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Continuation with Caution December 14, 2019

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Dec. 13, 2019 – This sounds (and is) a broken record.  One that just keeps on playing the same “groove” / track.  Case in point is the trend channel on the chart below (purple lines).  Note the rate of the incline before last week (price to the upper line) and that of price to this week (lower line).  Prices appear to be following (progressing) at the same rates.  OK, that’s all well and good plus we’re at the “all time high” scenario.  But . . . . note just how far higher prices would have to go to catch up to the upper trend line.  My support level is at 8600 for the NASDAQ Composite Index.

Damage was done a couple of weeks ago (about 10 bars back).  I’m on the lookout for a minimum of a “change of the rate” of increase or a deeper pattern change.  (click on chart to enlarge)

The China trade news could and likely will throw a monkey wrench into the entire market structure; either higher or lower.  But the Trump Tweets are getting just a little old.  (huge deal coming, big news, etc., and then nothing)  In the mean time I have to go with what I see.  Price trend up, most indicators are positive.  The notable exception is “Money Flow” which turned lower (red line above).

Sector Strength (in the short term) remains about the same.  Select Technology issues and Bank / Financials.  Watch for reports on Christmas retail sales.  They will be quite the bell weather for the economy.  I note that November sales were a disappointment.

That’s it for now.  Have a good week and be careful with the news whip lashing these markets . . . . .  the risk increase at the “all time high”.   …………  Tom  ………….

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

Upward Continues December 7, 2019

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Dec. 6, 2019 – And so the upward move continues.  A test of the lower trend line (via negative China trade news), then back up.  This shows that the markets are factoring in some type of “trade deal”; maybe not the whole thing, but something.  Interesting that small cap and mid cap stocks came alive over the past week; generally a positive sign.  Now with earnings season well behind us the focus will be on trade and retail sales for the holiday season.  If either disappoints . . . . well we now have a taste of the result.  It will be sharp & swift.

In the mean time one must follow the trend and it continues to be upward.  Call me skeptical, but I remain an uneasy long investor in here.  Part of my logic is that we’re closer to the top (likely) than we are to the bottom.  The regular chart is back and the software upgrade issue has been resolved.  🙂   (click on chart to enlarge)

I’ve moved the Resistance (at 8705) and Support (8542) levels tighter to try and be responsive to any negative news.  IF these levels are violated on the Close that would confirm a possible trend change or correction.  Until then, the other indicators are positive and we go with the current trend.  Let’s look at the percentage of stocks in the broad S&P 1500 index and see where they stand.

Price Strength – In Accumulation / Distribution –Current short term Sector Strength:

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.

Upward Trend Continues December 1, 2019

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Nov. 29, 2019 – This was a very short trading week in the US, though there was plenty of news internationally.  Most notable were the continuing back & forth comments regarding China trade.  Things don’t appear to be going very smoothly.  The big question is whether the new tariffs will go into effect on Dec. 15.  The count down continues, though I would not count out a “strategic delay” to give everyone more time.  IF the tariffs go into effect this market will react poorly (IMHO).

The chart below shows the price action.  (My software is acting up; a new version, so a few indicators were not immediately available.)

So far, so good.  I do remain cautious as market breath is starting to narrow; meaning less stocks are participating in this rally higher.  (click on the chart to enlarge it)

With this market breather I thought it would be interesting to compare the performance of the major market Indexes year to date.  The chart below begins at the Dec. 31, 2018 close and continues to last Friday.  You see how each index benchmarks off of the other; Bonds included.

That’s about it for now.  Sector strength remains the same from last week.  Have a good week.  ………..  Tom  ………..

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

Direction Still Up: Clouds Forming? November 16, 2019

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Nov. 15, 2019 – Make no mistake, the direction of the US markets remain “Up”, but . . . . storm clouds may be forming.  Two signs of that are the percent of “Smart & Dumb money” (from SentimentTrader. Com) and my own sentiment composite (top pane, chart below).  The difference between “Smart & Dumb Money” is fairly high indicator of where market tops happen.  That does not mean “all Hell is breaking loose”, but it does raise the caution flag.  The “big guys” are cautious.

Note just how far & fast this market has come in the 6 weeks.  Due for a change or at least a pause?  I’m certainly thinking that is a strong possibility.  It’s just natural.  I also note that price action “Price Strength” is back to Neutral.  Time to Sell?  No, but not a great time to buy either.  Let’s continue to monitor the reaction of the market to any news, whether it be earnings, geo-political or the like.  That will be a clue.  Trade news is going to be a key item here.  Right now we’re being whip-sawed back and forth on that front.  There is a big incentive to inflate these market over the next year (i.e. election); watch the big picture carefully.  (click on chart to enlarge)

Short term, here’s where the sector action is:

That’s about it for now.  I’m in there with significant positions, but getting more uncomfortable as this market pushes higher.  Watch volume spikes on big move days.  Also be aware of “Lack of Demand” (low volume), especially over multiple days.

