Special Risk Capital Management LLC

Market Pause . . . So Far March 25, 2016

March 24, 2016  It’s Good Friday and the U.S. & European markets are closed; it’s quite.  Not much happened in the Asian markets on Friday either.  Last week was a down week, but we’ve been expecting a pause anyway.  Volume has been rather light the past 2 weeks and as the market corrected that theme continued.

A low volume rally (up) followed by a low volume pullback (lower) does not have the markings of a significant market top.  I don’t see any Buying Climax followed by Selling, at least not yet.  This just looks like Low Demand, and the market can continue in that vein for quite a while.

Oil is all over the place and commodities in general appear to be picking up on that idea.  Looks like a return to volatility.  Probably the bigger issue is that there is little leadership in the market.  Financials, nope; technology, not really; Industrials, weak.  This just has a feeling of the summer time “blahs” come early.

We’ve broken that steep upward trend line (purple), which was expected.  Sentiment and Money Flow remain OK / Positive.  Volume is flowing into stocks during rallies, but there is no hurry to get in (low volume).  If the Lack of Demand continues into next week, and we get any type of bad news, this market could head south very quickly.  Traders don’t want to risk those profits in here and they will be quick on the trigger to sell as the first quarter closes.  Maybe that’s why defensive stocks like Utilities are still doing pretty OK right now.

The pie chart below shows the sectors of stocks that are on my watch list.  (click on graphic to enlarge)

Semiconductors, Retail, Utilities, Heath care, and yes even some pharma / biotech are in the mix.  But it’s fairly spread out by sectors; it’s that leadership thing.

So let’s be careful and watch the price bars and volume next week to see if Distribution actually starts to pick up or if this remains just a pause.  We’re due for either.  Happy Easter !    …….  Tom  …….

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