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Shifted into Neutral June 30, 2018

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June 29, 2018 – As talked about last week, if the market showed significant weakness on Monday (or a few days later) I’d begin to hedge my positions.  And on Monday the markets gapped down fairly hard; note circled area below on the price chart.

Since then, market participants have been trying to figure out IF this is “the correction” for the summer or just a minor blip driven by trade wars fears.  I find it interesting that the low last week stopped just 2 points from the Wyckoff resistance line (green line) which is at 7421.  “Resistance is now support” as many technicians say.  However the big level is the Wyckoff support level (red line) at 7354.

I think that folks are still trying to determine just how serious this down move is.  Case in point is the Price Strength of all stocks in the S&P 1500 Index.  The pie chart below shows over half of them in a weakened state, then roughly a third Neutral, the remaining Strong.

But . . . . Distribution of shares (Selling) has not picked up.  The pie chart below shows nearly an even balance between Accumulation (buying), Distribution (selling) and Neutral status.  So Far, we’re seeing a lack of buyers instead of significant selling.  But, that could and will change if this market goes much lower.  In that case I’ll increase my hedging to “full” by using a bear fund to offset portfolio losses; i.e. synthetic Cash neutral.  Stock will be sold as stops are hit or if they are weaker than the market (indexes); just like normal.

Last point is to look at sector strength.  I’m generally seeing more defensive sectors moving toward the top of the list in this short term evaluation of strength.

The bottom line is to protect your profits & honor stops as they are hit.  Watch key support levels and be especially careful if volume picks up on down bars.  So far, so “OK” (not “good, just “OK”), but this market is not in the mood for surprises or bad news.  With all of the computer driven algo programs running, there could be a rush for the exits.

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

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

Wait For It ! June 23, 2018

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June 22, 2018 – A quick look at the chart below implies the early stages of weakness.  The circled indicator on Fridays Close are all headed in the same direction.  My master hedge indicator also shows a trend toward heading to Cash IF the markets don’t rally on Monday.  Also I note the big jump in volume with a narrow range down bar; selling into strength perhaps.  The bottom line is that risk has increased and this is no time to be “hanging out to dry”.

IF this market does correct, how much and for how long?  I have no idea, but likely this would not be a major move; just one for the “hot hands” to dump and reload for the next move up.  Hey . .  it’s Summer and time for some selling into the Fall (possibly).

OK, here’s a list of sectors by strength.  Of note we see Technology, Industrials and Finance toward the bottom . . . not showing leadership.  Just a thought.

Since readership is down, I’m going to make things “short and sweet” . . . . perhaps many are on vacation.  🙂  Cheers and have a good week.   ………….  Tom  ………….

Market Lift Off June 3, 2018

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June 1, 2018 – OK, we had a break out higher this week.  The 7421 level (resistance) was broken and we also have a new support level at 7354.  “Support” is the low where the “last buying” came into the market (a.k.a. a Wyckoff “Significant Bar”).  IF, the 7354 level gets broken (on a close) it would likely signal a change in character for this market; especially if were to come on higher than normal volume.  But, for the time being Market Sentiment is bullish as are the Money and Volume Flow indicators.

For the time being, we’ve got to continue being invested.  That doesn’t mean we can’t rotate toward stronger stocks in stronger sector though.  What I do find unusual is that small cap and NASDAQ stocks are generally doing better than the large cap stocks (i.e. S&P 500 & Dow Industrials).  The tax changes and regulation changes are now been factored into price.  What is next to drive prices higher?  It got to be corporate profits and positive geo-political news.  Europe (Italy and German banks) are having a tough time and that has spilled over to Latin America.  Something to monitor.  The North Korean, China trade and European tariff issues remain as well.

Looking at the stocks in the broad S&P 1500 index (below) we generally see a fair amount of green and a minimal amount of red.  These longer term indicators are pointing in a positive direction.

S&P 1500 Stocks Price Strength –

S&P 1500 Stocks in Accumulation / Distribution –That’s it for this week.  Take Care.    ………..  Tom  ……….

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

Market Meets Resistance May 19, 2018

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May 18, 2018 – The market (as measured by the broad NASDAQ Composite Index) met resistance near the 7421 level (blue line).  All week long it hovered around that level and just couldn’t break through it decisively. Remember that this level is determined as a (Wyckoff) “Significant Bar” on a weekly scale; that’s the weekly high where selling last appeared.  Since the market “balked” the last time it was there it is significant to note and monitor.

This is not a bad omen, it just means that in an average market one would expect the price action to slow before breaking one way or the other.  The short term indicators remain positive from Market Sentiment to the Money & Volume Flows.  In order for the market to move higher we’d like to see a Sign of Strength (SOS) which would be a daily bar with a wide range, closing near the top on increasing volume.  That would indicate buyers stepping in.  Attention is given to the fact that as we approach summer it is a typical slow / weak season.  I don’t subscribe to the phrase “Sell in May and Go Away”, but summer is usually slow.  We could just bounce around in this range for a few months; that would not be surprising.

Looking at the market health from a different perspective, we note the number (i.e. percent of) stocks in the S&P 1500 Index that have strong price action and those in an Accumulation, Distribution or just Neutral phase.

Price Strength –In Accumulation / Distribution –Sectors that are doing well include Energy (Oil & Services), US Small Cap Index, China, Internet and Basic Materials.  Latin America is one of the weakest areas,  That’s about it for now.  Have a good week.          …………  Tom  ……….

