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At the Top November 26, 2020

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Nov. 25, 2020 – I’m writing this with very low speed internet and it’s painful, so it will be short; just like this week. In the US Thursday is a holiday and Friday is a half day so not much the rest of this week.

On the chart below you will note that on Friday we just barely crested over the previous top / trading range on very light volume. Thus next week will either confirm the breakout or reject it. Careful now.

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All indicators are positive and the general feeling is cautious optimism so higher seems to be the direction though likely not in a straight line.

Here’s what is doing well in the short term –

Interesting that Energy, Small Cap and Banks / Finance are in the lead. Small Cap looks like a “risk on” indicator so that is a plus. Banks . . . it’s about time; Energy, I’d be cautious.

That’s it for a short week. Happy Holidays to all but please Take Care out there.

…………….. Tom …………..

Still Within (trading) Range November 14, 2020

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Nov. 13, 2020 – Monday sure started off as a break away rally day with the election out of the way and a COVID vaccine announcement, but it quickly turned into a Distribution Day (red down arrow on the chart).

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The opening kissed the previous high at 12074 and then quickly headed “south”. This on high volume. It’s like many investors just wanted to get back even. The rest of the week was basically a drift higher but on low volume, with support at 11425. Thus prices remain in a broad trading range bound by the purple channel lines.

Money Flow is negative, not recovering from the previous sell off, but Volume flow is slightly positive. Price Strength is Neutral. I’m seeing a mixed bag from my other technical indicators. Market breath is neutral while overall price momentum is positive. I’d like to see these two areas in sync before getting completely back in. Thus I’m still holding a fair amount of Cash right now.

One reason for being hesitant is that we’re still in earnings season and next week major retailers report 3rd quarter earnings & maybe projections too. This will be an indicator of consumer confidence and a sign (perhaps) of what to expect for holiday sales that are right around the corner. Sure, political drama does continue but few doubt the results, though Georgia could swing the Senate and provide a smoother time for the Biden administration. That will bear out January 5 so we’ve got some time on that.

One bright spot is the strength in small and mid cap sectors. Aslo banks and Finance areas picked up after lagging behind for so long. Also select countries are showing some early strength. Something to watch.

Short Term Sector Strength –

That’s about it for now . . . a mixed bag with prices in a trading range. This could be a stock pickers market with only a few sectors really performing well. (note: I’ve added a market performance indicator to the sector chart above; this is strength relative to the S&P 500 Index.)

Have a good week. ……….. Tom ………

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

Improving but . . . . November 6, 2020

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Nov. 6, 2020 – The (US) markets hit a swing low on Tuesday, Election Day, then promptly rocketed higher on Wednesday & Thursday. Friday was a near “wash” with not much movement higher.

OK, what next? As we approach the previous high (12074 on the NASDAQ Composite) we can expect hesitation. After all, is everything now back to the highs in early September? Virus cases are up at new highs and earnings going forward are “if-y” at best. Are retail sales this holiday going to be strong with unemployment so high? Perhaps the post election move was a relief rally and Friday was a time to “ring the cash register”.

click to enlarge chart

One of my market models turned Bullish on Wednesday, the other on Thursday (both not shown), but they tend to be aggressive on calls. I did do some minor purchasing late last week, but I prefer to wait until Monday afternoon to see what & if there is follow through. So this will be short.

Sector Strength – Short Term:

Select Commercial Services, Semiconductors, Metals & Mining and Healthcare seem to be the best areas to be in now. Tech in general is improving though Friday looked very “if-y” (there’s that word again). If we are truly back on track we should know early next week. And a good practice is to scale into a position(s). No need to jump in with both feet, there will be time. I didn’t close out everything during the market drop so rebuilding positions should be a matter of filling out the portfolio with stock leaders within sector leaders.

Time to digest the past and look toward the future. Have a good week. ……… Tom ……..

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

Covid Catches Up October 31, 2020

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Oct. 30, 2020 – This was the week that shook the markets with Covid-19 flaring up nearly worldwide again. Now, many countries take a different approach to reacting to this increase . . . except the United States, and time will tell just how severe the markets treat each approach. Clearly the big Tech companies in the US were not treated very well by refusing to provide forward guidance on earnings. The reason is the unknow of Covid. Heck, people can put off buying new gadgets or services for quite awhile so the 4th quarter 2020 is a mystery right now. Just think about the retail sector with the holidays approaching. The markets do not like instability, and we’ve got that for sure.

click to enlarge chart

All indicators (above) are down and it sure looks like we’re headed to the 10519 level next week. Oddly enough I doubt the election has much to do with the market drop, but the results after the election may be a far bigger concern. No matter what, Trump will not go quietly and likely his followers will . . . follow. Another sign of instability.

