10-2-2018 Comments
With major indices challenging their highs, underneath another story is unfolding. Pascal mentioned the small caps are showing weakness; indeed. NYSE new 52-week lows have climbed and have been doing so for a month. One of the indicators that counts new highs and new lows is the Hindenburg Omen, 14 of the last 20 trading days have shown Hindenburg conditions with new lows dominating. This is unheard of. The NYSE advance-decline line is diverging from the indices, this is rare in the current market. The years 2000 and 2007 saw this kind of divergence. The period prior to the 2015 intermediate top also showed a divergence.
I have almost given up trying to read the market this way, QE forced liquidity covered all market weakness. Oil price may be a factor. Today Light Sweet Crude broke out above a consolidation at $75. One year ago I made a price projection for oil based on a large inverse head and shoulders pattern of $85.50. A year ago, with oil at $50, that was hard to believe. Higher oil prices may be taxing the economy.
The shorting candidates that I uploaded to the watchlist in the in High Growth area are: ANET, EA, EXPE, FB, GDS, OLED and WTW. GLD might be a candidate with its reversal at the 50-day today. I am in three of these.
Mike Scott
Cloverdale, CA