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Finance: Track price action, not pundits’ talk

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PHUKET: As I am writing this, I haven’t turned on a TV in more than 10 days. So I am not getting any news from a verbal source about nuclear confrontations with North Korea, Trump uncertainty or whatever else is going on in the world. However, I have been reading the news and it’s different when you read news versus just listening to people talk on TV.

I am also watching for the price action of the market, key indices and stocks. What I see is that despite all the scary news and uncertainty, the market appears to be coiled with many key indices or stocks about to spring forward.

Instead of dwelling on the negative, just consider the following signs about what is going right.

Track the iShares North American Tech-Software ETF (NYSEARCA: IGV) performance. This focuses on a high growth sector and its performance gives a better indicator about stocks than anything we would get from watching CNN, CNBC or any other ‘news’ channel. IGV is where the big strong growth companies and leadership stocks exist and it’s hitting all-time highs as of the end of April. If IGV were to break down, then I would be raising cash.

Secondly, Alibaba Group Holding Ltd (NYSE: BABA) has broken out. While it is a global Internet behemoth, right now it has one of the most bullish charts in the market as compared to just before the US elections. BABA then pulled back a bit only to hit a yearly high and now sits just below all-time highs and is above its IPO debut for retail investors.

Observe how other stocks have powered higher. Stocks such as online travel giant Priceline Group (NASDAQ: PCLN) and life sciences cloud computing stock Veeva Systems (NYSE: VEEV) have continued to act well with PCLN up 25 per cent since the start of the year and VEEV up 31 per cent (as of the end of April).

Look for tight lines on technical charts. Looking over the technical charts for leadership stocks such as Alibaba, Priceline Group, Alphabet (NASDAQ: GOOG) and Apple (NASDAQ: AAPL), we see no evidence that ‘smart money’ investors are selling shares or taking profits off the table.

Observe the Netflix (NASDAQ: NFLX) technical chart. Netflix is a good example of a stock hitting all-time highs and yet, not many investors are cashing out by selling shares. This means most investors believe its run-up is not over.

Amazon.com (NASDAQ: AMZN) looks resilient. Amazon is a juggernaut and since the US elections, it’s steadily powered higher as more traditional brick and mortar retailers continue to struggle to compete with it. AMZN’s chart also looks similar to Netflix as it steadily moves higher.

I am keeping an eye out for the overall S&P 500 index to finally break out of a two to three year bottoming formation to (more than likely) stair step to higher levels. If that were to happen, even weaker non-leadership stocks would likely be taken along for the ride.

Don Freeman, BSME is president of Freeman Capital Management, a Registered Investment Advisor with the US Securities Exchange Commission (SEC), based in Phuket. He has over 20 years of experience working with expatriates, specializing in portfolio management, US tax preparation, financial planning and UK pension transfers. Call for a free portfolio review. Don can be reached at 089-970 5795 or email: freeman capital@gmail.com.

— Don Freeman

 

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