Special Risk Capital Management LLC

Keeping “The Drive Alive” November 22, 2014

OK then, this was a good week to be invested, but Friday did throw a possible “penalty flag” on the market field.  Taking a look at the chart below, we see that the grind up continues and it stayed within the channel lines spotted in on the chart.

What is some concern is the “play action” on Friday.  Note that Fridays bar opened with a nice gap higher, then spent the rest of the day moving lower, and on top of that on increasing (but not high) volume.  Looks like many folks were selling into this rally; a.k.a. Distribution.  The caveat is that Friday was options expiration, so price action and volume in general could be suspect.

The news on Friday was pretty good.  Industrial production was at a multi-year high and existing home sales were much better than expected.  What could possibly go wrong?  The concern is that this market is extended, in that it has moved very far, very quickly.  It needs to rest just a bit.  Now we may see a race toward higher prices for the next 5 weeks as managers try to catch up with this move, so don’t be too surprised if that happens either.

Japan and some European and Latin America sectors are going well, also Industrial, Pharma, Financial (though not banks) and Consumer sector here in the US.  In the chart above we note that “Money Flow” is still pretty positive as is Market Sentiment.  We did see a brief one day drop to Neutral in the Sentiment reading, that shows that the overall Bullish sentiment is waning.  No Caution levels yet, but just take note that the Bulls are slowing down just a bit.

So let’s watch what happens as we enter the Thanksgiving holiday week.  Trading usually is light and sometimes markets are easier to move.  I’d like to see a slow, continual grind higher.  Increasing volume and weak bars will concern me, but we just may have to wait until the following week for and trend confirmation IF that occurs.

Have a good week and wishing you an early Happy Thanksgiving !        …………  Tom  ……….