Special Risk Capital Management LLC

Tale of Two Markets May 9, 2020

May 8, 2020 – There is a fair amount of speculation that we are looong overdue for at least a modest correction. Last week I showed two possible scenarios. So why haven’t these played out? Well the chart below pretty much answers that question:

The result, especially this week, is that “the market” is being lead higher by Technology stocks and the large cap stocks really haven’t moved all that much (note dashed arrows).

Two things I’ve read this week:  new account openings are at a high at retail on-line brokers & the number of shares (outstanding) for the SPY ETF has decreased significantly over the last 2 weeks.   Now . . . . I’m not drawing conclusions, but one has to wonder if this rally is being fueled by “stay at home” amateurs and that the SPY ETF is in redemption.   (note: search for redemption / creation of ETF’s for more information). Hummmm. I am watching market breath very closely for signs that the big guys are selling.  So far no, but the Up/Down volume is getting “light”.

I note that “money Flow” has turned lower, but other than that the NASDAQ Composite Index (the super set of the top 100) is holding up well. I’ll keep my support & resistance levels where they are. I remain concerned that stocks are venerable to bad news, either on the virus side or earnings side.

The short term sector strength table is shown below –

We see Tech sectors at or near the top and also Energy. With oil demand low and supply high I’d be very careful with that sector right now. Small positions & short term only (IMHO). I’m “passing” on it.

I’m “dancing close to the door” in case “the parties over”. That about it for now. Have a good week. ………… Tom …………

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