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Signs of a Pause February 2, 2019

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Feb. 1, 2019 – While the overall trend of this market remains up, by mid week there were some signs starting to show themselves of a possible weakening of momentum.  In my more complex market model I got a “Caution – Move to Cash” signal that continued into Thursday but never triggered into an position change.  This model is fairly sensitive so not every “Caution” gets confirmed, but the case remains that momentum could very likely be changing.  Bar Strength has dropped and Fridays bar spread (the price difference between the high & low) was very narrow.  Narrow bars show that selling and buying are about equal and after a nice run up that could mean a pull back.

The chart above does show current prices at / near the 7225 resistance level so let’s keep an eye out next week for some type of pull back / pause; it’s overdue anyway.  A look at the number of stocks in the S&P 1500 Index that are in Accumulation / Distribution is shown below.  Very strong indeed.

Also the number of stocks that are showing strong Price Strength is equally impressive.

With so much “green” a pause or minor correction would be normal.  For this reason I’m a little hesitate to add any more positions right now.  I’d like to see what this market does in the next 2-3 days first.  We are starting to wrap up the earnings season now and the results have been generally OK with a few surprises.

Here’s a look at what Industry Sectors are strongest in the relative short term:
I’m about 75% invested right now, waiting to complete re-accumulation, but watchful in the near term.  Have a good week.  ……  Tom  ……

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

Steady As She Goes, but On Watch January 26, 2019

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Jan. 25, 2019 – It’s sounding “old” but so far there’s no real indication of major market issues and so the phrase “Steady As She Goes” sounds appropriate.  Prices have recovered a lot and very quickly so some pause or minor correction is not out of the question.  Prices on the NASDAQ Composite Index closed Friday very near our 7225 resistance level (green) and this would be a “logical level” for that hesitation to begin, but nothing is a given at this point.

This market seems to shrug off most news events.  The one thing that could trigger a major move (in either direction) would be trade talk results with China.  Domestic politics and Brexit don’t seem to matter much.  Interesting that these have been discounted.  Sentiment, Money & Volume Flows are all positive and Price Strength is strong.  I am selectively long, picking stocks and sectors that appear to provide opportunity and that have not got ahead of themselves.

My new sector strength table is shown below.  Technology and Financial sectors are showing strength in the short term.  Mid-Cap indexes are also doing well.

And so it goes.  We just have to go with this trend and so far this trend continues to be up, though I’m pretty uneasy about it.  Have a good week.  ………..  Tom  ……….

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

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Market Continues Higher January 19, 2019

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Jan. 18, 2019 – My first level of price resistance at 6930 was blown through, but the next level at 7225 is not far away.  Earnings coming out are mixed, some good and others rather poor.  This rally seems to be a “Fear of Missing Out” rally which is typical after the severe oversold condition on Christmas eve.  Money & Volume Flow indicators are positive as is Market Sentiment.  At least a minor pullback is overdue and that will give us an idea if the “smart money” is trying to get whole from the late Fall market correction, or if it is just a pause that refreshes a re-accumulation phase.  The key will be volume.  Light to average volume on a sell off means it will be shallow and short lived.  Heavy volume = heavy selling and the recent lows could be re-tested.

For now we just have to ride this trend and in the immediate term the trend is higher.

The table below is different.  I’ve changed it to condense the sectors but also to add the indexes and some key international market indexes.  I’m thinking that this simplifies things while broadening the scope to international sectors.  The idea is to make this more meaningful and “actionable”.  Comments are Welcome.

That’s it for now.  I’ve got a feeling that the first quarter will be a bumpy ride, since there is so much undecided that could have a major effect on the markets.  Have a good week.       ………….  Tom  …………

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

Uncertain Market Driven by News January 5, 2019

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Jan. 4, 2019 – First off I’d like to wish everyone a very Happy New Year.  By all indications (economic, political & governmental) 2019 will be a “doozie” of a year . . . much to expect in the months ahead.  In the past week we’ve seen a near 10% change in prices of the major indexes in just 2 days from top to bottom.  Amazing since is some years that would have been the price range for the entire year.

We’ve seen a significant rally from the Christmas Eve lows, but there has been so much damage done since late September that a weeks rally on modest volume won’t wipe away the lingering bearish concerns.  Apple dropped the bomb that investors should NOT expect healthy gains in profits and the tariff war continues though news leaks try to paint a more optimistic future.  The US government shut down and Fed concerns  make investors nervous and uncomfortable; a bad recipe for higher prices.  With all of those in mind my feeling is that we’ll trade in a broad range roughly between 6930 at the top and 6130 at the bottom (purple freehand drawing below).
The chart above shows investor Sentiment improving while most other indicators remain Bearish or Neutral.  Next week the full complement is back on Wall Street, so we’ll see if they drive prices much higher or not.  Right now it’s anyone’s guess.  For the time being I’ve removed my hedge (i.e. sold off the bear funds) and only hold modest positions in Bonds and Precious Metals.  I’m considering buying Latin America (index) and Biotech, but that’s about it . . . heavy in Cash.

