Special Risk Capital Management LLC

Ditto (not much has changed) February 18, 2017

Feb. 17, 2017 – This IS getting to be redundant, because really not much has changed over the past 3-4 weeks.  We remain in that upward sloping price channel (see chart below), with most indicators showing a positive reading.  True, the momentum of Advancing to Declining issues has slowed, but that don’t necessarily mean anything but a slowing in rapid market advance.

I believe that there are a bunch of positive things being anticipated by this market from tax cuts, to de-regulation to infrastructure appending to defense spending, but until something doesn’t pan out, we’ll be where we are.  Perhaps (just perhaps) the “Smart Money” is waiting for the last buyer to jump back in.  After that . . . .well, it could be a quick trip back down.  The only question is how far and when.  No one knows.  Let’s not get complacent here, as it is always calmest before the storm.  (so much for clichés)

I’ve spotted in a few support levels and added (my interpretation of) “Wyckoff Significant Bar” levels (red & green dashed lines).  As long as we hold within this channel and remain above support, we have to consider this rally to be intact.

I’ve been researching methods of measuring sector strength and that algorithm is still in development, but far enough along to be of potential value.  It basically measures / ranks price returns over 5, 10, 15 & 20 days, along with the number of stocks Advancing or Declining (A/D), as well as the A/D volume (activity) in those stocks within sectors.  The table is shown below as a “raw score” , % price change and relative A/D ranking (A-F).

This is a version of classical “Top Down Analysis”.  Market Direction, Sector Strength, then Stock Selection within those sectors.  (sorry, I can’t provide specific stock ideas . . . regulation, etc.)  These sectors have been strong for well over a month now; many since mid-November.  But, as always, we should be on the lookout for rotation OUT of these sectors as they mature.  The bottom line is it is likely better to look for strong stocks toward the top of the list as opposed to the bottom; more likely to put the odds in your favor.

Hope this helps.  Have a good week.   ……..  Tom  ……..

Chart by MetaStock; table by http://www.HighGrowthStock.com. Used with permission.