Special Risk Capital Management LLC

Covid Catches Up October 31, 2020

Oct. 30, 2020 – This was the week that shook the markets with Covid-19 flaring up nearly worldwide again. Now, many countries take a different approach to reacting to this increase . . . except the United States, and time will tell just how severe the markets treat each approach. Clearly the big Tech companies in the US were not treated very well by refusing to provide forward guidance on earnings. The reason is the unknow of Covid. Heck, people can put off buying new gadgets or services for quite awhile so the 4th quarter 2020 is a mystery right now. Just think about the retail sector with the holidays approaching. The markets do not like instability, and we’ve got that for sure.

All indicators (above) are down and it sure looks like we’re headed to the 10519 level next week. Oddly enough I doubt the election has much to do with the market drop, but the results after the election may be a far bigger concern. No matter what, Trump will not go quietly and likely his followers will . . . follow. Another sign of instability.

Taking a look at the broader S&P 1500 stocks we see most are in Distribution (selling). Not much green in the pie chart.

Short term sector strength also shows the weakness in previous market leaders.

Tech, Industrials and Financials took a big hit this past week; even Utilities dropped a bit (a traditional “safe haven”). I have been raising Cash this week. I doubt that we will see a major drop unless things get even worse, which is possible. Keep an eye on what businesses are doing, any talk of a stimulus after the election and of course, volume (especially on down days).

Take Care and for those in the USA . . VOTE ! ……. Tom ……

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