Special Risk Capital Management LLC

A Rough Week March 17, 2023

March 17, 2023 –  This was a rough week . . .  pocketed with bank failures, inflation / interest rates (continue) and of course (monthly) options expiration.  All of this is contributing to market volatility.  Yes, Financials took a beating, 3 banks going under and another requiring massive infusions from 11 other big banks.  It was reported that over the past couple of weeks, there were many banks around the country lining under at the FED “Discount Window” to borrow short term money.  Lack of liquidity?  You bet.

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Adding to the whole thing was volatility in the Bond market with all sorts of theories of where interest rates were headed next.  The European Union Bank raised theirs by ½% this week.  And what will the FED do on Wednesday, March 22?  What is more important . . . fighting inflation or calming the markets?  We’ll soon know.  

Adding to the woos is that market breath is poor.  Only 10% of the stocks in most indexes are advancing.  The bottom line is big cap stocks, especially in Technology, are holding up the indexes and that’s not a sign of a healthy market.  Take a look at the Short Term Sector Strength table below and you’ll quickly see where the strength or rather lack of weakness is.

I was VERY lightly invested at the beginning of the week and even more “lightly” at the end of the week.  Again, this is a news driven market and the FED trying to balance lower inflation with avoiding a recession appears to be getting harder and harder.  Wednesday will be an interesting day.

Have a good week.          ………..  Tom  ……….

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

Back to 2022 March 10, 2023

March 10, 2023 – It was a rough week, especially on Friday.  Bonds were up (interest rates down), the US Dollar Up, but dramatically down on Friday, all on economic news & bank failure concerns.  Yes, when the banks sneeze, the markets catch a cold.  I sound like a broken record but this (remains) a news driven market.  Up on poor economic news (the FED will stop raising rates) and FOMO and then down when the economic news is really pretty strong (back to inflation fears).

Click on chart to Enlarge it for easier viewing.

We’re back within my trading range and the open question is how much lower.  IF the Last Point of Support (LPS) is to hold and return to higher highs it’s got to happen PDQ (pretty dam quick).  Else we’re headed lower to at least the 10805 level or back to the old January lows.   We have now returned to the late December, 2022 levels and all we have to show for it is volatility.   This is a market for short term trading at best and not quite ready for ‘investing’ (IMHO).  But that time will come and it will likely not be very obvious.   I’m not convinced that we’ve seen a climatic sell off yet when everyone throws in the towel and gives up.

The Short Term Sector Strength table is shown below –

More economic news on Tuesday next week and it will be interesting to see how the market reacts.  I remain heavy in Cash with only a few small positions and I’m standing close to the exit door on those too.  Have a good week & Take Care.          ……………..  Tom  ……………..

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

Improving Slooowly March 4, 2023

March 3, 2023  The overall market underpinnings are improving, but slowly.   Last week I talked about a fall back and we got it.  I was expecting a little bit more, but so be it. 

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The move up mid-day on Thursday was driven primarily on “FED Speak” about tapering interest rates and the Friday follow though was likely due to Fear Of Missing Out (FOMO).  But . . .  what has actually changed?  Retail sales are reported as slow, interest rates have not been cut and inflation is stubbornly high.  So right now I’m just a little skeptical until I see continued upwards price action and increasing volume.   I revert to my phrase “This Is Going To Take A While”; referring to the economy improving slowly.  The dream of a V shaped bottom, or anything like it, with a blast off back to new highs is just that.  A dream.

Chart structure wise we do have a higher swing low and that’s good, but not a confirming higher high just yet.  There is some “risk on” buying in Small Cap stocks and overall breath of advancing stocks is improving.  Lastly, general seasonality is positive for the stock market going into the Spring, so we have a tail wind for a couple of months.

The Short Term Sector Strength table is shown below –

So let’s observe the action next week.  Do we continue higher with volume coming in (buyers), or is this just a false breakout of a defined trading range?   With the market being driven by short term news and options activity I’m just a little cautious.

Have a good week.       ……….  Tom  ………..

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

This May Take Some Time February 25, 2023

February 24, 2023 –  Earnings season is winding down with a mixed bag.  Generally earnings were OK but the forward guidance was poor; i.e. the expectations of poor earnings in the future.   This along with continued concerns that inflation may not be under control and high interest rates will persist, has put a damper on the recent rally.

Click On Chart To Enlarge

We broke out of the trading range in early February and that’s a ‘Sign of Strength’.  But now we’re back in the range that was established in mid-November, 2022.  This “backing off” could be what Wyckoff called a ‘Last Point of Supply’ (11223 level) and a lunching point going forward . . . or . . . a retreat back into the trading range.  If price continues to fall below 10805, well then, the market is in serious trouble and ‘This May Take Some Time’ to recover.  There are two camps: a) the low is in and b) we’re headed back toward the October low.  In any case there really hasn’t been much progress since the early Fall of 2022.

There is a lot of FOMO (Fear Of Missing Out) and ultra-short term options trading that added excessive volatility to this market structure.  I’m not seeing much long term money coming back in right now.  And yes, this is a News Driven Market, whether it’s geo-political or economic, it’s just not a stable environment right now.

The Short Term Sector Strength table –

I note the strength of the US Dollar (not bullish for US stocks) and interest rates beginning to inch back up again.  Take Care and have a good week.   ………….  Tom  …………….

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

Beak Out with a Backup February 12, 2023

February 10, 2023 –  Last week not a whole lot progress but a whole lot of up & down action.  A few things are starting to emerge: market breath is improving; more stocks are generally going higher than lower.  We have broken out of the last trading range, but not decisively just yet. 

I’ve drawn 2 scenarios on the chart.  The first is the Green idea where we drop a little lower before resuming a general up trend.  In Wyckoff terms that would be a backup to the Last Point of Support (LPS), which would be around 11492 on the NASDAQ Composite Index.  Next is the Red idea which would call out a failed breakout and a fall back into the trading range.  I am slightly favoring the Green scenario right now; but staying flexible.

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I do note that in the “big picture” there is significant resistance to any price movement near the 1300 level above, so that would likely be a near term target and with a pause to consolidate.

What could be a big factor next week is the CPI report on Tuesday.  The market is expecting a ½% rise for January / a 6% yearly rate.  That would be OK, showing that inflation could be slowly coming down.  Much of anything above that would likely throw cold water on any market rally.  And of course earnings continue this week, so that could surprise too.

The Short Term Sector Strength table is shown below –

That’s about it for now.  This market is news driven with many issues still up in the air.  I have taken small positions out and looking for actual confirmation, especially on the weekly time frame.   Have a good week.       …………  Tom  ………..

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