Special Risk Capital Management LLC

Market At Stall Speed October 31, 2015

This week we saw a verification of the gap up of late last week.  While that would indicate a true move higher I also point out most of this weeks bars have been narrow range on about average volume.  To me this shows buyers only slightly out weighting sellers.

The Money Flow indicator seems to bear this out as it heads back to “Neutral”.  Market Sentiment remains “Bullish”.  I’ve drawn in a rather wide price channel in purple on the chart.  The top line is the ‘supply line’ and the lower is a parallel to it.  I doubt that the market will retreat anywhere near the lower channel but it does provide a sense that we are “closer to the top than the bottom”.

I’ll post my monthly newsletter within a day or two, but one thing I point out is the change in market leadership coming out of this correction.  The once leaders of Biotech and Healthcare have relinquished the lead to Technology (electronic & software) and other large cap growth sectors.  Notable absent from leadership are the Finance and Energy sectors.  Low oil prices and a likely interest rate increase by the end of this year are likely restraining them for now.

My feeling is that we’ll see a modest pull back and consolidation over the next 2 weeks.  If price do move down we’ll closely watch volume on those down bars for signs of excessive selling.  A “test for supply” would be appropriate at this time and how it forms will give us a road map for the remainder of the year.

Check out the usual sector and market strength charts in my newsletter as I won’t repeat them here.  Have a good week.        …………  Tom  ………….