Special Risk Capital Management LLC

Within Range, Conditions Improving February 7, 2015

We remain within the trading range that has developed since late November of last year (dashed blue lines) as we bounce between the 4810 and 4565 price levels.  My initial concern (worse case) was that this could be / maybe be a Distribution structure in its early stages.  As the range went on it became less and less a likely scenario and I’ve completely removed those labels from the chart.  What is beginning to be a little clearer is that this is a re-accumulation structure.  Here is my logic / case for that:

Starting at the top of the chart, “Money Flow”, we see the ebb and flow of money coming into and out of the market over the short-term with the price swings.  But lately that red histogram is staying about the Neutral zero line for longer periods of time.  Also the Market Sentiment indicator (below money flow) has recently turned up to Bullish.  The last time it was bullish was back in late December and that was weakly confirmed with  a minor blip up in Money Flow.

On Friday we did bounce off the 4780 level, the past swing high, but volume was light and it appeared to be driven by news more than anything else.  I sure would like to see a couple of days closing above 4810 on average volume (showing folks not selling into a rally).  That would help confirm this idea.  We can also see strength in individual stocks within the S&P 1500.  There is more “green” (stocks in accumulation) than “red” (stocks in distribution) on the pie chart below.  This is a significant improvement in just the past week.

In short, the market environment is beginning to look better, but it still is a “stock pickers” market as not everything will go up.  Taking a quick look at what sectors are going up over the short-term: (note all are in accumulation A)

Let’s see if the market action next week supports a break out above this trading range.  I’ve got to believe there is a ton of money out there waiting to get into this market.  Have a good week.  ……..  Tom  ………

charts courtesy of MetaStock & http://www.HighGrowthStock.com; used with permission.