Special Risk Capital Management LLC

“Stopped on a Dime” June 4, 2016

June 3, 2016 –  An interesting week as the market literally “stopped on a dime near the previous top of 4970.  Renewed concerns about the FED raising interest rates (again & again), as well as fears that the global economies are slowing even more.  So we’re at an important inflection point.  Will we break the old highs and continue to rally or just bounce off and head lower.  Either could happen as investors and traders are nervous.

The overall problem that the FED faces is actually raising rates.  The chart below shows why.

Interest rates (10 year) in the US are much higher than the rest of the world . . . even higher than Spain & Italy (go figure).  Raising rates further will flow even more international funds into the US.  Good for US stocks (except financials), but it puts a dampener on what other countries are trying to do to stimulate their economies.  A conundrum for sure, with no easy solution.  I’ve got to believe that the EU and Japan do NOT want to see the US interest rates rise any further for a while.

If the FED keeps rates stable, the markets will likely like that; raising them would likely start a short term sell off (the “June Swoon”).  In the mean time all we can do is trade the market that we have and try not to get ahead of ourselves.  Here’s what is currently doing well (in the short term) out there:

As usual, click on any graphic to enlarge it for easy viewing.

I note that volume has picked up to “average” and most of it is on up bars (accumulation), market sentiment is positive, so I am cautiously and partially Long.  I’ll increase those Longs if I see continued strength, but for now I could go either way based on where we are near a previous top.

That’s it for this week.  Take Care & Good Trading.     …….  Tom  …….

chart by MetaStock; table by http://www.HighGrowStock.com