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At the “Spring Level”, due for a Bounce (up) April 7, 2018

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April 6, 2018 –  OK, I’m going way out on a limb and predicting (oh, I hate that word) that this market will react higher next week.  Why? Because we’re at an important price level that Richard Wyckoff would call a “spring”.  And the other reason is that I’m seeing early signs of volume coming back into the market on “up bars”.  Now, that is by no means a guarantee, and a true Wyckoffian would wait for a “Sign of Strength” (SOS).  That SOS would be a wide range bar, with a close near the top of the range, on above average volume.  That SOS bar may take a few days to develop, but that’s what I’m watching for.  It’s kind of my “clear” to start selective buying; but not yet.

The chart above shows Sentiment, Volume & Money Flows negative, but the glimmer of hope is that the Price Strength has moved out of the Bearish range into Neutral.  That’s NOT an “all clear”, just the possible beginning of one.

This market is weak.  Just look how it is reacting to any news item.  It doesn’t take much to push it in any direction.  And as such, my idea of a possible recovery could easily get blown out or only short lived.  Earnings for the first quarter are just around the corner so there is plenty of opportunities for market moving news, let alone what comes out of the White House.  This is not an easy market to trade and make money in unless you’re very short term focused.

The pie chart below shows the current damage with a fair amount of red.

S&P 1500 stocks; Price Strength:

S&P 1500 stocks in Accumulation / Distribution:

Here are the strong sectors (in the short term):

No surprises since most are defensive in nature.  Let’s carefully watch for our SOS confirmation next week before we take any significant positions or take off a hedge.  Have a good week.       ……………  Tom  ………….

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

Volitility Returns; at Important Level March 30, 2018

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March 29, 2018 – A short week this week but at seen below, price volatility is back and we’re at / close to my “spring level”.  This “spring level” (6880) is important because that’s the nearest price where buyers “came into the market” on a weekly basis.  It’s the low price of a Wyckoff “significant bar”.  IF this is an Accumulation structure, this price level would be logical for the price to bounce off of and head higher.

That remains to be seen as next week is a holiday week and volumes are expected to be light.  If this level does not hold, then we could very likely be headed lower and the whole price structure scenario would have to change.  The big wild card is the news.  And with that, anything could happen to spook investors.  It would take much in this weak market environment.  The damage was done, now the market has to prove itself.  Earnings season is just around the corner.

Many major sectors remain “bearish”, but I’m playing it safe with only a small position short Latin America and short Japan.  It won’t take much on Monday to close these positions out; any hint of strength would do it.

Happy Easter & Happy Passover to all.  Have a good week.     ……….  Tom  ……….

Chart courtesy of MetaStock; used with permission.

A Change of Character March 3, 2018

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Mar. 2, 2018 – Years ago I took a 6 week course in evaluating mutual funds from Michael Price; a very nice and knowledgeable fellow.  One thing (of many) that stood out during his instruction was the comment “markets will react poorly to news in weak markets, but shrug off bad news during strong markets.”  As Yogi Bera said, “You can tell a lot just by looking.”  What we’ve seen is the reaction to an event (the VIX rotation debacle) in an over bought market, but with a foundational shift.  That shift is (I believe) concern about this administration; what it is doing and what it has done.  Case in point is the +400 point drop in the Dow over Trump’s comments about tariffs.  Markets don’t like uncertainty, and now we’ve got it over a multitude of fronts; and it’s not likely to stop soon.

It appears that the reaction after the peak in late January signals a change in character for this market.  That doesn’t mean that we’re in a Bear market, but it could mean that we certainly can’t expect advances like we’ve had over the past year.  Corporate earnings will be strong; the tax cut has nearly assured that, but that’s “old news” now.  I think that any significant bad news will likely shake this market again.  The analogy is “2 steps forward & one step back”.  We’ll make progress, but it will be slow, selective and choppy.  We’re entering into a stock pickers market.

OK, enough editorializing. Sentiment has turned positive, Money and Volume Flow indicators are lethargic at best, so I’ll call them neutral.  We’re currently bouncing off that blue Resistance level around 7332, with the Price Strength indicator very lightly Bullish.

I’m selectively buying positions in Technology and leading Internet companies.  My sector model does not show enough strength to jump in with any more funds at the moment, so I’ll stay mainly in Cash in that model.

The pie chart below should give you an overall view of the health of this market:

Stocks in the broad S&P 1500 Index that are positioned in relation to their 52 Week High price.

Stocks in the S&P 1500 Index that are currently in Accumulation (buying), Distribution (selling) or Neutral.

That’s all for now.  I’m being careful and selective and “expecting the unexpected” in this environment.  Have a good week.   ….  Tom  ….

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

Selling Begets Selling February 10, 2018

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Feb. 9, 2018 – A week ago Friday was just the beginning, and then came this past week.  That’s when the wheels came off and the computer “algo” selling programs kicked in.  The swiftness of all of this was the surprise, and not that it happened.  This market was well over bought.  Note the chart below that the short term trend channel is standing up compared to the long term channel.  Now we’ve corrected back to the bottom of the long term channel, and that may be a good place to pause and consolidate.

