Special Risk Capital Management LLC

“True Grit” Next Week October 23, 2015

Well now.  All week the NASDAQ index bounced around our 4905 level, then Friday gapped up above it.  The gap was in response to great earnings by the likes of Amazon, Microsoft and Google (Apple reports next week).  News out of Europe about a possible new round of Quantitative Easing in the Euro zone helped out as well.  So . . is the all clear sounded?  Perhaps, but this market is “over bought” and such a break out above resistance (SOS) usually requires a fall back to that price level, which would form a Last Point of Support (LPS).

Volume appears to be supporting the SOS theory (increasing), so now I’d like to see a fall back to around 4905 with a rebound characteristic of a close in the upper range, on average or above average volume (buyers stepping back in on the slight sign of weakness).  I’m thinking next week will show this markets “True Grit” / True Strength.  We should not have to wait very long now!

Market Sentiment and continued Accumulation Waves (green line) support this possible price structure.  The only concern I see is that the Small Cap stocks are not as strong as the Large Cap ones.  Unusual, but not unheard of at this point.

How strong is this market overall?  The next two pie charts are of the number of stocks in the very broad S&P 1500 Index:

Price Strength above ^

   and Accumulation / Distribution above ^

There is a lot of Green up there.  Next I’ll show the sectors of the stocks that are of interest to me right now.

No surprises as Semiconductors, (domestic) gaming & restaurants and the airlines have been in the lead coming out of this correction.     (click on any graphic to enlarge for easy viewing)

I’ll be watching for a day or two set back, then a renewed sigh of strength before I’m all in for this market.  Have a good week.  …….  Tom  ……

chart by MetaStock; pie charts by http://www.HighGrowthStock.com; used with permission.