Saturday, October 25, 2014

A Tale of Two Markets

"It was the best of times, it was the worst of times, it was the age of wisdom, it was the age of foolishness, it was the epoch of belief, it was the epoch of incredulity, it was the season of Light, it was the season of Darkness, it was the spring of hope, it was the winter of despair, we had everything before us, we had nothing before us, we were all going direct to Heaven, we were all going direct the other way - in short, the period was so far like the present period, that some of its noisiest authorities insisted on its being received, for good or for evil, in the superlative degree of comparison only.
-Charles Dickens "A Tale of Two Cities"

We are in a tale of two markets. Depending on where you look for opportunity you are either seeing groups in full meltdown or breaking out to new highs. If you listen to business media the walls are caving in, if you follow Relative Strength plenty of names are making new all-time highs. For this reason we continue to focus on winners and ignore or sell losers.

It Was the Best of Times...

With the SP500 recovering most of the damage from its recent sell-off, it appears that we will be testing the highs before testing the lows. The Bulls have asserted themselves at these key levels and are trying their best to move the market higher. The Hammer pattern we have seen so often looks to be resurfacing despite the failed attempt 2 weeks ago.

SP500 weekly Hammer formation
The market was defended at the weekly uptrend support and saw strong follow-through after last week's selling exhaustion. We have seen this action before (just check out February of this year for a nearly identical formation) and supports higher prices to come.

Portfolio Stocks Trading at New Highs

More than half of our Portfolio holdings traded at new all-time highs this week. They are demonstrating their ongoing relative strength and are leading this market higher.






VIX Retreats Back Below 20

With the VIX immediately trading back below 20 and the breakout level, it looks as though last week's surge did in fact mark a panic capitulation for many market participants. If the VIX can now hold below these levels the market should have an upward bias.

+ US Jobless Claims Continue to Come in at New Recovery Lows
+ Global Central Banks Remain Highly Accommodative
+ Long-Term Equity Trends Remain Higher
+ US Interest Rates Remain Near Their Historical Lows  

It Was the Worst of Times...

Despite the bounce in stocks this week the market remains under critical trend resistance. 

SP500 weekly below flattened 20 WMA

Just glancing at the last 2-years of the rally you can see clearly how the rising 20 WMA has acted as strong uptrend support on any pullback attempt. Now we are seeing something different. Even after a remarkable recovery of 140 S&P points, the market is now just touching the underside of the flat 20 WMA. The slope of the moving average has for the first time topped out and has begun to roll over as well. Remember previous support should become new resistance once broken. 

Also note we have the first confirmed lower swing low for 2-years. If the market fails to move to new highs, we have to assume after seeing a lower low that a lower high will follow. 

SP500 Sector Stocks Trading Above the Rising 20 WMA Remain at 2-Year Lows. 

On the surface the SP500 is made up of 500 equally impactful companies. However the Index is "cap-weighted" meaning the largest stocks have the largest effect. Basically the SP500 is made of 500 stocks but only about 90 of them really matter for its general trend direction. I track those 90 stocks on a weekly basis to see what the underlying strength actually is. When the majority of the largest S&P stocks are trading below their 20 WMA and trend support, there will tend to be a pull on the index as a whole and it will be prone to breakdowns. When more stocks begin to turn higher than are turning lower, the market receives a positive boost and rallies are more sustainable. 

Currently only 38 out of 90 SP500 Sector Stocks are trading Above their rising 20 WMA's. This means only 1/3 of the most influential SP500 stocks are in uptrends. Upward momentum will be under pressure when the majority of its component stocks are in downtrends or transitioning.  

Big Breakdowns from Major Multinational Companies 

Exiting KO
After a strong breakout move, KO tanked below its breakout level, through the 20 WMA and prior support area. Volume also increased on the selling this week and we will take our quick exit. 

Longer term the higher lows are still intact, but in a struggling market environment, failed breakouts are the last place I want my capital committed in. 

