Special Risk Capital Management LLC

Markets Continue the Climb January 23, 2021

Jan 22, 2021 – With all of the active news items (especially in the USA) it is amazing that these markets have not slowed down let alone corrected lower. Let’s see: virus deaths continue higher, vaccine in short supply, (US) government still “dynamic”, margin debt extremely high, option call activity at all time highs and money pouring into small speculative stocks. I might add that the ratio of stock prices to earnings is very high too. What could go wrong? Disappointment; and earnings season has just begun. So far the banks have held there own as well as NetFlix . . no so much with IBM though.

As we can easily see prices continue higher and at the top of their channel. Trading volume is high and the Money Flow is the only indicator that’s negative. The result is we have to follow the trend, but remain cautious for any signs of weakness in the broad market. My market internals model (not shown) shows a slight slowing in momentum but no signs yet of a correction.

Just how strong is this market? The pie chart below is of all of the stocks in the S&P 1500 index. The color relates to where the price is in relation to the Bollinger Bands of each stock (i.e the standard deviation / volatility based off of the 20 day moving average). Generally, this looks pretty positive with not too many in the red zone. Again, so far, so good.

Taking a look at what sectors are doing in the short term via the table below:

Of note is the strength of China and continued strength of Small Cap stocks. The columns to the far right show per cent return over 5, 10, 15 and 21 days. Not much more to say except “stay the course”. I’m continuing to research market correction warning signs and hope to provide some insight into that to avoid account draw downs. Remember, in order to make up a 50% lose, you need to have a 100% gain just to come back to break even. We need to avoid big losses as much as trying to get big gains. With all of these caution signs things may turn very quickly.

Have a good week and Stay Safe ! ……….. Tom …………

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