Special Risk Capital Management LLC

Patience May, just may, Be Called For May 13, 2011

My overall “market stagnate” theme continued this week.  But sometimes patience is called for while we wait for the market to tip its hand and make the next move.  Perhaps the Summer Doldrums have set in . . .”Sell in May and Go Away” comes to mind.  What I’m seeing now is ‘No one really knows’.  Here’s what I mean:

Above is the S&P 500 Index since early November, 2010.  I’ve roughed in some high and low trading ranges not to provide actionable levels but to illustrate that we’ve basically not gone very far since late February.  The big move, which has defined this trade, happened early this year.  Now don’t get me wrong, it sure looks like a general up trend with a base being built, but it could also be a top forming or just a trading range.  We don’t know; but nobody else does either (at least not for sure).

Let’s take a good a little deeper look at the S&P 1500 stocks and see the number of stocks dvancing, Declining and Unchanged . (click on charts to enlarge)

While not exactly a roaring Bull, it really doesn’t look that bad either.  Actually, it looks pretty even; back to the stagnate theme and . . . range bound prices.

What’s going well?  A very select group of stocks, within a select group of sectors.  Healthcare, Utilities, Semiconductor, Consumer Staples and Consumer Discretionary groups are out performing.  Commodities in general took a hit last week, somewhat driven by a stronger US Dollar (International commodities are denominated in $US; strong $ = lower prices since more $ are needed to buy the same amount.)  So we see a dichotomy of thinking: defensive issues, along with more speculative ones.  Hence – Patience Is Needed.   🙂

I’m always interested in comments or suggestions.  Please post them via the ‘comment’ section at the top of this post.  Have a good week & becareful out there.

Charts courtesy of High Growth Stock Investor (www.highgrowtstock.com), (C) 2000-2011, used with permission.