Special Risk Capital Management LLC

What A Week August 28, 2015

A few may have expected a market correction but not this quickly and with a sharp rebound.  We did see a distinct Lack of Demand (extremely low volume) right before the drop, but the drop was severe.  OK, Wyckoff-ians will see this as a Selling Climax (sc) and the following Automatic Rally (ar) structure, at least so far.  What next?  Likely a trading range between 4565 on the low side and 4810 / 4910 on the high side.

Could this be a V shaped rally back to the old highs?  Sure but that would need to be fueled with some volume on wide range up bars.  So far I’m not seeing that, but it’s early yet.  My Sentiment indicator composite remains “Negative” and I don’t see much Accumulation right now (below).

The pie chart above is of all 1500 stocks in the S&P 1500 index and their current states of Accumulation (green shades) and Distribution (red shades).  It just looks early for a recovery to old highs, so likely we can expect a wide trading range for awhile.

Sectors doing the best job of recovering from their lows were generally the previous leaders within the leading sectors (biotech, specialty pharma, consumer discretionary & select tech stocks).  My scans for Wyckoff Accumulations in growth stocks have yielded only a hand full of candidates and none of them passed the final chart review.  In this environment I’ll wait for patterns to firm up.  Just remember that good stocks will form nice patterns of accumulation before the market in general does, so we can’t really wait for the market.

I’m still experimenting with my Wave indicator, which currently is in a holding pattern.  Have a good week and be extra cautious out there as nothing “has to happen”, so let’s anticipate but not predict.    ….  Tom  ….