Mar 29

Weekend Review and Watchlist

The S&P suffered its biggest weekly decline in two months, beginning with two reversals off the highs Monday and Tuesday, before the real crunch came on Wednesday when it sliced through the 20 and 50-day MA’s.

Here it is via $SPY:-

Remarkably, those closes on the S&P cash on Monday, Tuesday, and Wednesday marked three consecutive closes on the absolute low tick of the day. Maybe some market historians out there can give me some stats on whether that’s happened before?

In any event, rallies being sold into, slicing through potential support levels on increased volume, and going out at the lows in consecutive sessions are all classic signs of distribution and make for one sloppy looking chart.

For sure, the longer-term trend is intact, and as we shall see later there are still plenty of stocks holding up well, but some damage is now evident, and personally I thought compared to previous moves that have kickstarted some vicious ‘V’ shaped rallies, the bounce attempt of Thursday and Friday was pretty pathetic.

To put it all in context though let’s turn to the ‘Correction Roadmap.’

Clearly there’s not too much to be worried about just yet, but given my previous comments I wouldn’t be surprised to see some follow through next week. We’re around 1% above the low close of 3/11 of 2,040, but the real test would be if the 200-day MA comes into view around 2,010 which coincides with the multiple lows made in January.

A quick look at the nine S&P Sector SPDRs gives some further detail on what took place this week:-

Healthcare ($XLV) remains the strongest sector, and despite the obvious pullback, it’s still in a clear uptrend and sits above its 20EMA. Incidentally, the same can be said of Biotech via $IBB.

 

Consumer Discretionary ($XLY) comes next, sitting above its 50-day and without having put a lower low in place.

 

Next come Financials ($XLF) and Technology ($XLK), and it should tell you something when we’re looking at the third and fourth best looking charts and yet they’re both in short-term downtrends and below their 50-day MA’s.

 

Moving on to Consumer Staples ($XLP), although it might look like they’re well above the 200-day, that’s very heavy looking price action to me with the 20 and 50-day MA’s both declining and having crossed.

 

Then it starts to get ugly, with the Industrials ($XLI) testing the 200-day…

…Materials ($XLB) having already broken theirs…

…Utilities ($XLU) wondering what happened to the bond proxy trade…

and Energy ($XLE) just happy it’s no longer making new lows.

 

Despite declining 1.2% on the week, our Marketfy portfolio continues to perform well on a relative basis, handily beating the S&P which fell 2.2% this week. YTD the portfolio is now +10.3% vs +0.1% for the S&P.

We had one exit signal this week, in $QLYS for a gain of 43%.

If I ever write a book, this trade will be in it. The reason? It’s a classic example of how I will still take an entry in a strongly trending stock even if the market itself isn’t strong. Pull up a chart of the S&P and take a look at where it was on the morning of October 16th when we took this entry.

I trade each stock on its own merits. I don’t trade a stock based on what the market is doing, I trade a stock based on what the stock is doing.

One more thing. Is it possible we just sold it at the low for that move? Absolutely, it can happen. It’s one of the numerous pitfalls of trend following and what makes it so hard for people to execute, but we take the signal and move on. If it moves back to new highs we can enter again.

We also had an exit in one of our additional trade ideas; $ZLTQ.

This had already come close to triggering an exit in early March but rebounded strongly without reclaiming new highs. It took a beating on Wednesday but fell short of taking out our stop until Thursday, when it followed through to trigger an exit for a small loss.

Full analysis and commentary on current signals, as well as entry/exit posts, additional trade ideas, and a comprehensive watchlist is available here.

The weakness in the market understandably took its toll on our watchlist. I had to dig deep this week to come up with a list of names, which for me means going beyond the usual happy hunting ground of S&P 500 and IBD names. Many large-cap names have seen some damage to their trends but it’s good to see some new names coming through.

Financials which previously had a strong showing have now mostly disappeared. They’ve been blowing hot and cold for the last few weeks with numerous breakout setups that either never come to fruition, or trigger and then quickly fail. Business Services however have been strong and appear to have improved again.

Here’s a sample of 10 names:-

$NOAH

 

$USCR

 

$GILD

 

$CRUS

 

$HILL

 

$ASGN

 

$CBG

 

$CEB

 

$MDCA

 

$LB

Full analysis and commentary on current signals, as well as entry/exit posts, additional trade ideas, and a comprehensive watchlist is available here.

 

 

 

 

 

 

 

Mar 21

Weekend Review and Watchlist

In recent weeks I’ve touched on the theme of continued strength in global markets relative to the US, notably Germany, China, and Japan, and although they all made further impressive gains, it wasn’t at the expense of the US this time around, with the S&P notching up a 2.7% gain of its own to leave it just 0.4% shy of its all time highs from three weeks ago.

Last week I commented “The Russell ($RUT) looks all set to resume its uptrend after a tight consolidation of that breakout” and that’s exactly what we got with a solid follow-through this week, marginally outperforming the S&P.

 

The run in Biotech continues to steepen, with $IBB recording its biggest weekly gain in 5 months:-

 

Another notable gainer on the week was Real Estate via $IYR:-

 

Of the nine S&P Sector SPDRs, Healthcare ($XLV) is easily the best…

…followed by Consumer Discretionary ($XLY)

 

The rising star though appears to be Financials ($XLF) after a volatile week.

 

Our Marketfy portfolio had another good week gaining just under 3% and outperforming the market for a gain of +11.6% YTD vs +2.4% for the S&P. This week we had one exit, two new entries, and one additional trade idea.

Full analysis and commentary on current signals, as well as entry/exit posts, additional trade ideas, and a comprehensive watchlist is available here.

Our watchlist has grown to 30 names and is dominated by financials which had a volatile few days this week. Many names staged breakouts on Wednesday, which by Thursday appeared to have failed, only for them to emerge even more strongly in Friday’s session. Healthcare and Consumer Discretionary make up the bulk of the remainder.

Here’s a sample of 10 names:-

$GS

 

$MCO

 

$AFL

 

$AFSI

 

$HON

 

$LEN

 

$JAZZ

 

$LLY

 

$JWN

 

$TJX

Full analysis and commentary on current signals, as well as entry/exit posts, additional trade ideas, and a comprehensive watchlist is available here.

 

 

 

 

 

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