Special Risk Capital Management LLC

Friday “Head Fake” ? March 12, 2016

March 12,2016  Stocks were generally weak this week with the exception of Friday, and wow, what a leap up.  What was impressive was after the ECB (European Central Bank) announced zero interest rates the markets sold off hard, but late in the day rallied back up.  This was a show of strength with buyers coming into the market to absorb the selling on Thursday.  On Friday the markets gapped up and continued to rise.  Happy days are here again?  Well I’m just a bit cautious with that.  Notice that on Friday the volume was fairly low, with the last three days of the week below average (red line).

I really looks like there was more “lack of selling” than major buying.  Most indexes are getting close to a downward sloping trend line (not shown here) that goes back months.  Money Flow is positive, but leveling off.  Accumulation Volume is dominate, though the last three days were nothing significant.  Sentiment continues to be bullish.

I’m feeling that the market is loosing steam and either will pause for a few days or will correct back down.  If a correction is in play, the amount of the downward bar spread along with its volume will tell us just how serious the selling could be.  The pie chart below shows what sectors the stocks in my watch list are in.  Most of these could be classified as ‘defensive’.  A little bit of Banking, but that’s about it for the top ones.

I’ve changes the graphic for the Top & Bottom Sectors list.  It gives the percentile Relative Strength (1 to 99) and shows how it has changed over the last +2 months.  This is helpful to see just how long sectors have been strong and it’s an indication if they start to fall off in the ranking.  Let me know what you thing.

Top 10 Sectors-

Bottom 10 Sectors –

As with all graphics shown here, click on them to enlarge for easier viewing.

I still like Latin America. Precious Metals and Basic Materials, though the precious metals move is getting “old in the tooth” right now.  The market continues to move higher, but defensive stocks appear to be the main ones being bought.  Traders covering short position also helped to fuel this rally (especially in energy stocks).  Let’s watch how the markets response to the US Fed announcements next week.  That may be all the excuse that traders need to move in either direction.

chart by MetaStock; pie chart and tables by http://www.HighGrowthInvestor.com.  Used with permission.