Special Risk Capital Management LLC

Santa Rally At Last December 26, 2014

The much anticipated “Santa Clause Rally” did arrive in the form of the “V” shaped bottom.  These “V” shaped bottoms or tops drive most market followers crazy.  They are hard to detect both at the beginning and end of these price formations.  Most technical indicators will begin to show weakness about the time the correction is ending.  It happened in October and again just before Christmas.  These are “shake out” formations, and actually designed to shake out most of the “weak holders” who don’t like any price correction.  It this case the traders are just waiting to “buy the drips” (and “sell the rips”).

The chart above shows that we broke above the 4790 level but we’re now at / near the previous high (4810).  This is where things get interesting.  IF the market is really that strong we may hesitate at this level then continue up.  IF the market is actually weak we should start to see selling coming in at this level.  Since we are in a holiday mode volume is naturally light and does not provide us with any good clues.  Low volume as we touch new highs does not indicate selling / distribution, but we will have to wait until after the New Year to get a good volume read on the situation.  In the mean time the near term remains up.

Note that my Sentiment indicator and Money Flow (above) show bullish directions.  That’s a big plus, but my stock scans remain rather sparse for “buy candidates”.  I would expect more candidates in a strong up market.  So I remain a little cautious in here.  The table below shows the Industry Sectors that are moving ahead.  These are good places to prospect if you’re under invested.  (click on graphs to enlarge them)

That’s about it for this holiday shortened week.  I hope that Santa Clause was good to you.  See ‘ya back here next weekend.  Cheers !  ….  Tom  ….

chart courtesy of MetaStock; table by http://www.HighGrowthInvestor.com; used with permission