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Short Term: Stuck in the Middle; Long Term: Down ? August 16, 2019

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Aug. 16, 2019  A quick look at the chart below shows the market in a trading range / consolidation between 8041 and 7643 (green & red dashed lines).  Major damage was done during the latest drop and once again volatility has returned.  In my opinion this volatility is being driven in a major way by “algo” / computer trading, as once a move starts we see volume coming into the markets to amplify it (in either direction).  The computer programs basically “dog pile” into and out of the market.  It’s something we have to live with, and the way to look at it is what has happened over the past 5-10 days and not just the last 2 or 3.  (click on chart to enlarge)


Market Sentiment, Volume and Money Flow indicators remain Bearish.  The short term Price Strength is Neutral.  The question is are we in a consolidation / base building phase or just a pause?  Until the price closes with a break in either direction we won’t know.  But my “guess” is we have more room below than we do above at these levels.  All that’s needed is a news item (like China trade or Iraq) and away we go; and go quickly.  That quick response makes managing a portfolio a lot harder.  But there is an old saying, “It’s better to be out wishing you were in, than in wishing you were out !”.

I remain in a fairly hedged out / cash neutral status for now.  A look below to the sector strength table shows why.  The majority of the top sectors are defensive (China being the exception).  Not exactly an endorsement for a strong, growing equity market right now.


So, not much else to say except try to keep some powder dry and if things get worse, I may go slightly short (net overall).  Watch the daily volume and what the price bar does on those high or low volume days.  Direction wise, but also the spread of the bar and where it closes within the range.  Is the volume being absorbed or is it pushing price in a direction easily?  These will be the clues on who is doing what.  So far the big holders have not liquidated much, but if they do, we’ll see it and act accordingly.

Have a good week.  ………….  Tom  …………..

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

Market Neutral August 10, 2019

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Aug. 9, 2019 –  After the fall comes the moment of truth.  Is this “buy the drips” (which has worked many times before) or the start of something more substantial?  No one knows for sure, but we do know that “algos” (algorithmic trading) accentuates just about any move of more than 1% in a day, either up or down.  Damage was done via the large chuck of volume traded last week, so we’ll have to see IF buying comes back.  The last couple of days look like short covering rallies.

My key levels are 8041; a close above this would put me into CASH and sell my bear fund insurance.  And 7643; a close below that would have me add to my bear fund insurance and consider exiting a few more stocks.  Other indicators remain “bearish” due to the volumes that were traded on the down bars.

Looking at the broad S&P 1500 stocks and how they are fairing-

Price Strength:Weakness far exceeds strength.  Pretty much what is expected right now.

Accumulation/Distribution:A fairly even distribution of Accumulation (buying), Distribution (selling) and Neutral percentages of stock.  Thus not wholesale selling and more characteristic of a minor correction or a congestion of prices going forward.

Sector Strength:

The more defensive sectors remain at the top of the sector strength table.  It just seems that this market remains “on edge”, looking for direction.  Most of the earnings are now in and has been a few great and poor ones.  What concerns this market is the future and the future looks like a continuation of a trade war and geo-political  turmoil (red N. Korea, Iran, Brixit, slowing and lethargic world economies.  This is the time to be very selective and more short term focused; IMHO.

Have a good week.    ……… Tom ……..

Back to Caution August 3, 2019

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Aug. 2, 2019 – Just 2 short weeks ago I titled this blog as “Caution”.  Then the market went to new highs; go figure.  And this past week, in just 3 days we’ve seen that cautious position pan out.  All it took was the FED to “only” reduce short term rates by .25% instead of the much hoped for .50%. And then a Trump tweet on tariffs put the icing on the preverbal cake.  I remember the old quote that “strong markets sluff off bad news, while weak ones quickly react”.   What I find strange is that we’re a little over half way through earnings for the 2nd quarter and they have been generally pretty good.  It must be nerves about the future.

 

In any case we blew through the early warning “3 bar reversal” level at 8771.  I note that volume picked up during the price drop but not to panic levels.  My inclination is that we’ll approach the next level down at 7812 for a shallow but quick correction.  Looks like the big guys “sold at retail” and are looking to “reload at wholesale” prices.  When we start to see strength returning in the Technology and Internet sectors that will likely be the bell weather that strength is returning overall.

Let’s look at the very broad S&P 1500 stocks to see how much damage was done:

Price Strength – Accumulation/Distribution – 

No doubt that the percentage of stocks in the index has taken a hit with over half below their 20 day moving average or very close to it.  The number in Accumulation or Distribution is much more even, leading me to think that this is likely a “normal” correction.

Short term sector strength is listed below:

No surprise to see Bonds and Defensive sectors showing the most strength.

I have lightened up on stocks that were showing weakness greater than the market and have reduced sector holdings.  Since news is driving this market one must not get to confident that everything will return to previous highs.  We may just flop around in a narrow range until after Labor Day.  And so we go “Back to Caution” for the time being.

Have a good week.  ………..  Tom  ………..

