Special Risk Capital Management LLC

Concerns Continue February 13, 2022

February 11, 2022 – This market is pretty much “over” Covid, concerns linger about inflation and rising interest rates, but the hot topic next week (or more) will likely be Ukraine.  A quick thought dump:

• Hedging is at a 22 year high (i.e. buying of Put options)
• Evaluations of stocks remain high (P/E metric, revenue to growth, etc.)
• The spread between Junk and Treasury bonds are increasing (risk off for bonds)
• Rising interest rates into a slowing economy (major caution sign)

So these are a few topics that raise the hair on the back of Wall Street’s neck (so to speak).  The path forward is unclear and that’s what concerns investors.  A time for caution particularly if you’re buying securities.  I’m a fan of “scaling in” to any position.  You don’t have to jump in with both feet even if you’re 100% sure / optimistic about it.  Be selective.  To use a phrase “We’re closer to the top than to the bottom”.

It looks like 14532 is resistance and 13097 / 1300 is support.  That’s about where the trading range box is right now.  Investors that were counting on a ‘V’ shaped bottom will likely be disappointed.  A double bottom (or worse) looks like a possibility.

The Short Term Sector Strength table is shown below –

That’s about it for now.  I’m lightly in some Energy and Bank sectors.  I’m waiting for more signs of leadership before entering in a bigger way.  BTW, if you hold bonds or interest rate sensitive securities, it may be a good time to re-evaluate them . . .  interest rates are making a major turn as signaled by the Federal Reserve.

Have a good week and be careful.        …………..  Tom  ………….

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