Special Risk Capital Management LLC

A Dull, Waiting Market . . . December 7, 2012

This past week was actually pretty dull.  As the chart below shows we saw “supply coming in” (volume increasing) on a strong move up the week before.  That’s usually a sign of weakness and selling is around the corner.  Sure enough this week opened high then sold off on Monday.    (click on chart to enlarge)

This market appears to be bouncing between the 3040 and the 2965 levels.  Of note is the modest, average volume.  Hence it looks like this market is waiting for news; yes . . . Congress and that darn “Fiscal Cliff”.  IMHO the Fiscal Cliff issue will be resolved since no party wants to be labeled as the cause.  So the real question is not “if” but what the solution will look like.  And that’s what I think the market is waiting on.  The holidays don’t help either, we’ll start to see trading volume drop off next week with it realllly dropping the following week.   So news will move this market, we just have to wait for it.

Apple had another terrible week and that rolled through the Technology sector.  Since the NASDAQ 100 is capital weighted Apple had a unrulely effect on it (about 20% of the “Q’s” is Apple movement).  Finance has shows bursts of strength followed by dullness, with little follow through.  The market would like Finance &/or Technology to show some leadership but we’re not seeing it just yet.

What sectors are moving now:  the chart below gives us that answer.  No surprise that Pharma and Bio-Tech issues are in the top 10 along with Construction and a few basic consumer sectors.  It’s interesting to note that the R/S Ranking (1-100), that compares sector strength to the S&P 500 Index, is very modest and at mid-range, while Accumulation/Distribution (money flow, ranked A-E) is fairly strong.   Not much price action but it looks like stock is in “strong hands” in these sectors (little selling and steady accumulation).

And so it goes.  Not much else to say since the market is not giving us much of a clue for what may happen next week.  I suggest that you take your significant other out to a Holiday Party and just put the market and the “Cliff” on hold untill something actually develops.  Have a Good Week !        ……..  Tom  ……….

chart courtesy of MetaStock; table from www.HighGrowthStock.com ; used with permission (of course).