Have a good week.    ………… Tom  ………..

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

Continuation Higher November 8, 2019

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Nov. 8, 2019 – What’s there not to like?  The market gapped up higher on Monday and pretty much stayed in a narrow range most of this week.  Ignoring the impeachment and on again – off again China trade news.  So for now, I’ve just got to stay in this market even though I’m not entirely comfortable with it.

The chart above shows all positive indicators; not much else to say.  (click on chart to enlarge it)  Let’s take a look at the stocks in the very broad S&P 1500 Index below.

Price Strength –

Over 50% above their 20 day moving average, so strong price movement for most stocks in the index.

Accumulation (buying) & Distribution (selling) –

(Again) over 50% of the stocks indicating Accumulation of shares.  Maybe a little over done, so a pause is not out of the question here.

Sector Strength –

The Technology sectors continue to lead this market higher in the near term.

So the bottom line is this market continues higher until something forces investors to get nervous and sell.  We’ve come up a fair amount and survived (most) of the 3rd qtr. earnings.  The seasonality is generally good for the rest of the year, so got to go with the flow.  When changes comes, I’ve got a feeling it will come very quickly.  Hopefully the stair step higher will continue in the mean time.

Have a good week.      …….. Tom  ……..

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

New High . . What’s The Problem ? November 2, 2019

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Nov. 1, 2019 – OK, the markets are at / near all time highs so what is there to worry about?  Maybe nothing, but then again maybe there is at least some concern.  I’m changing the perspective and the time frame of the regular chart of the NASDAQ Composite Index (below).  The daily bars show us one thing but weekly bars can provide us with a different perspective.

I’m taking a liberal view of what a “top” is on this chart so bare with me.  The chart goes back about 17 months and the area over a year ago (mid Sept., 2018) is labeled “1”.  Thereafter we see labels at the swing highs / peaks of 2, 3 and 4.  Each time the market gets near the current level it has pulled back, and sometimes very quickly and significantly.  Presently many of the indicators are positive, thus indicating strength and continued prices moving higher.

Now I’m not saying that the market has to correct and head lower, it’s just that we’re once again at / near an inflection point.  I am currently “long” this market because in the short term it is headed higher as far as we know.  From a historical perspective one could have gone to Cash over a year ago and not missed much, and actually come out ahead.  The question to ask is what makes this top, top #4, different?  Or perhaps we’re in a very broad trading range and need to be quick on our feet to make any type of head way.

In any case we will have a much better idea within a few weeks.  Either the markets will continue to trend high after this current breakout, or it will confirm a “shake out” of the last buyers “holding the bag”.  I’ve read where the big institutions are very reluctant to buy into this market at these levels. The point being that we are closer to the top, than we are to the bottom.  It’s been a while since the trend bottom; an unusually long period.  I feel it’s a good time to be nimble and extra careful because the next minor correction could be more than that.  Let’s watch the bar action and confirm them with volume.  Signs of a rush to the exits are wide range down bars on high volume.

In the mean time here’s a table of short term sector strength –

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

Above Resistance, Close to Previous High October 26, 2019

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Oct. 25, 2019 – Well, onward and upward.  The NASDAQ Composite Index closed above resistance indicating strength.  That’s all well and good but the next level of resistance (above) would be 8325, which was the previous high on 7-26-19.  As we approach that level it is logical to expect a pause to digest the previous up move.  Since we’re right in the middle of earnings season there is always the potential for a surprise.  So far the earnings have been pretty good, with some guidance lower in the 4th quarter.  Volume has been average, so no one is rushing to buy.

                                                      (click on chart to enlarge)

For now we just have to go with the flow and watch for signs of weakness.  The support level is near the 8045 mark and any minor correction should hold near there.  If that level breaks we could be in for further downward action and just wind up in a broad trading range.  The good news is that we’re in a generally bullish sessional period as we head into the Christmas session.  Everyone will now begin to watch for consumer / retail spending, and that will weigh heavily on the market over the next 2 months.

On the sector front, the Technology sectors have regained their dominance.  Latin America and Small Cap stocks are also back in trend.

I am nearly back to being fully invested.  Still looking for a few more stocks to fill in the growth portfolio.  Lately my research has focused on “when to sell” to lock in profits during a correction.  Transaction costs are so low there’s no sense in trying to stick it out and be a hero.  The trouble is most growth stocks go down about as fast (or faster) than they go up.  Timing is a big factor.

