OT: Market under pressure (IBD)

Investment Analysis Clubs Saul’s Investing Discussions
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No surprise, the market is “officially” Under Pressure according to IBD.

A late-afternoon rebound managed only to shave a sliver off the day’s big losses. The Nasdaq composite led the way, down 1.5% by session’s end after falling as much as 1.9%.

Volume jumped sharply on both major exchanges. Combined with the big index declines, the price-volume action is perhaps the clearest signal that an investor can get that the big boys and girls of the market — namely mutual funds, hedge funds, pensions, endowments and banks — decided to take profits off the table and raise cash en masse
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Among the five distribution days on the Nasdaq, three saw declines of 1% or more (including Sept. 9, Sept. 13 and Tuesday). The Sept. 29 drop was 0.9%. In other words, the selling has shown more teeth.

Time for a little more caution, no need to fight the big boys. As we have seen recently, most corrections have been short and shallow, but we are due. It does not really matter what the “cause” is, if the big boys are selling (or buying) in high volume, you don’t want to fight it. Keep your list of great stocks and look for some great prices if that is you strategy. Those investing with the IBD rules will be preserving some profits and cutting the weaker stocks to have cash for the next upturn.

P.

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A late-afternoon rebound managed only to shave a sliver off the day’s big losses. The Nasdaq composite led the way, down 1.5% by session’s end after falling as much as 1.9%.

One day in the market is just noise that has a 50-50 chance of being right. I’ve been criticized for using charts but at least I’m using long term data

Not so FAST

Weak report out this morning from Fastenal (FAST):

http://discussion.fool.com/not-so-fast-32430271.aspx?sort=whole

Denny Schlesinger

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10/13/16:

The Nasdaq stepped down 0.5%, rubbing out most of a 1.3% morning loss. The S&P 500 and the Dow Jones industrial average fell 0.3% and 0.2%, respectively. The IBD 50 actually rose 0.2%.

Volume rose on both major exchanges.

The Nasdaq and the S&P 500 failed to retake their 50-day moving averages, hurdles that must be overcome if the uptrend is to shake its negativity.

While bulls welcomed the trimming of losses, the bears could accurately point out that the session still amounted to distribution.

The Nasdaq’s count increased to six days of distribution, but the S&P 500 stayed at eight. A Sept. 8 distribution day fell off the count because of time. After five weeks, distribution is no longer relevant to current conditions. Distribution involves a significant loss in a major index in rising volume. Such action points to institutional

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one day in the market is just noise that has a 50-50 chance of being right. I’ve been criticized for using charts but at least I’m using long term data

Exactly! That is why IBD counts distribution days over about 25 trading days, looking for a pattern of distribution (higher volume down days), that has shown to increase the odds of the end of a run and the beginning of a fall. This is especially useful for growth stocks which tend to outperform on the way up and under perform on the way down.

Their claim is that back testing has shown that these patterns of institutional distribution or accumulation have shown to significantly affect the probabilities and therefore are actionable.

Common sense says that spitting into the wind is not a winning strategy, so if you can tell which way the wind is blowing, you increase your odds.

Thus they say The Nasdaq’s count increased to six days of distribution, but the S&P 500 stayed at eight. A Sept. 8 distribution day fell off the count because of time. After five weeks, distribution is no longer relevant to current conditions.

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10/18/16

The S&P 500 added 0.6% but remained stuck in a sideways trend. The Nasdaq rose 0.8% to close a few points below its 50-day moving average. That line has been a barrier for more than a week and still stands as a threat to the composite’s ambitions.

Volume rose in the major exchanges, always a good sign when indexes climb. The Sept. 13 distribution day was deleted because it’s become too stale to count any longer. That tilted the price-volume calculus more in favor of the bulls, but not enough to remove lingering doubts about the market’s direction.

Distribution days: NAZ:4 S&P:6

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10/25/16
Started to look good on merger Monday, but gave it back today on increased volume…

institutional investors sold heavily Tuesday, as some bellwether companies gave bearish forecasts and earnings reports sparked big moves.

The Nasdaq fell 0.5%, giving back half of Monday’s 1% rally. Still, the composite has cleared some room above its 50-day moving average, an important step for the market. The S&P 500 decreased by 0.3%. The small-cap Russell 2000 slid 0.8%. But the Dow utility average bucked the trend, rising 0.6%.
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Volume rose across the board, which added up to a distribution day. With six on the S&P 500 and five on the Nasdaq, the amount of institutional-size declines the past few weeks warrants continued cautious investing and selective exposure to stocks.
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Housing suppliers like Whirlpool, Masco, Sherwin-Williams and Installed Building Products had very rough days - people losing faith in the housing market.

