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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.

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.

Not Much Buying Demand October 5, 2019

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Oct. 4, 2019 –  A pretty dismal week with a blip up on Friday.  The problem is the volume on Friday was very low, i.e. “No Demand”.  Looks like a simple short covering rally to me.  We are very close to the last swing low and the moment of truth is near.  Does this level hold (7663 support) or do we break down even lower.  It’s mixed and could be resolved via a news item.  But the US economy is slowing and with it corporate earnings.  The market is looking for stability and a good reason to rally back to the previous high.  With BREXIT and Impeachment looming in the background that doesn’t look all that great.  In addition, “price action” remains weak & “in the noise” without a clear direction.  (see last week for a description or in the “publications” page)

The market likes the idea of lower interest rates, but that usually means things are not that good and the economy needs help.  A double edged sword so to speak.

When you see government bonds, Utilities and Real Estate as strong sectors you know that (in the short term) things are not that great.  Here’s the table below:

Not much more to say.  I’m heavy in Cash with a light hedge on as insurance.  Have a good week.     ………… Tom …………

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

Tough Call, but Markets are Weak September 28, 2019

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Sept. 27, 2019 –   No doubt about it, the news is driving this market and driving it hard.  Yes, the turmoil in Washington is significant, but perhaps more important is the loss of creditability of the administration in other areas such as trade and the economy.  There have been so many tweets and brief comments about China trade negotiations (that never panned out) that traders are beginning to doubt the comments coming out of the Trump administration.  (Are talks really starting again in October?)

Any way all we have to go on is price, volume and time and that’s where charts come into play.  We’re now back to a likely bearish trend with a possible low of 7643 on the NASDAQ Composite Index.  Momentum has all but dried up.  All one has to do is look at what sectors are strongest to see, that in the short term, playing defensive is in order.

(click on graphics to enlarge them)

I’ve been skeptical about this latest price structure for a month for reasons that I explain below.  The Price Action did not confirm the Price Movement.  Take a quick look at my explanation about Price Action and Trends and you’ll see what I mean.

Sector Strength is shown below –

What concerns me is that a desperate president might “pull a rabbit out of his hat” in the form of a quick China trade deal in order to look better.  The “deal” doesn’t have to be “good”, just bringing an end to the tariff war would be bullish for most US and World businesses.  So . . .  beware the news and a desperate administration that is looking to deflect from it’s own deeds.  At any sign of price weakness I will “hedge out” the light positions that I have in our portfolios (Cash is OK).  This is not the time to be brave, but discreate.

Have a Good Week.   ………….  Tom  …………..

Ideas About Market “Price Action and Trends” Sept. 2019
First, let’s look at an old definition of trends of both stocks and indexes. It can quickly be summed up as if the security is making higher Highs then it is in an “Up Trend”, but if it is making lower Lows it is in a “Down Trend”. A “High” or “Low” is typically defined as a swing high or low and not necessarily a bar price high or low. For the purpose of illustration on the chart below, the blue “zig-zag” line shows a closing price movement of 2% or more. This “zig-zag” helps to visualize the swing highs and lows of price action.
Confirmation of an up trend change would not be just a break of a previous swing high level, but also a swing low that was higher than the last swing low. The opposite holds for confirmation of a down trend. The advantage of this conformation is to filter out brief price level breaks during a period of congestion, or sideways movement. The disadvantage is a delay waiting for that confirmation.

The red lines on the chart above show points where a swing low (level) was broken/failed; the green lines show where a swing high (level) was broken/failed.
Next let’s take a look at an indicator (top window) that attempts to factor price and volume over a short period of time to confirm “price action strength” early in a price move. I put a filter of “3” on the indicator to show if the movement is in the “noise” level of price movement or if above 3, a potential significant move. You can probably guess that the red is bearish movement and the green line is bullish movement.
I note that in the cases where a price swing high or low price level was broken, the indicator confirmed it at or before that point, except for Sept. 5, 2019, where the bullish price strength was below the “3” level and therefore considered “noise”. Currently both the indicator and break of a swing low level indicate a “bearish” short term trend in the NASDAQ Composite Index.

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  …………….

 

Showing Early Positive Signs August 31, 2019

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Aug 30, 2019 – OK, this will be short and to the point.  I’m now seeing signs of possible “stopping action” for this correction.  The chart below shows Market Sentiment (top) followed by Money Flow and Volume Flow beginning an up trend.  That’s encouraging, but we still need confirmation.  I feel that confirmation will be when the NASDAQ Composite Index closes above the 8048 level (dashed green line; click to enlarge chart).

That could come early next week as many traders return from the (US) Labor Day holiday.  Until price action confirms we must assume continuity, that is a market in a trading range with a negative bias.

One thing that helps confirm a possible market change is the table below.  I note that the more defensive sectors have moved out of the top ranks.  I have begun to nibble on a few stocks that have shown good strength relative to the overall market, plus have good price action.

Have a good week; even though the US markets will be closed on Monday, foreign market will be open and will give us an idea how the US markets will open on Tuesday.     ……..  Tom  ………

Chart by MetaStock; table by http://www.HighGrowthStockInvestor.com.  Used with permission.

 

Weak Markets in a Trading Range August 24, 2019

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Aug. 23, 2019 – First a short note:  I’ll be away from my office for the next 4 weeks.  In the past 5 years I haven’t missed a weekly report, but . .  that may happen over the next month.  Plus my posts will likely be rather short; so just a “heads up”.

Markets that are weak tend to react (or over react) to bad news, while strong markets usually ignore the news.  With just a few minutes of his time and one “tweet”, Trump can send the market down over 2%.  Bamb !  Not to get political, but this action shows just how on edge many investors are.  And, the algo computers continue to amplify any significant move.  This is a hard market to trade.  A look at the chart below shows the trading range that I believe we are in.  (click on the graphic to enlarge)

As a Wykoffian I’ve labeled the Buying Climax (bc), Selling Climax (sc), Automatic Rally (ar) and the Secondary Test (st).  The reaction at the top of the range on narrow bars and very light volume showed that there was no demand; i.e. no buying interest at that level.  Friday was a large bar down on heavy volume.  The next thing to watch is how this market acts around the 7643 level.  Do investors see this as a “buy the dips” opportunity or does the selling continue?

Again, we’ll analyze the spread of the daily bar and the volume behind it (effort = volume and ease = price action).  Effort with little Ease of Movement (price movement) tells us that buying (or selling) pressure is being absorbed and change is likely to happen next.  The other scenario is that we just continue to trade with little conviction between 8041 and 7643 until after Labor Day, or another piece of news crosses the wire.  In any case right now there is no clear trend in the near term.

Looking at the table below we note that defensive sectors are at the top of the list.  (note that these ranks are short term based)

I am holding a few stocks that so far are doing well compared to the general market, but also I have a light hedge on via being short the NASDAQ 100 & Small Cap Indexes.  I’m keeping an eye on a few mutual funds and will scale out to Cash if they show weakness relative to the overall market.  So far, they are doing OK.

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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