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Expecting a Bounce Higher, then . . . October 14, 2018

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Oct. 12, 2018 –  Well now, quite a week !  This was not a surprise but the speed that it unfolded was rather rapid to say the least.  With the number of “Algo Traders” (a.k.a. computers that trade without human intervention) we shouldn’t be surprised by how fast market can move now a days.  So what next?

We started to see potential issues with this market over a week ago when it struggled to make a new high; I’ve labeled that point “Failure” on the chart above.  All of the indicators on the chart are Bearish but let’s look at price levels.  Yes, we blew through the 7700 level and are now (possibly) stalling out in the 7443 area.  Friday had a good close, so it’s reasonable to expect a bounce higher soon.  Going back up to around 7700 would be a likely estimate for a bounce higher, and possibly all the way up to 7933 just to fake everybody out.

The real test will be what happens during that bounce.  Will sellers use that as an opportunity to sell into strength (watch volume), and then head back down again?  We won’t know until that shows itself but we shouldn’t have to wait long to find out.  My next (lowest) support level is 7205.  Folks are getting nervous about stocks being overvalued and the continued issue of high tariffs with China.  BTW, those 25% tariffs won’t click in until after the new year.  Will importers “front load” to beat them?  Watch for inventories and not shipping tonnage.

Sector wise there’s not anything worth talking about except for Rising Rates and perhaps Rising Dollar funds.  I’m still watching Latin America; it is volitile.  Right now I’ve cut back on stocks and have a fairly substantial hedge on the rest of the portfolios.  “Hedge” meaning short the Russell Small Cap index and the NASDAQ 100 Index.  Both small caps and technology got hammered; it’s the value thing again.

That’s all for now.  Have a good week.     …………  Tom  ………..

chart by MetaStock; used with permission

October Swoon October 7, 2018

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Oct. 5, 2018 – The “September Swoon” came a little late this year.  I guess they had to wait for the 3rd quarter to end and report, but this was not unexpected.  The only question was when.  The next question is “how far”.  I’m sticking with my 7700 target on the NASDAQ but also added the next level down at 7604.

What happens on Monday (10-8) will be a big indicator of where this market is headed.  I’d anticipate retail investors to sell on Monday morning; what happens after that will be key.  Do the “big guys” come in after the selling slows to buy the dip or do they also sell or just sit on their hands?  Friday was a average volume day closing off the lows after two high volume days on Wednesday & Thursday.  Indicating that in the short term perhaps the selling is over.  But that doesn’t mean buying will replace it.  The market can fall on low volume . . . . because nobody is buying (no one to hit the “ask”).

No surprise that all indicators on the chart above are bearish, but lets look at what lead up to this point.  For over a month now the price of the S&P 500 Index has been going higher, but the number of stocks making new highs has declined, while the number making new lows has increased.
This is just one of the many “market breath” indicators, but it does point out that the market index was being held up by fewer and fewer stocks; not a good sign.

Looking at the number of stocks in the very broad S&P 1500 Index we see a confirmation of that broad weakness.

# of Stocks in Accumulation / Distribution –# of Stocks in a Strong or Weak phase –There is a fair amount of red in both pie charts, maybe indicating that this time is different and “buying the dips” may have to wait a while.

Last thing I wanted to show is a price chart of Bitcoin, the Crypto currency.  These and other pseudo currencies have been the rage over the past year with hyperbolic rises and falls.  No judgement, just showing what can happen when everyone wants to jump aboard and then fade out.  Reminds me of the old J.P. Morgan comment that “when the barber and the shoeshine boy ask about buying, that’s a sign of a top”.
I am partially hedged as “insurance”; will add more or reduce as necessary.  Time to honor stops and trim out holdings that are weaker than the market.  That’s it for now, be careful out there.  ……  Tom  …..

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

 

Watching & Waiting for Something September 29, 2018

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Sept. 28, 2018 – We’re in a classical trading / consolidation range and the market seems to be just “watching & waiting” for a reason to go up or down.  There is plenty of news to spark things, but we just haven’t seen “The Big One” yet.

8105 is my resistance level (green) and 7976 my support level (red); these are (my version) of Wyckoff “significant bars”.  I’ve mentioned before that the low price of a weekly bar that closes much higher on volume is a significant price level of support.  That’s where “buying” last came into the market.  As is the high price of a weekly bar that closes much lower on volume is a significant resistance level; where “selling” came in.  The tricky part is in a consolidation phase where these two levels tighten up and get close to each other.  But, my feeling is that we may be in an Up Thrust phase of a Distribution structure; that remains to be confirmed.  Let’s not get tooo bearish just yet though.
I note market sentiment remains negative, Money Flow a little bearish, Volume Flow just sideways, not saying much.  (Short term) Price Strength just kicked up to slightly bullish.  Long term trend line channel is up and Short term channel shows a price break above the upper line, which is bullish.  The problem with (my) automatic Trend Channel lines is that they need price pivots (swing highs & lows) to reference and draw off of, and in a consolidation, that can take a while to develop.  I’m still thinking we could head lower to around 7700 on the NASDAQ Composite Index.

Let’s look at where strength is in the market in the short term –
Biotech, HealthCare, Energy (oil) and a very few Technology companies are showing up in my stock scans.  Japan has been doing well and I’m watching Latin America as well.  China is a rollercoaster for the time being.  Well, there’s not much else to cover.  I do have positions on but also a light hedge” just in case.  I’ll put more hedge on or remove it when this market gives me a better indication of direction.  One thing to gauge the market strength is how it reacts to news (either good or bad).  I learned that a long time ago taking a course from Michael Price.  (“Strong markets don’t react much to bad news, where Weak markets fall hard”.)  It will be interesting to see how this market reacts in the coming weeks.

Take Care, Good Trading and have a good week.  ….  Tom  …..

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

Range Bound August 19, 2018

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Aug. 17, 2018 – A quick look at the chart below shows why this market is range bound; i.e. bouncing between high & low price levels.  Note the “short term” trend channel and the support and resistance price levels are nearly the same.

NASDAQ

This market is looking for a reason to go up or down, but can’t find the follow through to break out of this range; at least not yet.  Echoing that idea is the rather low volume . . . not much commitment in either direction.

Looking at the top performing sectors (below) we really don’t see the typical leadership; that being Finance or Tech or Energy.  So the major sectors are on vacation too.

Top Sectors

Looking at the percent of stocks in the broad S&P 1500 Index and their status we note it being fairly even without much bias in either the Bullish or Bearish direction:

Price Strength –

Price Strength

Stocks in Accumulation or Distribution –

A-D

So, overall not much to dwell on for now.  The old saying “Never short a dull market” may have some validity here because this appears to be more of a pause.  Keep an eye on these levels and watch for volume confirming any directional change.

That’s about it for this week.  Take Care.    ……….  Tom  ………..

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

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.

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