LGIH took a dip too and is headed toward its 200dma - hard to advise holding it here.

Dist Days: NAZ=5 S&P=6

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10/27/16
Skating on thin ice now. I was surprised they didn’t call it today. I got a little lighter

Volume rose across the board, lifting the distribution-day count to seven apiece for the Nasdaq and S&P 500. The market uptrend remains under pressure.

A cluster of distribution days has frustrated the bulls. In the past 15 trading days, either the Nasdaq or the S&P 500 or both have incurred distribution in six sessions, including each of the past three days.

Normally, that kind of distribution might knock IBD’s market outlook to a correction. However, despite all the distribution, the Nasdaq and S&P 500 aren’t far off their highs. Many leading stocks are still in fine shape, although some have dropped below the 50-day line this week.

Losses were broad on the indexes Thursday. Declining issues led rising issues by a 5-to-2 ratio on the NYSE and 2-to-1 on the Nasdaq. For top-rated stocks, it was worse. In the IBD 50, losers led winners by a 6-to-1

After hours, the market got some bad news. Amazon.com (AMZN) posted Q3 earnings that were 33% below the Street’s consensus view. Amazon stumbled 5% in after-hours action.

Amazon had been one of the true leaders of this year’s market. The big cap closed regular trading up 70% from its closing low Feb. 9. Thursday’s earnings report threatens to puncture the confidence that bulls have in Amazon and in this market

Dist days: 7 for S&P and Naz

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10/31/16

Market was quiet today, down a small amount, but on lower volume.

Just when the distribution-day count started to get more palatable as days dropped off, the count is back up to seven for the Nasdaq and S&P 500. The Nasdaq had three in a row in the latest week, on Oct. 25, 26 and 27.

This, in and of itself, makes for a difficult environment to make money in growth stocks. A high distribution-day count is an indication of heightened institutional selling in the market. For this reason, it does not make sense to have aggressive exposure to growth stocks. If a new buy works, great, but don’t be afraid to take a profit if the gain hits. 10%.

With expectations high, growth stocks generally haven’t been responding well to earnings. A solid report last week from Alphabet (GOOGL) failed to spur meaningful buying demand. Shares rose nearly 3% early but ended with a gain of just 0.3% Friday.
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Big sellers were in Amazon.com (AMZN) last week as shares slumped 5% for the week. It rebounded in heavy volume Monday, rising nearly 2%, but it’s still below its 50-day moving average. A period of base building would help the stock’s cause at this point. The stock was extended headed into earnings after a breakout in mid-April and several visits to the 10-week moving average.

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11/1/16
Still looking worser and worser. I thought they would call it for sure today. Hmm.

The stock market continued to weaken in a broad retreat Tuesday, although a few signs suggest the indexes could snap back in the near term.

The Nasdaq composite and S&P 500 fell for the sixth day in a row, down 0.7% each. For the Nasdaq, it was also the fourth distribution day amid that losing streak, as the main exchanges registered higher volume.

Indexes have piled up eight distribution days in the past several weeks. That’s growing evidence of institutional investors cutting back on stocks, and it’s a bearish trend reflected in other significant ways.

The Nasdaq composite undercut the Oct. 13 low, and the S&P 500 sank below the September lows. The Nasdaq and S&P 500 are now making a narrow series of lower highs and lower lows, the definition of a downtrend. Both remain below their 50-day moving averages, too.

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Earnings season has gone badly for many leading stocks, and that’s another worry. Even a slight miss in results or forecasts is vastly magnified. An earnings report effectively can become weaponized, destroying an investor’s hard-earned profits in a stock with the effectiveness of a laser-guided bomb.

Investors, thus, need to seek shelter by keeping exposure to stocks moderate. Consider taking profits before a company issues its quarterly results, especially if your profit cushion is thin.

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Investor fear is running feverish. As seen in IBD’s new “Psychological Market Indicators” page at Investors.com, the put/call volume ratio spiked above 1.2 Tuesday and was 1.16 Friday. Yet, it is precisely in such high levels of fear that the market often finds a bottom. Readings above 1.15 on the ratio have coincided with at least short-term market lows. This contrarian indicator has been reliable for more than a year, and it is illustrated in the market-trend file linked at the bottom of this page.

Another indicator, the CBOE Market Volatility index, also signals that indexes could be ripe for a bounce. The index is more than 20% above its 10-day moving average, which has done its job in flagging market lows.

On another level, some price momentum indicators are flashing oversold signals for the market.