Here’s a look at the major US sectors as far as short term strength is concerned.

Even “the strong ones” are not that great right now.  Have a good week and buckle up for volatility in the coming months.  Weak markets don’t like surprises.………  Tom  ………..

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

Volitile Bottom (?) looking for a Bounce December 29, 2018

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Dec. 28, 2018 – The last post of the year and wow, what a week.  Massive moves inter and intraday.  I understand that we had a nice rally after Christmas but so much damage has been done on the way down that the light buying volume has not made up for it.  I’m still looking for a “head fake” rally to around the 6930 level (green dashed line) then likely a big move lower, but let’s take this one step at a time.  There’s always a possibility that we just chop around between these Resistance and Support levels and build a base.
All of the indicators shown above remain Bearish except for Price Strength which is neutral.  I don’t think we’ve seen the true market here due to the end of the year portfolio rebalancing from bonds to stocks by big pension funds and institutions.  Also there has been a fair amount of short covering (buying back stocks that traders shorted a month ago).

Price Strength of stocks in the S&P 1500 Index has improved but is still predominately “red”.

The Accumulation / Distribution pie chart hasn’t changed much from last week; it moves slower and the volume last week was very light.  The table below shows the very short term sector strength.
For the time being I’m happy to be mostly in Cash &/or hedged out.  Let’s see what the new year brings and maybe the markets will show their hand.

Happy New Year to All !            ………..  Tom  ………

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

Expecting a Bounce Higher, then . . . December 23, 2018

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Dec. 21, 2018 – First off let me wish everyone a Merry Christmas (for those that celebrate it of course).  Next week will be a slow trading session so I’m hesitate to read much into price and volume indicators.  Let’s start by looking at a bigger picture for perspective, namely the NASDAQ Composite Index on a weekly bar time frame, back 3+ years.
We’re currently back to the Fall of 2017 price levels . . . . yes, the “Trump Bump” has been wiped out.  Support at the 6375 level has been hit and the next level down is about 5425.  But I don’t expect this market to get there in a straight (falling) line.  Let’s switch back to a daily chart.

This market is extremely “over sold” in that it went down too much, too fast.  A possible scenario is a short continuation sell off on Monday (12-24-18) then a bounce back up to about the 7000 level before heading back toward a new low at 6375’ish level.  During any rally higher we’ll watch the price action and us volume to confirm it.  The tricky part is the volume analysis during a holiday period.  The bottom line is: are traders and institutions using a rally to lighten up even more by selling into a rally.  The news is not great world wide and any match toward the powder keg could mess things up without warning.  This is NOT a time to buy and forget; wait for a confirmation of a new trend because this one is lower.

A quick look at what a bear market looks like (% of stocks in the S&P 1500 Index):

Price Strength –

Accumulation / Distribution –

The lack of green in these pie charts is not an error, there is very little to see.

There really is no need to talk about sector strength because there is very little.  Think “Defensive” (Utilities, short term Bonds) and you’ve got it.  If you must expand that add Real Estate and Aerospace (military wise) to the short list.  I’m heavy in Cash and net short the indexes.  Looking for a “sign” if & when we get a rally.  Have a good holiday.          ………….  Tom  …………

Within The Range December 15, 2018

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Dec. 14, 2018 –  I’ve removed a few lines on the NASDAQ Composite Index chart this week, kind of getting back to basics, to make a point.  First this market structure is pretty much in a defined trading range. At the top is the 7520 green dashed line and at the lower edge is 6920 with the red dashed line.  Now these levels are not chiseled in stone but rather rough benchmarks to alert us when there is a change of character in either direction.

Also I note that the last 3 days of this past week have had volume falling off; Low Demand to Buy and Low Supply to Sell = lower prices on low volume.  For the time being that shows there is no rush for the exits, but also no rush to get onboard either.  The typical scenario for a trading range.  It just feels like everyone is waiting for either some news (trade talks or BREXIT) or for the end of the year.  The price levels that we’re at go back to February of this year . . . . we’ve lost the “Trump Bump” as reality sets in.  Reality is that stocks were expensive and the sugar high of corporate tax cuts have worn off.  It’s back to “what have you done lately!”.

The pie chart below is a new idea.  I took the stocks in the broad S&P 1500 Index that were within 5% of there 52 week high price.  Then put them in a pie chart by their industry groups / sectors.  You can follow the list down by going counter clockwise around the chart.

