Earlier this week I sarcastically noted it was very generous of Mr. Market to give everyone a chance to get positioned for the correction that the latest batch of goldfish with their six-second memory were forecasting.
Instead, I ventured, a range as narrow and tight as we had seen was more likely to produce a resumption of the trend that preceded it, rather than a full blown reversal. Sure enough, by the end of the week we had a pickup in volatility with several wider range days, only with an upward bias, finishing the week with an all time high close on the S&P and Dow. The correction roadmap is now looking more like the road to riches.
Oh there’ll be another one, there always is, and you have to manage risk like your biggest drawdown is always ahead of you, but there’s no need to engage in guesswork anticipating when it might happen or fight the trend that’s underway. Better to go with what’s working and be prepared to step aside when price confirms it’s over.
It’s incredible that a 10% correction from here, something we haven’t seen for over 3 years, now just gets us back to the lows of only 5 weeks ago. That’s how fast this move has been. It was like a stress-test for your strategy.
There were no new signals for our portfolio names this week but the numerous moves to fresh highs gave plenty of opportunity to trail stops higher. Here are a few highlights:-
I’m going to show $HD in two charts to really give it some context. Here’s a 2-year weekly and a 6-month daily. This is an incredibly strong trend, especially when you consider how easily it overcame the credit card breach news after the huge August breakout. Look how the stock consolidated and stretched higher again. We saw a microcosm of that move on the daily chart this week following its poorly received earnings report only for the stock to stage a strong reversal from near its 50-day and finish the week unchanged back near its highs. Our stop now moves to $93.34, just below the most recent breakout at what would also be a 5-week low near the 50-day MA.
This most recent 4-week stretch by $NKE is really impressive. I love these kind of stair-stepping moves, the definitive ‘higher highs and higher lows’ of an uptrend, but it’s more than that, it’s the efficiency of the trend with relatively narrow range days resulting in slow and steady gains. People might make more out of Friday’s candle than is warranted just because it reversed off its highs, but this remains a very strong trend. Don’t fight it.
$SBH is developing into a really healthy trend now with an impressive follow through this week after the brief consolidation of the post-earnings advance. The big news though is seen by look at a much longer-term weekly chart. This was the highest weekly close this year, and the all time high from July 2013 is now tantalizingly near.
Needless to say with the market at all time highs and sectors like Industrials, Materials, and Energy leading the way on Friday, the mix of names on the watchlist is perhaps the broadest its been in a while. Consumer names clearly still dominate, but it’s also interesting to see names from sectors that haven’t featured as heavily recently.
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