Special Risk Capital Management LLC

Amazing Markets Continue Up January 9, 2021

Jan. 8, 2021 – After this weeks events I (and likely many others) are amazed that the US markets did not correct significantly. I refer to the adage “Strong market remain so with bad news, where Weak markets react quickly” (or something to that effect). This market continues to be strong; so be it.

Money Flow remains rather dormant and continues its sideways move but everything else is, well, positive. I have been working on a sensitive market internals model that combines advance / decline momentum with up/down volume and volatility of the VIX (put / call ratio) compared to the market. For a week it went from Bullish to Neutral, but on Thursday (much to my surprise) it returns to Bullish. I’ve been researching ways to provide an advanced “heads up” to changes in the market. Nothing is perfect but this may have some potential. The works continues.

Just how strong is this market? The pie chart below shows the percent of stocks in the S&P 1500 Index and their 5 day % change. There is a lot of green down there.

What could be driving this? Well the only things that I know for sure is there is more demand than supply. One theory I’ve heard is that money from the stimulus payments from those with jobs is flowing into the markets. This perception of “easy money” does concern me, but I have to trade what I see and not what I feel. I remain uneasy about the increase of new “investors” into this market (see previous posts), but we need to see some amount of smart money distribution before I’m ready to withdraw or hedge. It will come, just don’t know when.

Here are the sectors that are doing well in the Short Term –

What I find interesting is the Treasury Bond going down (bear going up), which indicates an increase in interest rates. Likely a short term phenomenon, but something to watch in the coming weeks.

I’ve made minor changes this week. Selling a couple of things that have lagged the market advance and picking up a few that have showed strength. If this trend continues for a few days I may add to my Index model a Mid Cap ETF; we’ll see.

That’s it for now. If you like something or want to see something else let me know. Otherwise Take Care and Stay Safe. We’re not “There” yet; patience. Have a good week. …………. Tom …………