In this shortened week not a lot was accomplished. The S&P did reach a new high this week, but closed only 1 point higher than last week. The market still seems in creeper mode, but we could see volatility pick up next week as traders will have lots of time to digest the retail numbers from Black Friday. There is no rule that says the market has to pullback, but I expect we could see a small "sell the news" into official Black Friday results. That's just my feel. Feel doesn't matter much with a trend following strategy, so as always we will wait for price to confirm any sort of negative momentum before we get bearish on stocks.
This week makes 8 consecutive weeks of higher prices for the market and its got to come to a halt at some point. When I'm looking at my positions I see many places where a little pullback would make sense and then refresh the next move higher. I'm not thinking big drop or anything, clearly the bid for stocks is too strong for the bottom to just fall out, but it wouldn't be a terrible thing to see a couple lower weeks in the early part of December. I feel very confident with my stop placements on our holdings and believe a refreshing correction could open some decent swing opportunities coming into year end. You have to be willing to let some of your gains go to really catch all of a powerful up move. Markets don't just move in one direction, but you have to be willing to sit through some healthy pauses to keep yourself aligned with the bigger picture. And if the market decides to move into a deeper correction mode, we will follow our stops and step aside before too much major damage is done. Always remember to manage risk first.
That being said we do have a couple positions that need monitoring and a few others that might be ready to continue to the upside. Let's take a quick look.
Enbridge (ENB)
ENB is still struggling to put together a rally. We continue to see selling and closed lower on the week. This was also a confirming week with a second consecutive close below the 20 WMA (which has turned down after this week). I am still positive on the position above the $40.50 low, but the recent action needs to be reversed quickly or we will be stopped out.
Clean Energy (PBW)
PBW is toeing the line here, although it did bounce nicely on the 20 WMA this week and closed out near the highs. We still want to be in this name above $6, but the Relative Strength trend seems to be nearing a failing point. Sometimes this is a warning and other times it corrects itself quickly. This will need to hold these support levels soon if we are going to be able to stay aggressive.
Ford (F)
Ford is in a very similar boat to PBW. The stock is just hanging at the 20 WMA and near price support, while the RS trend is poking through the uptrend. I want to give F the benefit of the doubt but a close below $16.50 with a failing Relative Strength will force me to step aside.
Hain Celestial (HAIN)
On a better note, HAIN once again continues to find buyers near the 20 WMA. For the third time now in this recent uptrend, price has bounced right off that support line. The RS trend is strong and intact and if price could breakout above about $84.65 I would expect another leg higher. That would be a nice place to add to existing positions if you have been looking for a place to increase your HAIN exposure.
Home Depot (HD)
HD is also looking good after a nice bounce back week. With this week's move we now have a new all-time weekly closing high. The RS trend also shows a nice little retest of the breakout before it continued higher. If we get another follow-through week soon, we could move up our stop to the $75 low.
20+ Year Treasury Bond (TLT)
Something that is getting my attention this week is the potential for a Double Bottom formation in the Long Treasury Bond. We saw the previous low from August matched this week, yet price recovered nicely from the lows and momentum is not confirming the same low as price. Momentum is making higher lows since bottoming out back in late June. Nothing has been confirmed here at all and this is still a very early progression in this pattern, but the potential is there for this to begin to evolve into something more.
The pattern will trigger if price breaks above the prior high around $109. If this pattern forms and breaks to the upside it would be time to hedge or reduce your overall market exposure. I would most likely be inclined to buy the breakout in TLT and would thereby hedge my overall market risk. Bonds typically move inverse to stocks, so a positive move in the Bond market would be seen as a likely negative for stocks. If you were holding an 80% stock exposure and added a 20% Bond position, you would effectively reduce your market risk exposure to 60%. The bond position would protect your portfolio by a healthy margin while this pattern was in play.
On a short week like this I really don't have much else for you. I hope you all had a great Thanksgiving and that this review helps you proceed into the seasonally strong month of December.
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