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

Steady Move Higher July 27, 2019

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July 26, 2019 – Blow out earnings by Tech and Internet companies are keeping this market moving higher.  The hope for a FED funds rate cut are adding fuel to the fire.  So far, there’s not much to stop the marcher higher . .  until the last buyer buys into the market; but that may be a while off.

I’ve added a new indicator on this NASDAQ Composite chart (click on it to enlarge).  It’s called the 3 bar reversal and it’s shown via solid red & green lines.  I’ll leave it to those who are interested to “Google” what it is, but suffice it to say it is an aggressive stop / level indicator.  This is in addition to the dashed lines which indicate lows & highs of a significant weekly bar (generally slower to change, but still significant).

Of note are that all indicators on the chart are positive, but let’s see just how broad the strength is by looking at the stocks in the S&P 1500 Index below.

% of Stocks in Accumulation or Distribution –

% of Stocks in Strength or Weakness –

Generally this is fairly strong, though a little “over bought”.  A balanced move would be roughly 1/3 in the green, a 1/3/ yellow and 1/3 in the red.  But this reflects the recent strong buying in last weeks move.  Strong earnings and the hope of lower interest rates are a “magically thing”.    🙂

The table below shows where that current strength is in the market:

Once again, Technology companies are leading, which is a positive sign.  What adds to this is strength in the Bank & Financial sectors, which is encouraging as well.  Strong indexes are mid cap and small cap, another indication of “risk on” trading for investors.

I remain mostly invested and will add more in the coming week as conditions & opportunities warrant.  Right now that is looking fairly good.  More earnings will be coming out and barring any surprises, things continue to look up.

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

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

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Yellow Flag – Caution July 20, 2019

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July 19, 2019 – First off, there are a couple of sensitive indicators that are showing caution and a possible down turn here (started on Friday).  Some are price based and a few are more general based on indications of weakness driven by a lack of continued buying.  In any case it’s not necessarily time to bail out or hedge, but a time to be more observant.  (click on chart to enlarge it)

IF price on the NASDAQ Composite Index closes below the low on Friday, I’ll consider putting my Index model into Cash.  If it continues to drop below the support level at 7915 I would consider putting on a “light hedge” for protection.  Further weakness would increase the hedge to protect the rest of the portfolio.  On the stock and ETF side I’m looking for signs of weakness, especially in reference to the broad market.  The idea is to detect Distribution of shares; i.e. liquidation / selling.  Price weakness on increasing volume is not a good sign.

A lack of buying (Accumulation) doesn’t necessarily mean selling, but it could lead into that.  I’ll watch the VIX Index, which shows the ratio of call volume to put volume.  If these option traders are getting concerned, that’s usually a good sign that I should be too.  The question is always just how far.  The bottom line is no one really knows until buying resumes.  Remember, prices only go higher if there are more buyers than sellers.  Buyers need to see the possibility of even higher prices to buy now.  Earnings continue next week and we’ll see what effects they will have on the overall market.  Microsoft was good; Netflix not so much.  So far, a mixed bag.  Momentum is slowing; that much is known.

Right now Technology, Consumer Goods and Banks are in the lead in the short term.

That’s about it for this week.  Yellow flag is flying . . . watch for Red.  Have a good week.  ……  Tom  ……

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

Continuation (higher) July 13, 2019

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July 12, 2019 – Not much new to talk about as you can see below this market just continues to grind higher (click to enlarge chart).

All of the chart indicators confirm a positive market & environment, so the next most important thing is what sectors are moving and performing best.  That table is below.  (I should note that the performance metrics are near / short term and can change quickly.)

We’re beginning to enter into the 2nd quarter earnings reporting season.  This market is priced for good to great news, so any significant disappointments, especially from major bellwether stocks in consumer retail, technology or transports would put a damper on things.  As always, a major news item could tip the scales lower.  We’re at / near new highs so caution is warranted (i.e. topping & distribution).

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

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

The Summer “Doldrums” Setting In July 6, 2019

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July 5, 2019 – It appears that the Summer Doldrums are setting in, which is rather typical for this time of year.  That could change quickly with a significant news item; China trade, Mueller testimony, Iran conflict(s), etc.  No doubt the trend is generally up, but once again we’re at the top of a trading range.  Stocks will need some fuel to go higher and since the valuation is pretty much fully reflected in prices we’ll need something to push higher.  Nothing is “cheap” out there.  This will be a “stock pickers market”, so one must be selective as not everything will necessarily go up.  I’m doubting that not much will happen until the Fall.


This was a shorten week of trading in the US with many folks on vacation.  Activity is slow this time of year.  Of note is the strength in Technology issues (electronics, software, semiconductors, even Biotech).  Telecom and Banks jumped up a few notches this past week too.  Mid Cap stocks continue to show the most strength in the near term.  Sector strength table is shown below.  (click on any graphic to enlarge it for easier viewing)

That’s it for this holiday week.  Take Care & Good Trading.    ………..  Tom  ………..

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

Hovering Near The Highs June 30, 2019

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June 28, 2019 – First a few housekeeping items:  If you want to enlarge any graph or table in this blog, please click (or double click) on it and it should open up for easier viewing.  Second, just a reminder that I update over the weekend; it could be Saturday or Sunday.  Lastly, let me know if you’d like to see or hear about something different.  I’ll try to oblige.


