Investment Flow Chart Analysis - 12-13-2024

Once again, I am updating the Investment Flow Chart Analysis as of Friday, 12-31-2024

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-day simple moving average lines, so the presumption is that the market is in a longer-term positive trend.

Now, the question is whether the positive trend will continue. Both the NASDAQ and the S&P 500 remain above their 200 day lines so a full donnybrook possibility of a market decline remains ahead.

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.

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The longer-term trend shown in the first set of charts suggests a positive market while the  daily charts suggest a turning point may be at hand. The past week saw a change in the market's tone. .

The market call remains "Market in Confirmed Uptrend". The Accumulation/Distribution chart is shown below. As can be clearly shown, the number of “A” rated stocks according to IBD is starting to falter. 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 sold FICO for a s substantial profit this week and remains largely in cash.

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. Doesn’t anyone remember the Hunt’s foray into the silver market back in the 70’s and how the exchange survived?

Nothing is new …. Just a new group of sheep to be shorn.

Fred Richards

13 December 2024 p.m.