Special Risk Capital Management LLC

Continued Up Trend, But Due For A Pause June 20, 2014

This was a good week.  A steady climb in the indexes even in the face for “bad news”, especially Internationally.  As I’ve said before, when markets don’t respond to bad news, that’s a sign of strength (while the opposite is true).  The chart below shows that we finished up right about at the mid-point (green line) of our price trend channel.

The thing that does concern me is the aggressive upward slope of that channel, it’s pretty steep.  How long can this go on before the market gets tired?  I’m thinking that maybe another week or so, then we may just see some “fast money” selling to ring the cash register.  That would be a pause in this incline and likely re-set the trend channel to a more reasonable assent.

When everyone is on board and fully invested, the market WILL go down (who is left to buy?).  But right now with interest rates so low, there aren’t many places to put money.  Heck, you can make more in one day on an energy or bio-tech stock than your could in a year with a 10 year Treasury.   That’s not “natural”, and we’ll see this situation wind down eventually.  I just hope that it unravels slowly.

In closing I do note the very heavy volume bar today (Friday) along with the very narrow range price bar.  Off hand this would be a very negative sign, as supply (volume) is coming into the market and the demand is  absorbing that supply (prices not moving).  But keep in mind this is an Index.  And today was options and future expiration, so there was a lot of “settling up” to do.  (note the same volume the 3rd week in March too)  So, I’m not concerned ’bout this bar.

Let’s see how next week pans out.  Can Energy and Bio-Tech continue their tear?  And if so, for how long?  Right now the charts indicate a continuation, but that can quickly change as the “smart money” decides to rotate out of them.  Have a good week.             …………..  Tom  …………