Taking a look at the broader S&P 1500 stocks we see most are in Distribution (selling). Not much green in the pie chart.

Short term sector strength also shows the weakness in previous market leaders.

Tech, Industrials and Financials took a big hit this past week; even Utilities dropped a bit (a traditional “safe haven”). I have been raising Cash this week. I doubt that we will see a major drop unless things get even worse, which is possible. Keep an eye on what businesses are doing, any talk of a stimulus after the election and of course, volume (especially on down days).

Take Care and for those in the USA . . VOTE ! ……. Tom ……

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

Lethargic Market October 24, 2020

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Oct. 23, 2020 – This market just seems to be waiting for something to happen; stimulus, election, earnings, pandemic . . . . et al. Volume is down, Money Flow and Volume Flow are lethargic and prices don’t want to really trend in either direction. Indecision. It just seems like there is enough potential good news to maybe (just maybe) outweigh the bad, but maybe not.

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The upward trend channel (purple lines) have been broken, the bars are now colored red so that upward trend is no longer in play. But a downward trend has not really started either; we’re in a broad trading range for the time being. My other master indicators show the Accumulation of shares has slowed, but Distribution has not really taken off either, prices are not strong, but they’re not very weak either. What to do? Maybe nothing. I am about 75% invested but I’m having a hard time finding good places to deploy the other 25% . . . . and I’m get more concerned about the potential for loosing hard fought gains in a blink of an eye with the release of bad news. Thus, this market is not strong and can’t determine which way to go. Earnings continue to be reported and they are mixed at best. As mentioned before this market is “not cheap” earnings wise, which leaves it susceptible to a correction.

Other factors: I run a program which ranks major sub-sectors by strength but also internals (like volume / demand, number of stocks in the subsector advancing, etc.) and usually I filter out about 3 to 10 (out of 48) that have strong stock candidates. This week (again) I found none. Lethargic market.

Here’s a pie chart of major sectors and what they did as a whole last week:

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OK not bad, more green than red but in a number of cases only a few stocks in those sectors were actually strong. Also 5 days does not a trend make.

Here’s another view with a little broad time frame and factors other than price:

I note that the previous market leaders, those technology based, have fallen. The prices of tech has proceeded their value in many cases. There is reluctance to pour more money into those areas without some justification. Keep an eye on earnings.

That does it for now. Take Care, and for those in the USA . . VOTE !

………. Tom ……….

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

Market Hitting “Pause” October 16, 2020

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Oct. 16, 2020 – Well the week started with a bang and a price gap up. This on hopes of a stimulus package and looking forward to corporate earnings . .. . hint: the banks did well & hoping the rest follows. But the last 3 days were less than impressive.

The chart below shows “price strength” back to neutral and the price action seems to bounce back & forth within the price channel. Volume during the last half of the week was low, just not much demand. There could rightfully be a concern about reaching back to early September at the high of 12074, a logical resistance level (green line).

click on chart to enlarge

The first level of price support is 11572 (red line), then 11124 (where things start to get concerning) and the recent swing low of 10519 (if the wheels start coming off).

It appears that the market is comfortable with a Biden win and the stimulus being delayed until after the election. But if a package doesn’t get done in early November it could be a different story. The consumer is not as healthy as many think.

Sector strength (short term) is shown in the table above. Tech continues to show strength but Utilities are a little surprise. And lastly the 5 day % price return for the top sectors is shown below. This provides a view of how broad / narrow price strength is.

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Please feel free to leave a comment. Always interested in what you like, dislike or would hope to see. Have a good week. ………… Tom ………..

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

So Close . . . October 2, 2020

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Oct. 2, 2020 – On Thursday . . . we were Oh So Close to breaking out higher. Then came Friday with news that Trump got the Covid virus. Now I’ll admit that I did start to nibble on a few strong (i.e. tech based) ETF’s, but the volume doesn’t really confirm a strong price action. And so the wise thing to do is to take small positions (i.e. “scale in”) or just wait for confirmation.

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Note that Volume Flow is light (green circle, must be some hesitation here) and Money Flow remains weak. I point to the near break out on Thursday (green arrow). I’d like to see at least two consecutive closes above 1130 and preferable on some increasing volume (buying). The world is not coming to an end so maybe we’ll see some follow through early next week.

The pie chart below shows the % number of stocks in the S&P 1500 Index and how they did last week. Overall pretty good; more green than red at least.

And the table below shows where the near term strength is by sector.

Technology was doing fairly well until Friday, so I’d watch that sector closely for signs of strength & recovery going forward. Not much more to say except we may (just may) be close to a breakout or falling back into a trading zone. There just doesn’t seem to be an appetite for stocks with the uncertainty of the virus and the looming election. We may just have to wait it out.

