Investment Flow Chart Analysis - 3-21-2025
Once again, I am updating the Investment Flow Chart Analysis as of Friday, 3-21-2025
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 weekly charts of the NASDAQ and the S&P 500, the two indices have fallen below the 8- and 20-week simple moving average lines as well as to 50-weekly SMA, which suggests that the market direction is changing.
Now, the question is whether the negative 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 Elder daily impulse charts show recent daily action in both the NASDAQ and the S&P 500.
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The longer-term trend shown in the first set of charts suggests a changing market while the daily charts suggest a turning point may be at hand. The past week saw a change in the market's tone as the Trump effect might be stalling.
The IBD market call suggests an exposure of 0-20%.
The Accumulation/Distribution chart is shown below. As can be clearly shown, the number of “A” rated stocks according to IBD has fallen below the red line which suggests that positions should be reduced or moved to long-term safe positions like Treasuries or precious metal positions.
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 acquired a few precious metal stocks as of Friday's close but remains over 50% 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, the rising tensions in both the Middle and Far East and the outlook for the future in the U.S., investing at the moment contains a high element of risk. Remember that banks and governments for centuries can easily change the rules to prevent a market breakdown.
The US Treasury is facing a major refunding effort during the rest of 2025 and it is doubtful that the FED will be able to reduce interest rates significantly. Thus, the outlook for the U.S. deficit will continue to hamper the economy going forward as it squeezes private funding.
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
21 March 2025 p.m.