Special Risk Capital Management LLC

Uncertain Market Driven by News January 5, 2019

Jan. 4, 2019 – First off I’d like to wish everyone a very Happy New Year.  By all indications (economic, political & governmental) 2019 will be a “doozie” of a year . . . much to expect in the months ahead.  In the past week we’ve seen a near 10% change in prices of the major indexes in just 2 days from top to bottom.  Amazing since is some years that would have been the price range for the entire year.

We’ve seen a significant rally from the Christmas Eve lows, but there has been so much damage done since late September that a weeks rally on modest volume won’t wipe away the lingering bearish concerns.  Apple dropped the bomb that investors should NOT expect healthy gains in profits and the tariff war continues though news leaks try to paint a more optimistic future.  The US government shut down and Fed concerns  make investors nervous and uncomfortable; a bad recipe for higher prices.  With all of those in mind my feeling is that we’ll trade in a broad range roughly between 6930 at the top and 6130 at the bottom (purple freehand drawing below).
The chart above shows investor Sentiment improving while most other indicators remain Bearish or Neutral.  Next week the full complement is back on Wall Street, so we’ll see if they drive prices much higher or not.  Right now it’s anyone’s guess.  For the time being I’ve removed my hedge (i.e. sold off the bear funds) and only hold modest positions in Bonds and Precious Metals.  I’m considering buying Latin America (index) and Biotech, but that’s about it . . . heavy in Cash.

Here’s a look at the major US sectors as far as short term strength is concerned.

Even “the strong ones” are not that great right now.  Have a good week and buckle up for volatility in the coming months.  Weak markets don’t like surprises.………  Tom  ………..

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