Special Risk Capital Management LLC

A Terrible Market ? No . . . Not So Fast ! December 21, 2012

The holidays and all of the requirements are placing a demand on my time (and all of us), so this will be short.  But please don’t mistake a short posting for lack of importance.  Why ?  Well the short answer is what happened on Friday (see chart below).

Yes, Friday began with a downward gap in price at the very open but then recovered into a mild trading range until the last half hour of the day.  And then . . . buying happened.  Yes, volume surged in many popular stocks and prices along with it.  Take a look at the bars circled in red at the far right edge of the chart.  A gap down (selling) then a wide range bar closing at its High on very high volume (buying).

This market is holding up remarkably well in front the news.  And what confirms this is the strength of Small Cap(-italization) stocks, they’re doing pretty well Thank You.  This last bar on Friday could be considered a “Last Point of Supply” in Wyckoff Analysis terms.  Which would mean a dip back into the trading range (3040 to 2965) before price head higher.  Is that guaranteed?  No, but it sure has the marks of it, hence why this posting could be important for those not exposed to the market.  IF the LPS bar is confirmed by higher price next week this would be a “point of no return” for prices in this cycle (obviously price WILL return here some day).

The bottom line is watch what happens next week, the Christmas break will distort things a bit, but don’t let that get in the way.  The Low price on Friday would make a reasonable stop price level IF a position is taken and does not get proven out with higher prices.  Since this is a news sensitive market I need not mention that things can turn on a dime.  But the market did speak on Friday, and (IMHO) it was Bullish.  Time will tell.

Merry Christmas (for those who celebrate) and Happy Holidays to All.  Take Care.   …..  Tom  …..

(chart courtesy of MetaStock, used with permission; click on chart to enlarge it)