IBM weekly bars

Incase you were wondering, this is not a "buy" recommendation for IBM right here. Every possible technical tool I can use suggests downside is to follow. Lets take a look at each one of these windows:

1. Price (the most important arbiter) broke its uptrend off the '09 lows in April of 2013. It has since formed a Rounded Top pattern and is now setting its second major swing low with this week's gap lower. 

2. This is what Distribution looks like. The last 4-years of data shows that volume was at its highest during "selling" weeks. Large blocks of sell orders were being dropped on the market over a long period of time while IBM's stock lost upward momentum and began to trade sideways. This is how a market tops out; Institutions close a large position over time by gradually selling shares. Once the selling pressure becomes too steady the stock can no longer move higher and breaks down. 

3. We want to be invested in the strongest stocks in the market. IBM has been in a downtrend vs. the SP500 since 2012. This is about as weak as a Relative chart can look. There is no outperformance here. 

4. Using the MACD to help identify trend and momentum health we can see a steadily deteriorating situation unfolding. How I like to use MACD is to focus on whether the indicator line is above or below the Zero line. Above the line suggests an uptrending environment. Being below the line suggests a downtrending environment. Since making lower lows in mid-2012 the stock has had a very difficult time sustaining any sort of rally. With this week's breakdown, it appears that the trend lower will persist and is potentially just getting started.  

AMZN weekly bars

Amazon is in a similar situation as IBM right here. Price is breaking below support of a Descending Triangle pattern, RS is breaking to new 3-year lows, and the MACD is rolling back through its signal line below the Zero line. This looks like a downtrend to me. 

While it can be very confusing and distracting with all of this conflicting information, the real clarity comes from simply owning stocks moving higher and avoiding the ones moving lower. This way we never get caught in a situation where a loss grows to damaging levels and we always give ourselves the best odds of success by backing only the winners. By always keeping an open mind about the market and focusing on the action of individual stocks, we are able to always know with certainty which stocks we want to be in and which ones we don't. 

The market is often similar to "A Tale of Two Cities". There is always uncertainty around the corner, there are always good stocks to own, there are always risks and rewards that need to be balanced. But by focusing our attention on the best performing stocks and then moving out of them when they begin to signal vulnerability, we are usually able to stay on the correct side of the market the majority of the time. 

Saturday, October 18, 2014

There's a Little Panic For Ya!

Oversold Market Sees Some Relief 

We finally saw some support come in for the market after trading to quite oversold levels. The SP500 Sector Stocks made new two-year lows this week, which tells me two things:

1. It says that the SP500 is likely due for a relief bounce

2. It also says that under the surface strength is the lowest its been since 2012.

What this amounts to is that the market is behaving like it should during a downtrend. We are just scratching the surface of what a downtrend is all about. Who knows, maybe we did form a long-term bottom this week and we just rally right back to new highs. However by looking at the individual stocks from my watchlist it appears that this is simply a throw-back move into the prior support levels.

SP500 weekly
The weekly bar chart of the SP500 shows the trend channel from the 2009 lows. For the past year the SP500 has been trading above the upper boundary of this channel. Typically this is unsustainable action and the price will revert back to the original trend. This week's action penetrated the upper boundary, now uptrend support, but managed to close right back at the line.

The Daily view show the action zoomed in at the trend line:

SPY daily
On Wednesday we saw the market gap below the uptrend line which seemed to cause some heavy selling and a bit of panic. Wednesday morning marked the low for the week and price has since rallied back to the broken support. As you can see above, even though we saw a decent save attempt, price is still stuck below the polarity resistance near 1,900 (or 190 on the SPY shown above).

Also notice that as soon as the market began to roll over and pullback volume began to increase and persisted to grow almost each day into Wednesday's low. I think short term the selling has exhausted itself, but the rally back into resistance levels has seen volume decrease each subsequent day. Typically in a downtrend volume will accelerate with the trend and then be reduced on any counter trend bounce attempts. Classical technical trading tells us that low volume bounces are suspect and prone to failure. The low volume rallies haven't mattered or been bearish since QE took over the market, but with QE now a non-factor we may see behavior revert to more classical rules.

