Special Risk Capital Management LLC

Continuing Up the Channel June 3, 2017

June 2, 2017 – After a very brief pause, this market sprang to life on Thursday & Friday.  Up, up and away.  As long as we stay within this channel things continue on the same course.  I’ve moved up the first support test level to  6164 to reflect the low of this strong week.

Money and Volume Flows continue to be “Bullish” and Market Sentiment also is positive.  What did strike me this week was the sudden burst of strength in the small cap index (Russell 2000 index).  That’s a positive as well since these stocks are more “speculative” in nature.  I did find the strength in Utilities to be surprising since they are considered to be more defensive.  My only concern is that volume (at the lower edge of the chart) is rather muted.

How long can this go on?  I’m not sure it has “legs” and it looks to me to be a short term surge as we go into summer and a typical quiet period for the market.  The chart below shows the seasonality that is “typical” for the months of the year.  This has prompted the “Sell in May and Go Away” phrase.  Just remember that the markets don’t “have to” do anything, and seasonality is just an average.  Things (and market) usually oscillate around “average”, and it’s definitely not a predictor.

Here are the sector of stocks that I feel are strong and worthy of consideration:

Also, don’t ignore international stocks, as select European companies are rallying too.  That’s it for now.  It appears to be “steady as she goes” but this could turn on a dime with any geo-political issue.        ……….. Tom  …………