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Trend table status

Trend

SP-500

R2000

COMPX

Primary

Up 7/31/20

Up 1/29/21

Up 5/29/20

Intermediate

Up 10/2/20

?+ 4/23/20

?+ 4/30/21

Sub-Intermediate

Up 3/29/21

? 4/5/21

?- 5/10/21

Short term

Up 4/1/21

Dn 5/10/21

Dn 5/4/21


Don Worden of Worden Brothers (makers of Telechart software) used to keep a trend table before his health issues got in the way. I always found it useful. Mine is slightly different. Hopefully helpful. Up? or Dn? means loss of momentum. ? by itself means trend is neutral. ?+ or ?- means trend is neutral with bias of up(+) or down (-)

Wednesday, March 24, 2021

The market is looking heavy 3/24

In the last blog post I noted the market was acting poorly, but it could bounce.  It did and SPX made a new high, but internally the market appears to be getting weaker.

SPX closed below its 20 SMA today.  It only made a marginal new high on the last bounce.  It looks to me like it might want to test that last swing low which would take it down to the 100 EMA (white line).  The QQQ chart looks much weaker.

Usually QQQ tops after SPX, but as you can see it got nowhere near the high on the latest bounce.  This would seem to be a significant warning sign.  Check out IWM.

IWM also made a slight new high, but it is already below its 50 SMA.  

I noted a few times late last year there was very little selling pressure.  I figured people did not see an urgent need to take money off the table so they wanted to wait until this year.  When the new year came there still was very little selling pressure.  I did not mention this before, but that got me to wondering if they wanted to wait until after a year to get the lower capital gains tax rates.  That very could be and we just turned the corner on one year since the crash low.  There might be a little more selling pressure over the next few weeks.

May God bless you all with peace, good health, and happiness.

Bob



Friday, March 5, 2021

The market is acting poorly, but might bounce from here 3/5

Small cap stocks started the year on fire, but since 2/10 they have been struggling mightily.  In addition, most of the big tech names which have been leading the market for years are not acting very well.


SPX tested the lower channel line both yesterday and this morning before bouncing strongly.  Volume was strong today.  This looks like a good bounce setup providing there is follow through on Monday.  The VIX is acting very odd this year.  It has been over 30 twice already with only little pullbacks.  I don't know exactly what it means, but it is not quite normal.


The futures tested the 200 SMA pretty well the last two days.  This afternoon's bounce makes the chart look reasonably positive.

I believe some investors are selling overpriced stocks because of rising rates.  I also think other investors are busy buying the dip because the FED is printing money.  If rates continue to rise the market will probably continue to struggle.  On the plus side, the DC folks are talking about more stimulus.  Stimulus could help to keep a floor under the market for now.  We might be limited on the upside by interest rates and supported on the downside by fiscal stimulus.  Breaking the 1/29 SPX low (3694) would probably tip the scales to the bears.

The biggest risk to the market would be a pullback big enough to start another margin debt unwind.  We saw what happened last year when that happened.  As of Jan., the margin debt was about 42% higher than it was Jan. last year  Should it unwind again we could be in for a bigger drop than last year.  The trouble is unwinds are very unpredictable.  It will happen someday, but there is no telling when.

Have a great weekend,  May God bless you with peace, good health, and happiness.

Bob



Wednesday, January 27, 2021

Bizarre market 1/27

First of all I have to apologize to those who are supposed to get an email.  After my last update I had an issue with my email program which I did not get fixed until today.  So there are two updates to look at.

This was the strangest sell off day I have ever seen. 


Notice the high volume for today.  SPX was down 2.5%, but the NYSE up volume was 60% of the total.  That put the trin at an unbelievably low level for a sell off day of .17.  I think this next chart will explain the volume.

One single stock traded over 1.2 billion (approximately 4 times the number of shares outstanding) shares today.  You read that correctly.  This one stocks completely skewed the statistics.  Day traders are going crazy.  Take a look at GME for example.  One would think it is the year 2000.  This is crazy.  A bear market is probably right around the corner. 

 

Since the late Oct. low the futures have held above the 100 SMA (white line).  They closed slightly below that line today.  We will have to see if it can provide support again (futures must bottom right around here).  Notice the -DI line (bottom panel) crossed above the 35 threshold today.  Crossing this line opens the door to a bigger pullback like 10% or more.  We will have to see if the bears step into that open door.


The red line is close to giving us an oversold condition (middle panel).  However, oversold can aleays get more oversold.  The short term indicator (lower panel) dropped under 50% which is a warning sign if the market does not bottom quickly.  The last two times this indicator dropped below 50 SPX made it down to the 100 EMA.  That is still a good ways from where we are now.

Today could be a one day wonder, but the door is open for a larger pullback.  The lack of selling at year end last year suggested many people were waiting to take profits until this year to push out the tax bill.  Therefore, I have been expecting a sizable pullback to clear out the profit takers.  Today could be the start of the expected pullback. 

The market is wildly speculative.  We are seeing the kind of activity which only happens after a very long bull market.  I believe the only comparable times are 1929 and 2000.  I think the bull market which started in 2009 will end this year.  It seems unlikely this kind of foolishness can last all the way into next year.  Anything is possible in the market, but that seems unlikely.  A look at the margin debt data shows the downside risk is very high.  The Dec. debt number was a record high of 778 billion.  This is 216 billion (38%) above the Jan. 2020 number 561 billion.  The crash last year unwound only about 90 billion dollars.  Prior to Dec. 2020, the peak was in May 2018 at 668 billion.  The mini crash in late 2018 unwound about 94 billion dollars (648 billion down to 554).  I must point out there are still somewhere around 10 million people out of work that were working in Jan. 2020.  A crash now will certainly do considerable economic damage.  I don't think it is likely the market will bounce back the way it did last year.

I am sure we will see a higher level of volatility for the foreseeable future.  It is impossible to say if the final high in the indexes have been hit, but it is a possibility.  Be ready for more turbulence.

Bob   


Important

The information in this blog is provided for educational purposes only and is not to be construed as investment advice.