Both price support level were violated as were both the Money Flow and Volume Flow indicators.  I’ve added one additional indicator, that of (short term) Price Strength.  My goal was to provide an early warning indicator.  It oscillates from neutral, moderate, to very strong status.  Something to watch in the future; since this is new, I’ll do some back testing with it.

No surprises about the overall market strength.  The percentage of stocks in the S&P 1500 Index are shown in the pie charts below.

Price Strength –

Accumulation / Distribution –

There’s a lot of red up there, the damage has been done.  I’ll wait for a base to form and then a show of strength before I drop my hedged position (i.e. cash neutral).  I’ve liquidated 90% of my sector rotation positions (only high risk shorts are showing now; I’ll pass).  Truly weak stocks were sold and the remaining positions are hedged out.  Watch out for Monday morning retail selling though.  We need buyer not seller in the coming days, and the pro will lead the way.

I really thing that volatility is back and the time frames are shortened by computer trading.  It’s getting hard to NOT to get caught with your “pants down”, but we try.  Have a good week.        ………..  Tom  ……….

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

Along The Watch Tower February 3, 2018

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Feb. 2, 2018 – The big question on everyone’s mind this weekend is whether or not “this” is the beginning of the long awaited correction.  I’ll cut to the bottom line:  Yes, it certainly could be.  First let’s look at how weak this market is:

SP 1500 Price Strength

The pie chart above shows the percent of stocks within the broad S&P 1500 Index (1500 of them) that are in a short term (20 day) trend.  Obviously, more than half are “weak” with only a small amount that are considered “strong” (i.e. green).

The chart of the NASDAQ Composite Index (another broad index) is shown below:

NSADAQ

I note that the first level of price support at 7332 has been broken and the next level is 7111.  The significance of these price levels is derived from what Wyckoff called “significant weekly bars”.  That is the low price of the week where significant buying came into the market.  The other way to look at it is this is where money started to flow into the market, thus it’s low price is important.  Also in the chart above are the Money and Volume Flow indicators, which confirm price and volume “outflows”.  Sentiment is neutral.

OK, back to the correction question.  Is this the start?  We’ll know more early next week.  Will buyers come in and “buy the dip” or will additional selling happen?  Right now, no one knows.  But we do know that investors cash levels are at an all time low; and who will be the next incremental buyer to push prices higher?  The market has been over extended by being at the upper trend channel, so a pause / minor correction is not unusual.  Time to shake the market out?  Looks like it.

What is “the cause”?  Fear of higher interest rates?  Problems at the Trump Whitehouse?  Does it really matter?  Since the volume on Friday was only slightly higher, it really looks like “lack of buyers” and “extra sellers”.  That is a position of caution, thus not to get overly concerned about it just yet.

Overall, the S&P 1500 stocks look more like this:

SP 1500 A-D

With those in Accumulation and Distribution about equal (though this indicator is a slow to react one).

Let’s watch both the price and volume action on Monday and perhaps on Tuesday for indications about the seriousness of this (so far) 3 day event.  Corrections are OK, as long as we don’t get whip sawed by them.  I lighted up on just about everything on Friday afternoon, but if it gets ugly, I’ll buy a Bear Fund to hedge positions.  That gives me time to make an orderly withdrawal should that become necessary.

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

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

No “Santa Clause Rally” December 30, 2017

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Dec. 29, 2017 – Well it’s been an interesting year.  Sure this market has been very “kind & understanding”, but what drives prices higher is earnings (or at least the hope for future earnings).  The U.S. tax plan has past and it remains to be seen exactly what companies will do with that extra money.  With unemployment in the U.S. are near all time lows, I doubt if much added hiring will occur.  The last time this type of tax abatement happened corporations bought back their own stock or issued special one time dividends.  Either of those should drive prices higher.  We’ll see.

In the mean time prices continue to remain within the upward sloping price channel.  But as I note in the headline, index prices have really not done much in December.  While Sentiment and Volume Flow remain Bullish, the Money Flow indicator has dropped to a negative reading.  Now volume is typically light during the holiday period, but this is something to be aware of.  Also, I show you the chart below (the last 6 days; 10 minute bars) of the significant selling that came in during the last 20 minutes of 2017 on Friday.

Look at that volume spike.  I’m considering this to be an Up Thrust in the immediate term.  We’ll see if that selling continues after Jan.1, 2018.  This market is due for a correction from an historical perspective.  In the mean time I’ll show the pie charts of the stocks in the S&P 1500 Index.

# of Stocks in Accumulation / Distribution –

# of Stocks with Strong / Weak Price Strength –

So far, a fairly even split in healthy to unhealthy stocks, and that supports a continuation of the current trend (higher).  But let’s watch to see if tax selling comes in during January.

