Special Risk Capital Management LLC

Still . . Horizontal August 1, 2020

July 31, 2020 – For the past month (+ 4 weeks) this market has gone basically nowhere . . . . in a horizontal channel (purple line below). With all of the news, both good and bad, still no defined trend.

Volume has not been unusually high or low, so trying to find a hint of a demand signature is tough. Is this re-Accumulation or Distribution? Right now it just appears to be a consolidation of recent gains. Technology earnings are great, but what about the entire economy where Gross Domestic Product feel by over 30% last quarter? There is more than enough “bad news” to spook the market, but with liquidity (i.e. easy money) available at near 0% for big banks what is there not to like? At the first sign of the FED cutting back on loans, that will be the hour of reckoning.

I see “structure” in the lower half of market breath indicators giving me concern that only a few names are holding the market indexes higher. It just seems that things are great for a few big companies, but that good feeling does not go very far down the list. I keep thinking an international exposure may be a good idea, but nothing has developed just yet.

In the means time we just have to invest in what we have & what we see. I’m only about 50% invested and the rest in Cash. I’d love to buy more, but putting all money in just a few similar sectors is not a good risk control method. I feel like it’s a version of Musical Chairs. And when the music stops . . . Here’s a table of short term sector strength:

Not much more to say except be watchful of the leaders and signs of them “falling out of bed”. Take Care and have a good week. … Tom …

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