In many cases, eight distribution days have been enough to signal a market top. But the market can shake it off too. On May 17, the Nasdaq had nine distribution days and IBD’s market outlook held at “uptrend under pressure.” The market snapped back to a confirmed uptrend five days later.

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On another level, some price momentum indicators are flashing oversold signals for the market.

Awesome!

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These market breadth charts measure advancers vs. decliners.
They have consistently given very good signals.
A good way to use these is to hedge a little when they signal, and then hedge some more into the next rally.

I got a Hedge signal on my main Advance/Decline chart several days ago:
http://stockcharts.com/public/1057667/chartbook/417581582;

Summation Index
http://stockcharts.com/public/1057667/chartbook/424814412;
http://stockcharts.com/public/1057667/chartbook/442283860;

The Russell 2000 is leading to the downside.
http://stockcharts.com/public/1057667/chartbook/447055854

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11/2/16 still no TKO. The fighter is staggered and bleeding, but they won’t call it yet.

The Nasdaq composite fell 0.9% and ended practically at session lows. At 5097.56, the tech-heavy index briefly and barely undercut its Sept. 12 low. Profit-taking in the “FANG” stocks and other big-cap techs remained intense despite their reports of strong earnings and revenue increases.
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The savvy investor knows that the market conditions are not friendly to those who wish to buy new breakouts or pullbacks to the 50-day moving average. A heavy dose of caution and a sizable wad of cash in your portfolio remain the best strategy in the near term.

The S&P 500 was not far behind the Nasdaq, dropping nearly 0.7%. For now, the large-cap index still holds a thin cushion above its still-rising 200-day moving average
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The Nasdaq, however, saw volume increase, and so the distribution count rose to nine over the past 25 sessions, the highest since mid-May, when IBD’s outlook also was at “market under pressure.”
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The Russell 2000, down 1.1% on Tuesday, lopped off another 1.3% on Wednesday and is now 8% below its 52-week high
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Meanwhile, the market internals continue to deteriorate. Far fewer stocks are making new highs lately. Gains from recent breakouts have either been modest or disappearing. The Nasdaq’s advance-decline line has been falling for more than five straight weeks. The NYSE’s line also peaked roughly five weeks ago.
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Distribution Days: Naz=9, S&P=8, Big liquid leaders like Google, Amazon and Facebook are starting to crumble too - all below their 50dma on increasing volume.

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11/3/16 - lower volume saves us from a change in market status…

ock indexes sagged for an eighth straight day, but lower volume eased part of the pain.

The Nasdaq lost 0.9%, while the S&P 500 fell 0.4%. The blue chip Dow Jones industrial average shaved off 0.2%. The IBD 50 dropped 0.7%.

Volume declined on both major exchanges, allowing the indexes to dodge further distribution. Distribution involves an index loss in rising volume and points to institutional selling. In the past eight sessions, five were distribution days. (The Sept. 29 distribution day was erased Thursday due to time.)

I remember as a kid we went ice skating on a pond and I went onto ice that was a bit too thin, I could hear it cracking and raced to get out of there with my toes breaking through the ice and getting a bit wet as I pushed to make to safety. That is what the market feels like right now and I am not sure if it will make it or not.

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I have been very cautious here. I have four companies in my “buy” zone but have held off purchasing: CASY, DIS, LGIH and BOFI. I think they are good values but it feels as though even better prices may be ahead and if the market turns up I don’t feel a need to catch the exact bottom on these. SKX is also at a buy point price-wise, but I am waiting until I digest the quarterly report…, not convinced the international growth has legs.
The S&P looks to me to be a day away from the 200-day moving average and the internals don’t look strong to me.
I sold SWKS and MELI before earnings but kept AMN and SBUX and three others. AMN was up 3% before market closed and up another 4% after hours after earnings released. I listened to that conference call but none of the others, yet.
I don’t know if this is just election jitters or something more but I am o.k. to be holding a lot of cash. Market is ignoring the good news and punishing the slightest odor of bad. I suppose this means that when the mood shifts there will be a quick pop so it is never really comfortable to be overweight cash.

KC

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I don’t know if this is just election jitters or something more but I am o.k. to be holding a lot of cash

Well, the second Comey came out on Sunday and said the new evidence does not change his view on Hillary, the market futures soared. So, yes, lots of market jitters. The market sees Hillary as a known and stable president. The market is very unsure about Trump. If HRC wins, I suspect the market starts a nice run up. Interest hike in Dec is already highly expected, Nov-May is the “best” time for stocks, etc. If Trump wins, the market tanks, but then we have a great buying opportunity.

