Special Risk Capital Management LLC

Two Steps Forward – Two Steps Back December 20, 2015

This market continues to surprise nearly everyone.  Sharp up and then down moves prevail.  This type of action / reaction, especially in short bursts would seem to indicate a nervous market as we make our way to the end of 2015.  The reaction to the FED increasing interest rates and indicating that further increases would come slowly was greeted favorably.  But it didn’t last long.  As you can see from the chart below we’re right about back at the lower price (support) level.  (click to enlarge chart)

The 4905 level (on a closing basis) is pretty important as an indicator for the next 3-4 weeks.  The ‘Money Flow’ indicator shows weakness, Sentiment is Bearish and it looks like Accumulation volume alternates with Distribution volume (no decisive trend).  Friday gave us a high volume spike on a solid down bar, but keep in mind that this was options expiration Friday, thus volume is suspect.  If we break the support level (on a close) next week that could usher in more selling, and as we know, “selling begets selling”.  Let’s face it, investors are nervous right now.

I know some have talked about a year end “Santa Clause Rally” and that may happen, but it sure looks more doubtful everyday.  I see a lower High swing in the chart above and that concerns me.  International “shorts” are doing well, especially in Latin America and Emerging Markets; Oil is not far behind in weakness.  About the only strength I see in sectors now is in Semiconductors and that isn’t very strong.  This is a time to be extra careful.

The hopeful sign is that this price structure appears to be more “Re-Accumulation” in nature.  We see continued “tests” at the lower support level with no real volume confirmations of a Buying Climax or an UpThrust.  Individual stock chart analysis may tell a different story as it looks like the indexes are being supported by fewer and fewer stocks.   Wishing you Happy Holidays.         …………  Tom  …………