Special Risk Capital Management LLC

Action – Reaction July 28, 2012

What we’ve been seeing lately is what Richard Wyckoff would call “Action (then) Reaction”, a sort of stair step upwards.  This can drive most investors a little crazy since there is no obvious trend, but rather a slow & steady grind.  Until a previous significant low swing point (a.k.a. pivot point) gets taken out we must assume that the near term direction is higher.

While not entirely optimistic we are still in “the problem zone” where moves tend to stall out and revert back down.  But one can see the general progression of higher lows as shown by the blue trend line (note the exception in early June was likely a short-term “shake out” formation.  These significant gyrations in price are driven by news which is next to impossible to anticipate; Europe being the major item that investors are watching. 

The Accumulation / Distribution pie chart below shows general market improvements with the green Accumulation portion larger than the red Distribution.  Positive but not wildly / overly optimistic . . . a healthy sign IMHO.

The chart below shows the Industry Sectors that are strongest in the near term.  No real surprises here as Telecom / Wireless, Pharma / Biotech and Energy are showing signficant strength.  The question is for how long?  We don’t know.

That’s it for now.  Watch these price levels on the indexes, take cautious positions and don’t be afraid to lock in minor profits IF the market should turn back down (again).  The key is to avoid losses and from being whipsawed back and forth. 

Have a good week !     …….. Tom ……..

charts courtesy of MetaStock and www.HighGrowthStock.com; used with permission.