6-21-2015 Comments

[Mike]

Watch lists are updated. Portfolio still making progress. PANW is in the 20% to 25% harvesting range. I have set an alarm at the 10-day moving average to see if I can ride a bit further. I am trying to keep stocks that are extended too much above the 50-day in order should I buy that I can withstand a pull back to the 50-day without having to take a loss.

Friday's Russell re-balancing brought us another distribution day, day 6 in a 25-day trailing window. This level suggests raising a bit of cash. The MarketSchool exposure model suggests raising 10%. When raising cash you should generally sell a portion of your worst position.

I am still monitoring the 120-day ema on the S&P500 and I find nothing of concern. I will become concerned when the 120 ema is decisively broken indicating a change in market behavior. It seems that we are moving through a series of short lived rallies and pull backs. The pull-back frequency is increasing suggesting a Didier Sornette log-periodicity effect. What I don't see is the market accelerating upward which usually accompanies a log-periodic power-law top. If you just joined Didier Sornette is a physicist who wrote a book called Why Markets Top with a discussion on this topic. The book is not recommended for non-engineers or scientists.

The major leader in this rally AMBA has shown signs of a climax top. Friday's large pull back may be confirming. One method of managing a stock that you believe is in a climax run is to sell it if it breaks the 4-day simple moving average. AMBA would have been sold on Friday using this method. Climax tops of major leaders can sometimes signal a general market top. One climax run does not stop a market in its tracks so stay tuned.

[Mike]

Watch lists are updated. Portfolio still making progress. PANW is in the 20% to 25% harvesting range. I have set an alarm at the 10-day moving average to see if I can ride a bit further. I am trying to keep stocks that are extended too much above the 50-day in order should I buy that I can withstand a pull back to the 50-day without having to take a loss.

Friday's Russell re-balancing brought us another distribution day, day 6 in a 25-day trailing window. This level suggests raising a bit of cash. The MarketSchool exposure model suggests raising 10%. When raising cash you should generally sell a portion of your worst position.

I am still monitoring the 120-day ema on the S&P500 and I find nothing of concern. I will become concerned when the 120 ema is decisively broken indicating a change in market behavior. It seems that we are moving through a series of short lived rallies and pull backs. The pull-back frequency is increasing suggesting a Didier Sornette log-periodicity effect. What I don't see is the market accelerating upward which usually accompanies a log-periodic power-law top. If you just joined Didier Sornette is a physicist who wrote a book called Why Markets Top with a discussion on this topic. The book is not recommended for non-engineers or scientists.

The major leader in this rally AMBA has shown signs of a climax top. Friday's large pull back may be confirming. One method of managing a stock that you believe is in a climax run is to sell it if it breaks the 4-day simple moving average. AMBA would have been sold on Friday using this method. Climax tops of major leaders can sometimes signal a general market top. One climax run does not stop a market in its tracks so stay tuned.

In the first paragraph I mangled a sentence. What I was trying to say is that I tend to not put stocks on my watch list that are extended above the 50-day.

I also noticed another phenomena this morning. Stocks like FLT and ILMN can ride up finding support at their 10-week moving averages and then stop respecting the 10-week and slip down and start respecting their 40-week moving average. ILMN stopped following the 10-week in March of 2014. For FLT it was January of 2014. This gives them the appearance of looking tired and less desirable. You can easily see this deceleration on a monthly chart.