Special Risk Capital Management LLC

Weak Market – Waiting for Confirmation July 28, 2018

July 27, 2018 – Thursday and Friday showed us weak bars.  Does that mean the market will correct, and if so, how much ?  The answer is: Possibly.  My hedging indicator confirmed a possible weak market on mid week, but I will need confirmation of that on Monday.  If the market momentarily (a couple of hours) blimps down then recovers, that will negate the signal.  If it continues to go lower, then I will “buy insurance” and hedge (some) of my positions (i.e. buy a bear fund).

IF I had to predict, I’d say this is a short term weakness, with the NASDAQ going down to around the 7443 level (red line), which is also the lower level of the trend channel.  That would put us back to the late June swing lows.  From there we could ether expect buying coming back in at these lower prices, or a more severe drop.  Volume will confirm the price action.

In the longer term, this market doesn’t look too bad.  That’s one reason I doubt if we’re in for anything major.  Right now here’s how the stocks in the S&P 1500 Index are looking:

Price Strength –
Price Strength is fairly evenly distributed; no major issues of “over bought” which may indicate a major top.

Accumulation/Distribution –Accumulation is dominate; likely no major issues.

My philosophy is to error on the side of safely, so my hedge indicator is very sensitive to weakness and does NOT distinguish the level of weakness.  Thus I’ll watch Monday’s price action and volume closely.  As the saying goes “It’s better to be out wishing you were in, than in wishing that you were out.”

Have a good week, it could be interesting.    ………… Tom  …………

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