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

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

Market Improving, but . . . . October 19, 2019

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Oct. 18, 2019 – This week we saw a market improvement by breaking the 8062 level, but then stall out at 8172, which is close to a previous swing high (note on the chart below “failure”).  This stall can be considered very normal and merely a pause at a significant level before regaining momentum.  Or, it could be a “double top” which is bearish.  Volume did pick up a little on Friday but we didn’t see a wholesale exodus out of stocks.

What we’ll do is carefully watch for either signs of strength or weakness in the coming week and take our ques from that.  These signs will be where the closing price is in relation to the bar range (either top or bottom) and whether volume increases on those bars (buying or selling pressure).  A close below a previous swing low would confirm bearishness, and a close above a high would be bullish. (click on chart to enlarge)

What I do find curious is the sudden change in sector strength late in this past week. (see table below)  Recall that the Tech sectors (Technology, Semiconductors, “the Q’s”, etc.) were right near the top of the list; refer to the table in last weeks posting.  And now look at how far they have dropped in just a few days.  They’ve been replaced by more defensive sectors (Banks, Telecom, Wireless, etc.).  Are traders getting cautious?  Possibly, but this table is geared to short term strength, thus it can turn around quickly (i.e. made for trading).

I haven’t shown the “percent of stocks in the S&P 1500 Index” pie charts for awhile, so let’s see what they show –

Price Strength-Nothing very remarkable as nearly half the stocks in the index are above their 20 day moving average.

 

 

Accumulation/Distribution-

This pie chart shows a little more tentative strength.  “Normal” would be roughly 1/3 of the stocks in each of the three categories.  Too much green or red would indicate “over bought” or “oversold” conditions within the broad overall trend.  A big chunk of yellow / neutral shows indecision.

That about it for now.  I’m going to be especially observant next week for signs of strength or weakness.  Right now I am “cautiously long” with still some Cash to invest IF conditions continue to improve; but I always want to know where the exit door is located.  🙂  Have a good week.   …….. Tom  ………

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

Hopeful, but Not Great October 12, 2019

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Oct. 10, 2019 – This will be short since I’m “on the road”.  The gap up on Friday was “hopeful”, but the close was very weak (Not Great), hence the price action did not confirm that a new up trend had begun.  For this reason I think it’s wise to go slow until the structure of this market improves.  No need to be a hero in here.

It sure would be nice to see a solid close above the 8062 level on the NASDAQ Composite Index.  Volume is picking up but the “Money Flow” indicator shows that a lot of selling was done and so far has not been over come with buying.  Once again “news” has driven the market and if things don’t “pan out” with trade negotiations, the market could revert back lower.  Until we see some earnings coming across the wire from the end of the 3rd quarter, we will likely not be on solid footing.  I am not convinced that the all clear sign has been given just yet.

The sector table is below.  I note that Technology is the most optimistic of the sectors.  Not surprising since that area got hit hard during the last down swing.

I am slowly taking small position in here; the light hedge has been removed.  Have a good and cautious week.   ………….  Tom  ……………….

Better, But Not “Out of the Woods” September 7, 2019

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Sept. 6, 2019 – OK, the general U.S. market has recovered and is above my short term resistance level of 8048 (green line, chart below), but other indicators are not confirming this breakout.  This is unusual.  The “price action” is just poor.  Normally I’d remove all hedges and be in Cash ready for the next (likely) “Buy” signal.

I have reduced my short / hedge positions but still am keeping a light position open for some protection.  Note that “Money Flow” has turned back down.  This market is just too dependent on news to suit me; one news comment and off the market goes on a 2-3% move based on hope.  Not the sign of a strong market.

My “fall back” level is 7847.  That’s where I’d re-enter a significant hedge for increased portfolio protection.  My focus tends to be shorter term since I’m managing retirement funds without any tax consequences.  I remain is a strong Cash position now with only a few “longs”.

The chart below from Bloomberg is interesting on two fronts.  First, it shows that generally the estimates of EPS (red line, Earnings Per Share) for stocks are lower than what the actually are (blue line).  I guess you can call it “worse case” estimating.  Secondly, and important now, is that we see EPS falling in 2019 (green circled).  Regardless of what is said, earnings growth is slowing.

And that slowing is what I believe is behind the stalling in the market.  After all in the long run what effects the price of a share of stock is it’s earnings per share.  Short term is another story.

Lastly the table below shows what sectors in the US markets are doing in the short run.

Many of the defensive names have dropped off the top; Technology, China and Telcom are in the immediate lead now.

That’s it for now.  It will be an interesting week to see if this market can hold onto the breakout of it trading range that it was in.  Have a good week.        ……………..  Tom  …………….

 

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