Not a whole lot of movement this past week.  A bunch of narrow bars seem to indicate indecision.  The big volume spike on Friday is nothing more than end of the quarter rebalancing, since it all happened in the last half hour on Friday and there was little price movement (i.e. it was reporting volume, not buying/selling volume).  Indicators are positive with the first level of support at 7812.  Since this is a holiday week there will likely not be a lot of activity.  Reports are that Trump & China have called a truce on tariffs; kind of neutral news.  The market was hoping for something more positive.

Looking at overall market health via stocks in the S&P 1500 Index below:

Price Strength –Accumulation / Distribution –

Overall, fairly positive with many stocks significantly above their 20 day moving average and good Accumulation without too much buying.

Sector Strength –

Again we see Tech sectors and Energy near the top with Precious Metals still showing strength.  I remind folks that this table is short term strength and not an indicator of long term movements or trends.

That’s it for this week.  I’m doing selective buys but not in a hurry to be completely invested.   ……..  Tom  …….

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

Trend Still Up, but Not Robust June 22, 2019

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June 21, 2019 – The trend of the overall market remains up / higher but the movement higher is slow and argusious.  Narrow bars continue and while that’s not absolutely negative it is more indecisive as far as a continued direction driven by new buyers.

I discount the high volume on Friday due to options expiration and note that the NASDAQ Composite Index is near it’s previous high.  Most of the indicators are positive or neutral, but the Money Flow (red line above) remains lethargic at best; it is a combination of price & volume movement.  There has been so much news to whip saw markets around that the good news is that the news really has not had a big effect on prices.

Something to keep an eye out for next week are earnings reports.  FedEx will report on Tuesday after the market close.  It is generally a bell weather for commerce in the US and it’s forward looking guidance estimate will be interesting as an economic indicator.

The chart below shows the 4 major stock market indexes in the US, on a year to date percentage basis.  The Dow Jones Industrials (white) is price weighted large companies, the S&P 500 (green) is capital weighted largest companies, the NASDQ Composite (red) is a very broad index of over 3400 stocks and the Russell 2000 (yellow) a combination of large, medium and small capital stocks.

Of note is the current prices relative to the previous peak (dotted line).  You’re note that the “big guys”, the Dow and S&P 500 are now above their previous high, the NASDAQ is close to, but still below and the small cap Russell is significantly below.

Interesting that the NASDAQ and Russell outperformed the big cap indexes from January through early May but now are falling behind.  The idea is that investors are now more risk averse since smaller companies are generally high growth, but also more risky.  This type of pulling back on risk assets are usually associated with market tops.  No alarm bell, but something to keep in mind going forward.  Perhaps the small caps will catch up; or not.  Investor’s antenna are up for signs of a slow or weakening economy.

The current short term sector strength table is shown below.

High growth sectors are doing well right now.

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

Price charts by MetaStock & Worden Brothers / TC2000; pie chart & table by http://www.HighGrowthStock.com. Used with permission.

No Demand June 15, 2019

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June 14, 2019 – For those that are new to my blog, I update over the weekend (Saturday or Sunday).  I try not to miss a week, but if I’m on the road, postings will be a little briefer than “normal”.

OK, last week was interesting, especially the last 3 days.  Looking at the chart below I note very narrow bars that are in an unusually tight grouping.  This indicates that buyers equaled sellers; i.e. little net price movement.  That coupled with lower volume would indicate “No Demand”, at least in the short term.

It just looks like everyone is waiting for a sign to either go back to buying or to go back to selling.  Since so much of trading now is affected by computer algorithms it is interesting to see what the volume actually is when there is not a clear cut trend (up or down) or a “reversion to the mean” (over bought or over sold) condition.

Market Sentiment has improved as well as Volume Flow, but Money Flow remains negative and Price Strength neutral.  My more advanced market model is giving similar signals; lightly net positive but far from being fully committed to the Long side.  A close above 7965 would be a positive and a close below 7292 would be negative.  It just seems like there is to much uncertainty out there + it’s summer time to boot.

Looking at a longer term view of the pie charts of the percent of stocks in the “investable” S&P 1500 Index . . . . . .

% of stocks in Accumulation / Distribution :
% of stocks with Strong / Weak prices (past 20 days):

The A/D is about evenly balanced; a normally healthy sign.  The strong/weak is biased toward Strong to Neutral.  No major warning sign yet.  The sector analysis table shows a little different picture (IMHO).

I note the rise in more defensive sectors of Utilities, Real Estate and Healthcare.  Something to monitor as concerns about growth both in the US and worldwide seem to have investors on edge.  Broadcom (internet & cell phone parts supplier) estimated down their earnings due to the China tariff war and semiconductor companies are doing the same.  If Technology earnings fall flat in the second quarter (reporting in July) that would be a significant blow to the entire US market.

I am modestly long, but will take some “off the table” early next week if markets continue to weaken or cannot show a clear sign.   Have a good week.  ……..  Tom  ……..

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

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