Oil & Oil Equipment, Latin America, Precious Metals and Basic Material sectors are in the lead for short term performance  The entire Tech sector is struggling right now.

That’s it for this year.  I wish you & your family a very Happy & Prosperous New Year !   ………  Tom  ……..

Charts by MetaStock & Worden bros. / TC200, pie charts by http://www.HighGrowthStock.com. All used with permission.

A Taxing Situation December 16, 2017

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12-15-2017 –  No doubt about it . . . the stock market likes money and when they’re pretty sure that more is coming their way . . they get happy and drive prices higher.  Volume was dropping off (until Friday’s options expiration), so we’ll have to wait until next week to see the tax approval drama prove out and see if the market reacts with higher prices on higher volume.

I do want to see volume confirm price (ease of movement= price and effort = volume) in order not to get concerned about a possible Up Thrust After Distribution structure.  Likely, that won’t happen, at least not yet anyway.

The 6668 level remains my support level.  One thing concerns me is the Money Flow indicator; it’s falling.  Other than that, all “systems” remain bullish and I remain (nearly) fully invested.  Volume will typically drop off between Christmas and New Years and attentions divert to the holidays.  We may have to wait until the new year (and new tax basis ?) to see just how strong the underlying market really is.  But for the time being . . . “no worries”.

Here’s a table of short term sector strength –

Wishing you & your family a very Merry Christmas.    ………… Tom  ……….

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

A Cautious Bounce December 8, 2017

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Dec. 12, 2017 – This week we saw the market revert back to the lower short term price channel (purple line) but remain well within the long term channel (dashed gray line).  OK, a bit of a pull back, and that’s to be expected after a very steady run higher.  But I do note a drop off in Money Flow and Volume Flow indicators.

Two possibilities: 1) volume dropping due to a lack of buyers, and also sellers, or 2) lack of demand to buy.  We’ll have to wait until next week to see if prices recover and exactly what volume does.  I’ve VERY cautiously labeled the peak as a Buying Climax and the swing lower an Automatic Reaction.  Are they really?  We’ll have to wait a few days to see IF there is the follow through necessary to confirm a Distribution price structure.  My feeling is likely not a significant top in the market just yet, but I’m always looking for a trend change.

The 6668 price level (blue line) would also help confirm any weakness, so I’ll watch that as well.  Until then, I remain invested and monitoring sector rotation.  Right now Financials, Telecom, Industrials, Banks and Consumer Goods & Services are strong.  Sure, some of this is seasonal, but “money goes where it’s treated best.”  Real Estate, Gold and Semiconductors are now some of the weakest sectors.  (That happened quickly!)

So the market is strong right now and the pie charts show the percent of stocks in the broad S&P 1500 Index confirm that.

Price Strength:

Accumulation (buying) / Distribution (selling):That’s about it for now.  Time to watch the reaction / bounce strength and be just a shade on the cautious side.  Have a good week.    ….. Tom ….

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

Trend Up Continues November 5, 2017

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Nov. 3, 2017 – The trend higher continues, though looking at the “Money Flow” indicator (top pane), the flow of capital into this market is slowing.  The big leaders are technology, with semiconductors in the fore front of the pack.

The support level for the NASDAQ Composite Index is 6517, the last swing low point.  Whether the idea of a big tax cut for corporations is driving this market or not is somewhat moot.  It just continues to go higher.  I remain concerned about prices hugging the upper trend channel line (blue dashed lines), but we “can’t fight the tape” right now.

Looking at the stocks in the broad S&P 1500 Index below we see a fairly balanced situation for the market as a whole.

Price Strength –

Stocks in Accumulation or Distribution –

Sectors I like are: Japan, Semiconductors, Technology, (short) Latin America, Banks, Basic Materials.

That’s it for this week.  Watch the news carefully in case the Trump Tax plan falls apart; that could be a game changer.   ……..  Tom  ….

Market at Top of Trading Range – Struggling September 23, 2017

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Sept. 22, 2017 –  Really not much is happening in the world markets.  The NASDAQ Composite Index (below) shows us that we remain in broad trading trade that started in mid-July.  Those blue channel lines are nearly horizontal.

I note that conditions are generally positive, so I remain invested, but I also see that Volume Flow and the volume bars at the lower part of the chart are dropping.  There just doesn’t seem to be as much interest in adding to positions right now.  Technology has slowed, Developing Markets (Latin America & China) have also slowed their advances.  I’m still on the watch for an Up Thrust higher on weak volume to flush out the last of the buyers, but this is more likely a Consolidation pattern.

Some of the previously weak sectors like Energy and Healthcare have shown some rotation back into them.  The question is whether this is a market sector rotation (coming out of one sector and going into another) or just a general slowing down of activity / consolidation.  If this low volume continues without Index prices dropping it would indicate Consolidation.  And the market waits.

Not much exciting to review.  Have a good week.     ………  Tom  ………

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