Klein Market Summary-August 19th, 2013

Klein Market Summary

August 19th, 2013

Current Market Facts:

Technical Status

 Confirmed Rally – Beginning Week 7
   

Other Observations

Thursday’s gap down puts the rally and leading stocks under pressure

Distribution levels are very high

Some leaders are showing stress

Feel of the Market

The rally is under pressure
   

 Important Levels on Key Indices:

Index

Support

Last Close

Resistance

Nasdaq

3600

3603

3694

Nasdaq 100

3021

3074

3149

S&P 500

1654

1656

1700

 DJIA

15000

15081

15658

 

Market Interpretation:

The market may be at the beginning of a correction.  With elevated Distribution levels, Thursday’s gap down, and some damage in leadership, any more Distribution at these levels would conclusively put the market into a Correction.  Last week’s action featured the lagging DJIA leading the indices lower, as it plunged through its 50 Day MA on Thursday.  The Dow has lagged during the recent leg up, while the NASDAQ has led.  The Dow was hit hard by CSCO’s and WMT’s earnings reactions, while leader HD gapped down in the handle of its late stage base.

The NASDAQ Composite has shown more resilience than the other indices.  GOOG, which has been trending higher throughout the year, showed cracks this week, as AAPL broke out of a bottoming base with big power.  While AAPL is not necessarily the kind of leader it once was, it continues to exert enormous influence on the market indices.  This has helped to buoy the NASDAQ amidst the broader sell-off.  With the NASDAQ Composite and NASDAQ 100 off a mere 2%, it is difficult to rush out the door with leading stocks, especially when many continue their uptrends.

Joel’s Take:

Major institutional investors, as well as sophisticated individuals, expect Fed QE tapering in the next 6 months or so.  As such, tapering is not a surprise, nor should it be a threat to a rallying market.  Still, after the NASDAQ surged 12% uninterrupted in recent weeks, a 2% pullback is not surprising.

Some leading stocks are showing damaged or broken patterns.  Yet, others are displaying resilience, and even continued uptrends.  Still, if the market continues to trend lower, or market leadership erodes substantially from here, then a more defensive stance would be in order.

There is substantial evidence of resilient leadership, so far.  If the market trends lower this week or shows more Distribution, without signs of support, a more defensive posture might quickly be adopted.

Leading Stock Notes:

The proper analysis of current leadership for signs of topping is critical at this point.  For example, PCLN gapped up on earnings and then pulled back last week, filling its gap.  This action is not necessarily consistent with a top.  Furthermore, the stock is 15 weeks out from a long-term basing pattern.  Most leading stocks run a year or more from such a breakout.  BBRY ran similarly from its breakout in 2006 until it topped in late 2007.  Even so, PCLN’s action could develop into a base.

The action of CREE last week was quite disconcerting to me, as it gapped down and corrected 26% in 2 days.  CREE has been one of the best liquid leaders this year, up 124% before it cratered last week.  Other green energy plays showed weakness as well, CSIQ, SPWR, and SCTY.  TSLA pulled back hard ahead of the market weakness, but interestingly held steady amidst Thursday’s market plummet.  A few leaders seem to be constructing sound bases, which could add new fuel to market leadership.

  • The Klein Market Summary is a professional interpretation of the general stock market conditions that is updated on a weekly basis.  Joel T. Klein is the portfolio manager of the investment partnership Blue Diamond Capital, LP. He writes the summary using select technical and fundamental data.  The Klein Market Summary is not intended to provide investment advice of any kind, and is only provided for the entertainment of the reader.  It is typically updated Monday morning, weekly.  Please e-mail info@kleinasset.com, if you are interested in receiving this free weekly update.
  • Past performance is not a guarantee of future results.  Due to market volatility, a fund’s performance may fluctuate.  Current performance may be less than previous results.  An investment a hedge fund when redeemed, may be worth more or less than the original cost.  Information above is not a replacement for the Fund’s prospectus.  This webpage does not constitute any kind of offer or solicitation.  Additional information on investment objectives and policies is in the Fund’s prospectus.  Ask your representative for a prospectus.
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About kleinmarketforum

Klein Asset Management, LLC, formed in 2003, serves individual investors via a directional growth stock approach. When the market is in an uptrend, the firm seeks to exploit investment opportunities. When the trend is down or neutral, assets are protected. Klein Asset Management undertakes major market research projects. In many cases, these result in improved investment methods, which ultimately improve performance.

3 responses to “Klein Market Summary-August 19th, 2013”

  1. Eric mallory says :

    Always like the reports.

    What keeps lnkd out of the IBD 50.

  2. kleinmarketforum says :

    Thank you for your patience while I’ve looked into this. My understanding is that the IBD 50 is quantitatively generated, and then screened by RS rating. I don’t know why LNKD is not included, but it is clearly one of the very best stocks in the market.

    Personally, I would not use an index such as that one to find new buys. It is an interesting barometer of market strength. Yet, since it is screened by relative strength, it necessarily omits some great stocks which may be building bases, and have not yet extended. Determining these factors is all the more important in a market such as this, where many leading stocks have already doubled or tripled this year.

    Thank you for the question.

    Best

    Joel

  3. http://www.youtube.com/watch?v=SdPRtSpR5GY says :

    I pay a visit everyday some blogs and sites to read posts, except this webpage gives
    feature based articles.

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