Investment Flow Chart Analysis - 8-1-2025

Once again, I am updating the Investment Flow Chart Analysis as of Friday, 8-1-2025

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 risen above the 8- and 20-week simple moving average lines as well as to 50-weekly SMA, which suggests that the market direction is positive. In fact, after Friday's close, while both the NASDAQ and the S&P 500 are in new record territory, caution is advised.

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 positive market while the  daily charts are suggesting caution. The past week saw the market's tone turn negative as the FED failed to reduce the interest rate. However, the US dollar index did not show significant deterioration.

However, the Chalking Money Flow indicator as seen in the following charts shows serious deterioration as shown below.

After Friday's close, The IBD market call was reduced to an exposure of 60-80%.

The Accumulation/Distribution chart is shown below. As clearly shown, the number of “A” rated stocks according to IBD which had climbed back above the green fell hard during Thursday and Friday's market action.  Market rotation is occurring which has in the past found the overall market unable to move higher.

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. 

Investors should be concerned if the number of A's is unable to remain above the green zone as it is often the sign of a blow-off top before a major correction begins.

The Strategic Investing Portfolio still remains about 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.

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

Fred Richards

1 August 2025 p.m.