Special Risk Capital Management LLC

A Volatile but “Blah” Market December 4, 2015

OK, I’ve got some explaining to do.  This week saw a steady rise upward Monday through Wednesday on narrow bars and about average volume.  Nothing dramatic, normal balanced (buyers vs. sellers) activity with a small bias upward.  Then Thursday hit on news out of Europe that “easy money” might be drying up.  Followed by Friday with an attempt to reverse those comments.  So we certainly have volatility.  This market seems to want to find a direction, either up or down, and traders are nervous.  (To heck with the “Santa Clause Rally” I guess.)

So why the “Blah” ?  Well, we’re at the top of price resistance around the 5165 level and just kissed the lower trend channel.  BTW, breaking that lower trend line would have been a yellow flag of further drops; but we didn’t.  I say Blah because the market is struggling and we can see that in the McClellan Summation Index.  (the summation of advances minus declining issues; in short, market breath)

Notice how the summation index started to decline in March (yellow) long before the S&P 500 Index (blue) did.  Then in October it started to rare it’s head and go up . . . right before the S&P 500 did.  Where are we now?   I’m drawing a rather neutral, side ways market, but the summation index does not confirm this and is generally rather weak (so far).   I’ve got the feeling that this market is being supported by only a few stocks and overall its pretty Blah.  Not terrible, but Blah for now.

If the market broadens and more stocks participate on the advancing side, that could turn around.  And should that not happen or worse yet more stocks decline, then the market is in for trouble.  Let’s keep an eye on this for a couple of weeks.  There may be some year end positioning that will tip off which way this market will move (i.e. trend) next.

That’s it for now.  I note that I’ve put my December Client newsletter under that tab (above), click on it for more discussion.  Have a good week.  ….  Tom  ….

charts courtesy of MetaStock and Worden Brothers / TC2000; used with permission.