Special Risk Capital Management LLC

Riding the Range (again) September 30, 2011

If I sound like a “broken record”, it’s because this month has been nothing but an Up & Down / see-saw market.  On top of that, with significant swings of nearly 10% from peak to trough.  Great if you’re a nimble trader, terrible if you’re trying to go with the trend.

So, I’ll keep this posting rather short.  Untill we break out of this range, we’ll continue to repeat it . . . like the movie “Ground Hog day”.   🙂   But, here’s something to keep in mind:

Here’s our (now) familiar chart of the S&P 500 Index.  I’ve added a few blue arrows (click on the chart to enlarge) which appear to indicate volume increasing on Down or Weak price bars, and rather low on Up bars.  Signs of Weakness & Distribution?  (I X’ed out the Friday options & futures expiration day.)  Yeap, that would concern me.  I also added a lower Blue line which is drawn off of the Low.    It’s a 1×2 gann (angle) line.  Gann was an interesting fellow, and his theory is rather complex and esoteric; not to go into detail here.  but suffice it to say, the breaking of this line is not a positive development.

My major concern is what happens next week now that the end of the 3rd quarter is complete.  The “true” character of this market may show itself, if the news doesn’t take it over.  I watch the lower levels (a.k.a. “the Danger Zone”) for a possible bounce higher.  But if it breaks, there’s not much support below it.  Not a pleasant thought.  Hopefully, you’re like me and heavy in Cash right now, waiting to a firm sign.  Preserve that capital, we’ll need it, we just don’t know when.

Be watchful and be careful.  Have a good week.