Weekend Update: Defer To the Trend As Long As Its There

This week, once again proved treacherous for short-term traders. We continue to trade within the trading range we have been watching, yet we saw one new development that can't be pleasing to the Bulls. There was a breakout attempt that took the SP500 to new all-time highs this week, yet Friday's "sell the Jobs Report" trade killed off that trigger. The SP500 continues to hold up better than the other market indexes as after a short "dead-cat bounce", both the Russell 2000 and Nasdaq continued to show Relative weakness and rolled to the downside to close out the week.

SP500 daily bars- false breakout

SP500 weekly bars- range holds

While we had some theatrics day-to-day, we really are in a similar spot as we were last week. The large cap stocks continue to hold and probe all-time highs, but the more risky groups are being taken to the woodshed. We are still seeing money rotate out of last year's biggest winners and into more safety and alternative asset classes. Commodities have been looking exceptionally appealing recently with several groups already in breakout territory and many others setting up for big moves. Right now it is my sense that stocks are quite risky while Cash, Bonds, and Commodities present very intriguing values at these depressed levels. Only time will tell if that feeling is correct, but in terms of money flow and Relative Performance, that is where the strength is.

As stocks are at the edge of a potential transition, it is necessary to look over our holdings and make sure we know where we are wrong and where we will step aside. There were no changes to our portfolio's allocation this week.

Full Holdings (3/3)

AEP

AEP looks great taking a run at these prior highs. We continue to see breakout follow-through and are moving towards our target. Stops should be placed just below the rising 20 WMA with the breakout infection level @ $47.85. The reversal target is at $53.40.


TLT

Treasuries appear to be giving the weak holders a good shake here. TLT started the week heading higher through the resistance area. Then price dropped quickly back below the $108 level before settling out the week right at the current resistance. This still looks like its going higher to me, but we want our stops just below $105.50.


PBW

Clean Energy got rocked on Friday but is actually putting in a text book throwback to the breakout level. As long as price can hold above the 20 WMA and breakout level of $6.85, its still full speed ahead.


PPG

PPG continues to hold onto its new highs and even bucked the trend and closed higher on Friday. It is still exhibiting fantastic Relative Strength, so as long as its above $188.50, we are riding this one higher.


CMI

CMI gapped higher to open the week and still managed to hold a bit of those early gains. So far this looks fine moving toward our target of $164. Trailing stops should be placed just below $139.50.


Partial Positions 

WFC (2/3)

WFC set another new all-time high this week and relative to the market, this one is a big winner. They have earnings coming up within the next couple weeks, but right now its looking A-ok. Stops below $45.25.

HAIN (2/3)

HAIN is trying to hang in there but it has been weakening for weeks now. Its now failed to make a new high with the market two times in a row. A clean break of $88 would be enough to watch from the sidelines for awhile. Remember, we have been in this trade since $68 per share. Its been a winner for us, but they can't last forever.

UNH (2/3)

UNH continues to hold right at its all-time highs. This is a very bullish characteristic after such a strong surge two weeks ago. Relative to the market UNH looks great here and we have a nice cushion to let this winner run. Stops @ $75.70.


Cash (0/3)

F

We have been watching F decline for a few months now, but just this week things look to want to change a bit. Its still too early to tell but we can see RS breaking out of its downtrend and price is doing the same from its downward channel. We need to see a higher high put in as well as the 20 WMA to begin rising (currently its still declining), but this is about all we could have hopped for in a struggling market with a down trending stock. Lets keep a close eye on this one.

DDD

DDD continues to trade poorly. We have now seen 4 weeks of downside follow-through on the topping formation. I would expect some sort of relief rally soon, but I think this has one more leg down before we can hope for a bottom. The uptrend support at $48 should provide long-term demand for shares and that's where I will start to get really interested again.


----
Overall our holdings look quite fine at these levels. While some are testing key uptrend supports, support is support until it is broken. Until we see our stops triggered we have to continue to defer to the overall trend and not try to overreact to our emotions by anticipating. If the stops get triggered, we will step aside. But until that actually happens we need to continue to run these strong winners that we have been riding for so long now.