I note the significant decrease in over all volume (lower chart). Perhaps a lack of fresh demand. Has everyone that wanted to buy . . . have all ready bought? Without new buyers, who will buy and push prices higher? Something to consider.

Here’s the Short Term Sector Strength table:

I note Healthcare, BioTech and Real Estate are at the top. These can be considered to be defensive sectors. Something to keep an eye on going forward. (the 5,10, 15 & 21 day price changes support these ranks)

And so I continue to be invested but watchful for a significant change in character. Have a good week & Take Care. … Tom …

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

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.

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