Special Risk Capital Management LLC

Trend Still Up, but Not Robust June 22, 2019

June 21, 2019 – The trend of the overall market remains up / higher but the movement higher is slow and argusious.  Narrow bars continue and while that’s not absolutely negative it is more indecisive as far as a continued direction driven by new buyers.

I discount the high volume on Friday due to options expiration and note that the NASDAQ Composite Index is near it’s previous high.  Most of the indicators are positive or neutral, but the Money Flow (red line above) remains lethargic at best; it is a combination of price & volume movement.  There has been so much news to whip saw markets around that the good news is that the news really has not had a big effect on prices.

Something to keep an eye out for next week are earnings reports.  FedEx will report on Tuesday after the market close.  It is generally a bell weather for commerce in the US and it’s forward looking guidance estimate will be interesting as an economic indicator.

The chart below shows the 4 major stock market indexes in the US, on a year to date percentage basis.  The Dow Jones Industrials (white) is price weighted large companies, the S&P 500 (green) is capital weighted largest companies, the NASDQ Composite (red) is a very broad index of over 3400 stocks and the Russell 2000 (yellow) a combination of large, medium and small capital stocks.

Of note is the current prices relative to the previous peak (dotted line).  You’re note that the “big guys”, the Dow and S&P 500 are now above their previous high, the NASDAQ is close to, but still below and the small cap Russell is significantly below.

Interesting that the NASDAQ and Russell outperformed the big cap indexes from January through early May but now are falling behind.  The idea is that investors are now more risk averse since smaller companies are generally high growth, but also more risky.  This type of pulling back on risk assets are usually associated with market tops.  No alarm bell, but something to keep in mind going forward.  Perhaps the small caps will catch up; or not.  Investor’s antenna are up for signs of a slow or weakening economy.

The current short term sector strength table is shown below.

High growth sectors are doing well right now.

Have a good week.         …………  Tom  ………..

Price charts by MetaStock & Worden Brothers / TC2000; pie chart & table by http://www.HighGrowthStock.com. Used with permission.