Oh Yes, one more thing: IF you’d like to see & hear an interview that I did with a web developer & ex-hedge fund manager . . it would be here: https://youtu.be/tuqbhiZXo5s on YouTube. 🙂

Take Care & Have a Good Week! ………….. Tom ……………..

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

At (or Near) The Point . . . September 26, 2020

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Sept. 25, 2020 – Well my feeling is that we’re at or near an inflection point. On the chart below you can see that prices (near term) are bouncing up and down with no clear trend. Yes, Friday was a very positive day that closed above the downward sloping channel (purple lines) but we need far more confirmation. A positive break above the 11300 level would be bullish for going higher (green arrow) but also a break below 10412 would be bearish (red arrow). And of course, we could just continue to bounce back and forth between the two levels until after the election (in yellow). Is this a pause in a down trend or re-accumulation? Watch volume and a broadening leadership within the market.

click to enlarge chart

The leadership lately has been “all Tech, all the time” and that’s not a recipe for a strong continuing market. Besides there are many economic headwinds to overcome and right now they are being ignored (IMHO). Here’s one thing that concerns me: in general, strength is being shown in only a few stocks, and these are large cap Tech stocks that have a major effect on the indexes.

The pie chart above shows the number of industry sectors (48 in total) and their 5 day % return on price. 44 of them had a negative week (shades of red). One week does not a trend make, but if this continues . . . . well, not good. Narrow leadership.

Last point is the valuation of this market. The chart below shows the P/E (price/earnings) ratio from a historic perspective. i.e. “Are stocks cheap or expensive?”

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The yellow line is roughly where the classical point is between expensive and cheap (about a P/E ratio of 23). So looking at stocks in the S&P 500 index, the current evaluation is not “cheap”. Not to say that over valuation can’t continue, but we are in that “expensive” region.

My thinking is that we’ll hover around these levels until after the election . . and then we’ll see (or maybe after the first debate on Tuesday?). Until then I’m very cautious and only dipping my toes in certain areas and only in small amounts.

Sector Strength table –

I note a number of defensive sectors toward the top.

Have a good week. ……. Tom …….

Pushing On a Rope September 19, 2020

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Sept. 18, 2020 – This market continues to consolidate with no clear trend. I see folks trying hard to guess the next move either up or down. I feel that getting involved with that logic is like “Pushing On a Rope”; it’s just not going to work. Sure, some will guess correctly and others not, but that’s not investing IMHO.

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Looking at the chart above we note the trend indicators are all Bearish / negative. I’ve labeled three price bars 1,2,3 to show that the close of those bars are all very nearly the same. A “triple bottom”? Perhaps, but it does indicate to me that (on a closing basis) that the level around 10728 is gaining in importance. A close below the 10412-ish level would likely move the market lower. A close above the 11300 level would be a bullish breakout. The third scenario is shown by the gray bracket, and that is prices would remain within the trading range for a while, bouncing back and forth.

Typically one would look to the volume for confirmation but this Friday was options expiration day so there was (expected) high levels of volume as option writers “squared up”. We’ll have to wait until next week and with all of the political cross currents there is uncertainty. And markets don’t like uncertainty. Any breakout, in either direction, may take awhile.

Short Term Sector Strength –

None of these sector are very strong trend wise (i.e. values under 200).

And so it goes. I’m heavy into Cash with a light hedge. No need to “jump the gun” or “Push on the Rope” here trying to make something happen, or worse let, trying to be a hero. Patience.

Have a good week & Take care. ….. Tom ….

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

Price Consolidation September 12, 2020

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Sept. 11, 2020 – A quick look at the chart below of the broad NASDAQ Composite Index shows signs of price consolidation near the current levels. The dashed blue line is the near term support. If we drop (especially on the close) below this level we’re in for further weakness.

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Yes, this chart is rather “Bearish” with all indicators indicating the same, but when I look at the “cause” of this sudden drop, I’m not so sure. The chart below shows the dramatic increase of small trader (less than 10 contracts) call option buying (light blue line; S&P 500 in black).

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This certainly shows wild speculation and was likely driven by many people sitting at home due to the virus. (Nothing to do? Make lots of money trading options!) Funny how this fell apart days after Apple & Tesla split their stock, and . . SoftBank revealed that they had $ Billions in call options. The stage was set; everybody had “bought in”.. I’m thinking we’ll bounce around until next Friday (Sept. 18) when those call options expire. Then we may have an opportunity to reset and see just where we go from here. This sudden move was driven more by news and the market itself. An economic awakening may yet to occur and will likely happen over weeks and not days.

Sector Strength table below:

I remain heavy in Cash right now. Looking for the market to decide, and yes, it can go either way. Let’s see if these levels can hold and this market takes a “breather” perhaps into the election. Earnings will not be great, so folks will be cautious for a while.

Have a good week. …. Tom ….

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

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