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

Breakout Up, but One More Hurtle May 13, 2018

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May 11, 2018 – A quick look at the chart below confirms an upward breakout.  Sentiment, Money Flow, Volume Flow and Price Strength are all positive.  But more important are the closes above previous Support levels.  But . . one more hoop to jump through is the 7405 level, just above Fridays bar (light green line).

The 7405 level was the last level were Buying Stopped on a weekly basis.  That level was generated back in late March.  With that small caveat I’m “comfortably long”; that’s “invested but not aggressively so”.  The thing I’m looking for is where the market leadership is located.  During the post election run upwards Technology, Semiconductors and Consumer Goods were the darlings.  Tech and Oil have returned to leadership but I sense some hesitation.  Banks, Financials and Small Cap stocks in general are showing signs of strength and that would help maintain confidence in any continued upward movement.

Earnings have been good, but with the massive corporate tax cut they should be.  For now the market is looking way past this reporting period.  A run in Basic Materials would signal a longer term bullish look for the world economies.  For now here’s how sectors are looking in the short term:

Looking for leaders in the “green sectors” at the moment.  Also of note is the recent strength in China stocks.  Have a good week.  ….  Tom  ….

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

Looking for Market Follow Through Next May 5, 2018

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May 4, 2018 – The markets were generally lower this week until Friday; that’s when the jobs report came out.  Everyone found what they wanted in it.  Unemployment dropped to 3.9% (low) and wage growth was minimal (low inflation pressures).  So Friday was a recovery day.

I had a small hedge in place to protect our portfolios in this environment, but took them off (according to plan) on Friday.  That market model is now in 100% cash waiting for confirmation of a trend . . . in either direction.  I’ve placed Wyckoff key bar labels on the chart to signify a possible structure scenario.  Of note is the low on Thursday as a potential LPS (last point of supply).  Such a structure is Bullish and (theoretically) the market should take off higher very soon.  What does concern me is the rather low volume on Friday, indicating a lack of sellers and mostly low volume buyers that pushed prices.  Covering shorts it appears to me.

Of note also is the close very near the 7205 level (red line).  That was our resistance level short term.  I need to see a break above 7332 to feel more comfortable though.  Sentiment is positive but Money and Volume Flows are pretty neutral right now.  Price Strength is neutral to bearish as well.  Let’s see how the stocks in the broad S&P 1500 Index are fairing:

% of Stocks, Price Strength –

% of Stocks in Accumulation / Distribution –

Both pie charts are fairly even and that’s usually a healthy sign.  I’m still looking at more defensive sectors like Rising Dollar, Japan, Oil and Utilities now, but that could change quickly next week IF the market goes higher.  That’s it for this week.  The coming week should provide us some clues for the next move,  but uncertainty remains with earnings and geo-political issues in play.     ………..  Tom  ………..

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

Low Volume – Dull Market April 29, 2018

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April 27, 2018 – There is an old saying, “Never Short a Dull Market” and that’s what may be happening.  Next week is another round of earnings reports from the first quarter and this market just wants to wait and see what they are.  Granted that the earnings have been very good (generally), but the guidance going forward has been “luke warm”.  The tax benefits have long since been anticipated and reflected in prices.  It’s the future that concerns Wall Street right now.

I’ve placed some Wyckoff labels on the chart above and the notable one is a possible “LPS ?” in red.  That is the “Last Point of Support” where this market would break upwards IF a major Sign of Strength bar develops.  Low volume, so not much Supply; what we would need is increased demand.  That demand (SOS bar) would be a high volume bar with a wide daily range and a Close near the top.  In short, a break out bar.

Interesting to also note was how the NASDAQ Composite Index stopped right at the previous Support level of 7205 on Friday morning then headed down.  A significant break above 7205 on high volume would lend validity to a SOS bar, but for now that’s just a scenario.  Breaking above 7332 would be a big confirmation.

The table below shows what sectors are currently doing well –

Interesting to see Technology and Emerging Markets still in the basement along with Banks and Finance.  We’ll need to see some leadership in major sectors such as these for any sustained rally.  That’s about all for now.  Have a good week.    ………..  Tom  ………

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

At a Make or Break Point April 22, 2018

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April 20, 2018 – This market appears to be at a “Make or Break” point, in that it stopped at a resistance point (near 7332; NASDAQ Composite Index) and my Wyckoff “bar strength” indicator has (finally) given a strong bullish reading.  The resistance point goes back to early February where we had a “significant weekly bar” which is where buying last came into this market (blue line).

While Volume & Money Flow indicators are now looking more bullish but I think we need a confirmation before we get too optimistic.  A close comfortably above 7332, especially on increased volume, would help.  While I’m cautiously invested now, I still have cash to deploy and I’m thinking that we’re close to putting both feet back into the water.

This is a big week for earnings announcements so that will have a large bearing on how the market moves from here.  I am “in” Oil & Oil Services and well as Precious & Basic Metals.  Both Japan and European sectors merit attention.  While the US Technology sectors have improved, there still remains concerns especially in the Semiconductor sector.

So this week should provide us with a sign of breaking out above this resistance or a failure which would usher in concerns and lower prices.  We shall see.  Have a good week.  ………….  Tom  ………….

chart by MetaStock; used with permission

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.

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