Worst case scenario is a Bush-Gore-like “tie”, that stretches out the decision and causes possible riotous activity. So just hope for a clear decision either way.

Yes, I believe cash is good now, but be ready. (see next email)

I hold and like CASY, but is a weak growth stock now:
Rating
Composite Rating 44 Fail
EPS Rating 83 Pass
RS Rating 26 Fail
Group RS Rating C+ Neutral
SMR Rating C Neutral
Acc/Dis Rating D+ Neutral

I have been long DIS for a few years, but a weak growth prospect now…
Rating
Composite Rating 65 Fail
EPS Rating 90 Pass
RS Rating 24 Fail
Group RS Rating B Pass
SMR Rating A Pass
Acc/Dis Rating C+ Pass

I like LGIH a lot and brought it to this board, but I sold not too long ago. Still like it, but waiting. OK growth rankings:
ChecklistRating
Composite Rating 93 Neutral
EPS Rating 99 Pass
RS Rating 80 Pass
Group RS Rating B- Pass
SMR Rating A Pass
Acc/Dis Rating D+ Neutral

Never wanted to touch BOFI, not very strong
ChecklistRating
Composite Rating 89 Neutral
EPS Rating 94 Pass
RS Rating 63 Fail
Group RS Rating B+ Pass
SMR Rating A Pass
Acc/Dis Rating C- Neutral

Take a look at Ulti Software (cloud stuff), very strong, #1 in its group:

ChecklistRating
Composite Rating 98 Pass
EPS Rating 95 Pass
RS Rating 78 Pass
Group RS Rating A Pass
SMR Rating A Pass
Acc/Dis Rating B- Pass
http://stockcharts.com/freecharts/gallery.html?ulti
Ultimate Software (ULTI) gained nearly 3% to 216. It’s near the top of a flat base with a 224.17 entry.

MCHP not bad. #1 in its group within semis. Stronger than SWKS
ChecklistRating
Composite Rating 99 Pass
EPS Rating 79 Fail (weak Relative Strength)
RS Rating 90 Pass
Group RS Rating A+ Pass
SMR Rating A Pass
Acc/Dis Rating B Pass

Microchip Technology (MCHP) jumped 3% to 62.23. It’s working on base with a conventional entry at 63.21. (only on strong volume past the buy point)

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11/7: Comey gets the markets fired up. Could be the start of something that “officially” moves the confirmed uptrend if HRC wins. (I’m not saying she is good or bad, just how the market is reacting - they like certainty, and Trump is as uncertain as it gets).

Major stock indexes rose out of a deep slumber Monday and scored big gains by the close. Volume fell from Friday’s levels, and base breakouts were hard to come by, but several growth names tacked on nice gains in heavy volume.
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Advancing stocks swamped decliners on both exchanges by more than 4-to-1.
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a screen of stocks with top Composite Ratings up in heavy volume yielded 25 names, the most in some time. That said, the market still has to prove itself for more.

At least part of Monday’s strength was due to short-covering by the bears. Once the short-covering runs its course, it’s important to watch for fresh signs of institutional buying.

Three strong up days in a row from June 28-30 put the market back in a confirmed uptrend. It amounted to a tradable really before distribution days started to appear in the second half of August.

Investors always need to weigh risk vs. reward ahead of a decision to buy a stock. Ask yourself these questions: Is the current market an easy environment to make money in growth stocks? Have breakouts in heavy volume been working? Are leaders acting well? Is it obvious that new institutional money is coming in from the sidelines?

If you answered no to some or all of these questions, it’s best to be tread cautiously and wait for uncertainty to subside in the market.

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11/8. Election night.

Tuesday certainly has the potential to move the market on high volume.

Interesting notes:

Volume was flat on the NYSE and lower on the Nasdaq for the second day in a row. Ideally, index gains come with higher volume, and volume Monday and Tuesday did not match the intensity of most days last week, when the market was in a nose-dive. Still, there was one favorable change in the price-volume equation because the Oct. 4 distribution day became too aged to count any longer.

So now we are at 7 Dist for Naz and 6 for S&P

The nitpicking comments above do not minimize the strength of this week’s rally. The Nasdaq has wiped away an entire week of losses and the S&P 500 has erased seven days’ worth of declines . Notice, however, that IBD’s outlook still sees the market under pressure. The two-day rally is no reason to increase exposure to stocks, although Tuesday’s election should clear up some of the big questions dogging investors.
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Mexico’s Bolsa IPC main index jumped nearly 4% in the past two days, in another sign that expectations of a Donald Trump defeat worked their way into market

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