No surprise that Utilities, Real Estate and Consumer Products are holding up better than other sectors.  Another way to look at this is via my regular table which is ranking sector by there short term strength.  This style ranking will be valuable when an up trend develops, but for now it sure looks like being defensive or in Cash is a good idea.

The best news is that Christmas is coming, no matter what !  🙂  Have a good week.     ……….. Tom  ………..

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

 

Back to the Trading Range December 8, 2018

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Dec. 7, 2018 – Wow what a week.  Even though the markets in the US were only open for 4 days (because of the Bush funeral) there was volatility galore.  This market appears to be settling in a trading range between 7520 and 7000 on the NASDAQ Composite Index (see chart below).

Both the long and short term channels are pointing lower but they are beginning to flatten out.   I know many people feel strongly that the markets will either go up or down a fair amount before the end of the year, but what they may be missing is that we just remain within this basic base building range until some economic news sends the markets in some other direction.  I note that Market Sentiment (top window), Money & Volume Flows are Bearish.  Price Strength is Neutral.  Actually, this rather supports a trading range theory.

Looking at the stocks in the very broad S&P 1500 Index –

Accumulation / Distribution:Far more stocks in Distribution, but about equal to those in Accumulation & Neutral.  OK, weak but not terrible.

Price Strength:Here is where we note a strong bias toward weakness in price.  No surprise since this market has fallen a bit since it’s highs.  Bottom line: yes prices have fallen, but we’re not seeing a major rush to sell and get out of the market (i.e. not a major Distribution . .  at least not yet).

Stocks that are holding there own in the sectors of Utilities, Real Estate, Consumer Staples and (even) Gold Miners.  These are all defensive sectors to hide out in IF you must be invested.  Right now I’m heavy in Cash (still) and have a small “hedge on” via a Bear fund as “insurance”.  No need to be heroic here since there is no clear path in either direction.

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

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

Market at a “Hopeful” Point December 2, 2018

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Nov. 30, 2018 – Overall a positive market reaction since a cool Thanksgiving week.  Currently I’d call it “Hopeful”, but quite an all out Up Trend (even in the short term).  Looking at the chart below I’d really like to see the NASDAQ Composite Index close above the 7332 level and we’re very close to that now.

Sentiment is positive as is Money Flow and Volume Flow has just turned up.  That’s all good, but the structure still is in a short term down trend with lower lows and lower highs (purple channel).  There has been so much damage done since late September that some base building is in order before we can be confident of any resumption of a Bull market.

Late word is that the China tariff increases have been put on hold for 90 days while a longer term agreement is being worked out.  The market will initially like this but again the “devil is in the details” and a longer term agreement will need a lot of work and compromise.  Are both sides willing to compromise?  We’ll see.

Here’s a list of short term sector strength –

We’re starting to see some upward movement is the previous market leaders like Consumer Goods, Technology and Healthcare.  I’m beginning to take small cautious positions in stocks and the “Q’s” index (NASDAQ 100 Index).  Continued strength will quicken the exposure while the opposite will be true.  This market is “hopeful” but not healed just yet.  What type of response we get from the China news and particularly how long it lasts will be an indication of overall strength.

Have a good week.    ………  Tom  ……….

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

Trend Lower, but at Support November 24, 2018

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11/23/2018 – This will be short to match the abbreviated trading on the U.S. exchanges and the very low volume due to the Thanksgiving holiday.  Well the trend continues to be down but we’re right at an important support level of 6880 (red line) on the NASDAQ Composite Index (see below).  To move higher I’ll have to see a close above 7225 (green line) and some measured buying volume returning.

Trade tariff concerns, BREXIT and general international economic concerns are just making buying common stocks a difficult decision.  Oil has dropped dramatically over the past month and there just is a negative “funk” in the world markets; no one is in a hurry to do anything it seems.  I sure would like to see a Selling Climax to wash out the weak hands.  There really aren’t any “strong” sectors presently, so I’ll forgo that for the time being.

I thought it would be nice to take a look at how the big trend following hedge funds are doing as we close out the year.  This data is from the website http://www.automated-trading-system.com/trend-following-wizards-october-2018/ , it’s free and you too can subscribe to it; it comes out monthly.

You can see that there are some very big funds with assets under management (AUM) in the billions of $.  But . . . look at how they are doing !  So don’t feel to bad about your own performance as these pros typically get 2% fixed of assets + 10% of your gains.  It doesn’t look like a good year for any of them.

That’s it for now.  Next week should set the environment for the rest of 2018 as many traders return.  I’m heavy in Cash right now and that looks OK to me.

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

chart courtesy of MetaStock; used with permission

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