Special Risk Capital Management LLC

2 Steps Forward and One Back November 10, 2018

Nov. 9, 2018 – This market took “two steps forward and one back” this week.  I’ve got “that feeling” that we’re not out of the woods just yet.  While many are assuming a “V” shaped bottom and the only direction now is straight up I’m not nearly that confident.  The chart below shows Market Sentiment back to Bearish (top) and the Volume Flow is very anemic at best.  Sure Money Flow is Bullish and the green “strong price” bars are back coloring in the chart.

So what could be a problem?  Well for one thing, this sudden correction did a lot of damage as witnessed by the heavy volume on those nasty red bars.  Logic would tell us that after such heavy selling the markets need to consolidate / build a base before any resumption of an up trend.  Though the Short Term Trend Channel has been broken that’s only valid in the short term anyway, and we got that bounce higher.  Prices met resistance near the 7520 level (green dashed line) and that was a reflection of a “significant bar”; that is where buyers last came into this market.  We need to see closes above this level to validate buyers coming back.  Otherwise, we could be headed back to the 7443 level (dashed red line) and set up for that trading range / consolidation.

Consumer Goods, Healthcare and Wireless sectors continue to show strength; Financials and Banks are beginning to looks better too.  Tech had a short burst higher, but now looks tired.  The table below shows what the near term sector strength is:

Overall the stocks in the very broad S&P 1500 Index are improving with a improved split between Strong & Weak and those in Accumulation / Distribution.

Price Strength –   

Accumulation / Distribution –

I’m slowly and selectively re-entering this market with the aid of a cautious eye.  The price structure just does not provide me with enough confidence to jump in with both feet.  My main market model is slightly positive, but only slightly.  Maybe the coming week will shed some light on the next significant move . . . in either direction.

Note that this blog gets updated over the weekend with the data and perspective of Fridays close, so looking at it late in the week is just a little “stale”.  Don’t hesitate to make any comments, always happy to hear back.  Have a good week.        ………….. Tom ……….

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