Special Risk Capital Management LLC

Expected Decline; Time to Be Careful August 11, 2017

Aug. 11, 2017 – OK, we’ve had a quick drop but only a minor one so far.  Our first support level of 6303 on the NASDAQ Composite Index was broken on the close on Thursday.  That gets our attention.  But . . . notice how “average” the volume was (lower pane) and then on Friday (8-11-17) volume dropped off even more.  Obviously we’re not seeing panic selling or a mad rush to the doors.  And this was on a Friday (before a weekend); traders were rather comfortable holding on to stocks over the weekend.

Where we’ll get much more concerned is if prices breaking the 641 level on a close and / or volume picking up on a wide spread down bar.  Then it’s time to hedge or sell.  For now I’ve just lightened up a little on holdings, paying more attention to weaker things that I hold.  Not surprising that Market Sentiment (top pane) and Volume Flow are negative.  Money Flow has turned down but remains above zero.  This confirms a lack of buyers, but not significant selling for the time being.

The number of stocks making up the S&P 1500 Index that are in Accumulation and Distribution (below) shows a fairly even split.  Again, not large amounts of selling at this time.

The Price Strength (below) shows a different picture, but confirms the idea that the weakness is caused by the lack of buyers.  If there are more sellers than buyers, prices will drop.  The amount of Red that we see far exceeds the green.  Prices are generally weak.

Looking at sector strength we see more defensive stock sectors moving to the top of the list, while previous leaders (technology based) have moved lower.  Since the general feeling is that stocks are over priced based on good earnings, but not great, this is likely a typical pause for re-accumulation of shares at a lower price.

Let’s hope that the conflict with North Korea is only an excuse to have a minor correction.  Speaking of sector strength, it appears that International stocks are fairing a little better right now.  I have cut back on % amounts to hold, but China, Latin America and Emerging Markets in general are looking to hold up rather well after making significant gains recently.

That’s all for now.  Watch that 6141 level and signs of volume increasing on any down days.  Otherwise, we’ll be patient and wait for a better time to redeploy our Cash.  Have a good week.     ……….  Tom  ……….

Chart by MetaStock; pie charts & table by http://www.HighGrowthStock.com; used with permission.