Investment Flow Chart Analysis - 11-11-2022

 

Once again, I am updating the Investment Flow Chart Analysis as of Friday, 11-11-2022.

 

The methods described below borrow heavily upon the lessons learned from Ernie Zahn, Ralph Hansmann and William T. Golden at Cornell, Linder & Co. & Ben Graham during my time on Wall Street in the 1960ís utilizing fundamental research including Point & Figure charting.

 

Since then, I have incorporated ideas from William OíNeilís CANSLIM methodology, Ian Woodard and High Growth Stocks as well as Stock Charts.

 

The first decision is to determine what the daily, short-term or long-term trend of the investment market is.To make this determination, look at the 50- and 200-day simple moving averages on a weekly chart as shown below to determine if both the NASDAQ and the S&P 500 averages are either both positive, both negative and/or split.

 

 

 

As can be seen in the above charts of the NASDAQ and the S&P 500, the two indices are below both the 20- and 50-week simple moving average lines, so the presumption is that the market remains in a longer-term negative trend.

 

Friday's close for the S&P 500 was above the previous low which is a good sign.  Friday's close for the NASDAQ was above the previous low of 341.58 suggesting that an upwards bounce might happen.

 

Now, the question is whether the negative trend will continue.Both the NASDAQ and the S&P 500 are above their 200-week lines .

 

So now the question is whether to:

 

1.       Be long,

2.       Be short, or

3.       Be on the sidelines.

 

Remember pigs get slaughtered.

 

The daily charts show recent daily action in both the NASDAQ and the S&P 500.The view to the right of each chart shows in detail recent trends and volume movement.

 

 

The longer-term trend shown in the first set of charts suggests a negative market. The daily charts confirm that the recent rally attempt gained traction with the market action this past week.

 

The IBD market call has changed to  "Market in Confirmed Uptrend". The Accumulation/Distribution chart is shown below. As can be clearly shown, the number of ďAĒ rated stocks according t IBD has risen above the red line.. The methodology which I use has a rule that states that when the line falls below the green zone, profits need to be taken.Further, when the line falls below the red line, the trading portfolio should be in cash.  As the line approaches the red line, trading positions with tight stops can be entered.

 

 

 

The Strategic Investing Portfolio remained in cash during the past week.In running the various screens in both IBD stock screener and StockCharts, we have  found few positions in which to recently invest. We maintain very tight selling points on our positions.

 

We continue to run the various IBD and StockCharts screens each day but the current political and economic conditions suggest that prudence is justified.

 

With the uncertainty concerning Russia and the mess in Ukraine and the outlook for the future, investing at the moment contains a high element of risk.  However, changing the rules to prevent a breakdown in the markets has been around for centuries.The bullion banks and the commodity exchanges have changed the margin requirements multiple times to prevent them from going bankrupt.Doesnít anyone remember the Huntís foray into the silver market back in the 70ís and how the exchange survived?

 

Nothing is new Ö. Just a new group of sheep to be shorn.  Based upon the economic fundamentals, the recent week reminds me of the tulip craze markets of bygone time ... crypto anyone?

 

Fred Richards

12 November 2022 p.m.