Special Risk Capital Management LLC

Continued Slow Grind Up May 30, 2020

May 29, 2020 – Not much new as far as the stock market is concerned. The slow grind up continues. This appears to be driven by the extremely low interest rates given to the big banks; they “rent money” at 0% and invest it. Plus a significant number of small investors; driven by “stay at home”. (?)

So prices are staying in the upward sloping channel (purple lines) and the indicators show a bullish condition. But . . . from a historical perspective the market is over valued (price to earnings ratio). Even higher than before the Covid Crash. This can’t go on “forever”.

This market is also over bought. Money just keeps on chasing prices higher. The pie charts below show just how over bought we are getting; a lot of green there. These represent the stocks in the broad S&P 1500 Index.

The table below shows which sectors are the strongest in the short term.

So for the time being, we go with the flow. But I still remain uneasy about this market. Just too much liquidity out there which could drain very quickly if “something” bad were to happen.

Have a good week. ……….. Tom ……….

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