Investment Flow Chart Analysis - 5-12-2023

Once again, I am updating the Investment Flow Chart Analysis as of Friday, 5-12-2023.

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 1960’s utilizing fundamental research including Point & Figure charting.

Since then, I have incorporated ideas from William O’Neil’s 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 above both the 20- and 50-week simple moving average lines, so the presumption is that the market has positive momentum .

Friday's close for the NASDAQ was above the previous weekly close suggesting that a positive movement was underway. Friday's close for the S&P 500, however,  saw the average below the previous weekly 50 day MA so the upward trend could still be considered dangerous.

Now, the question is which trend will prevail. 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 using the Elder impulse system. Recent action suggests that the upward trend is strongest in the NASDAQ but the larger cap stocks in the S&P 500  may be faltering.

The longer-term trend shown in the first set of charts suggests a market that has run out of steam.

The IBD market call remains  "Market in Confirmed Uptrend". The Accumulation/Distribution chart is shown below. The number of “A” rated stocks according to IBD during the past four weeks has remained below the red line.   The methodology which I use has a rule that states that when the line falls below the green line, profits need to be taken. Further, when the line falls below the red line, the trading portfolio should be in cash. 

The Strategic Investing Portfolio added several positions during the past week but has also closed two positions as of Friday evening. 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.

Nothing is new …. 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?  As Minsky said ... it only takes one grain of sand to destroy ....

Fred Richards

12 May 2023 p.m.