Just as with uptrend breakouts (which will often pullback and "re-test" the breakout area), downtrends will bounce and re-test the prior support levels. The principle of polarity in supply and demand tells us prior resistance becomes support in uptrends and prior support turns into resistance during downtrends. Since the market has recently broken below support we would expect price to rally back to see if the prior support now becomes resistance. The thing we need to watch for are if stocks can begin to reclaim their prior support, that will be the first sign that maybe a bottom is in fact in for stocks.

It is my view that the market is in the middle of a 5-wave decline on the Daily chart and we are seeing a wave4 counter trend bounce now. A wave5 washout should occur over the next couple weeks.

VIX and TLT Signal Initial Panic Wave 

Two reliable measures of investors intentions and sentiment showed initial panic moves this week and that also supported a short term relief from the selling. The VIX measures fear in the market; the VIX is the ratio of negative bets vs positive bets made by options traders. When the VIX rises it signals that more bets are being made against stocks going higher than for them. Similarly Treasury Bonds are considered one of the safest investments available, when we see large rallies in the bond market it means investors are seeking shelter from riskier assets.

Both of these groups saw tremendous inflows on Wednesday morning. The VIX spiked more than 30% while TLT rallied over 5% after the open of trading. For those new to the market a move like we have seen in treasury bonds since 2014 is a BIG move. There have been larger spikes during crisis markets, but TLT has rallied 20% this year. 20% is a lot for any market, especially bonds! So not only have we seen a strong steady rally in bonds for a year, but Wednesday morning gained more than 5% which is a quarter of the entire yearly gain. Needless to say investors were getting a little panicked and overstuffing the "fear" shelters.

I believe we saw a bit if a washout of over-speculative investors and were due for some bounces in stocks. Since Wednesday morning the SP500 is up 70 points off the low.

Intermediate term though these defensive setups are both poised for higher levels, which likely means more trouble for the stock market ahead.

TLT daily 1-year

Fortunately we were watching for a target acquisition near $124 for TLT and Wednesday morning we were able to take advantage of the surge and lock in some nice gains. I have been highly exposed to Treasury bonds since early 2014 and used the pop Wednesday morning to reduce my exposure by 30%. I am still at a 10% holding level across my accounts and I believe we could eventually see upside to the $132 level. I will then be taking another 30% off on that potential acquisition.

TLT weekly

This is classic "blow-off" type action happening in TLT. We have seen a prolonged rally fueled largely by the "rising rate environment" mentality. The unwind of that kind of sentiment can be long and impressive when it finally breaks the last of the bearish bettors. That's when you see these "i give up" type moments; I believe we saw one of those moments this week.

Looking at bonds here I believe that they move lower over the near term, but intermediate term the trend is still well intact. Stops should be trailed up to the rising 20 WMA near $115.

VIX (Market Volatility Index)

While I don't trade the VIX I do find it a valuable tool to measure sentiment in the market. Spikes in volatility have historically marked bottoms for the stock market. Wednesday's move looks like a very nervous spike. The VIX easily saw its highest reading in 2 years:

VIX daily- with spike and throw back
Looking at the daily chart you can see Wednesday's huge surge followed by two days of swift reversals. With the VIX above 20 (warning level) after the throw-back attempt, it looks like we are seeing an important breakout in volatility that we have not seen in some time. Whether it can hold above 20 is yet to be seen, but the longer it stays elevated the more likely another spike in fear will be.

VIX weekly- looking at prior peaks
Taking a longer term look at the VIX you can see where the prior peaks have been and how this one compares. There are a couple things you can take away from looking at the longer term chart. First you could say we have a lot further we could go before equalling the fear we saw in 2009, '10, and '11. That would be the negative outlook. That we have broken the 2 year downtrend and are now entering a more pressured market environment.


You could look at these peaks and say that we still have a long-term series of lower highs and lower lows, and that Wednesday's spike is the end of this little stumble.

Its impossible to know how this will play out but in my opinion we need to watch how it behaves around the 20 level. If it just flops right back below 20 next week I would say the move is probably over and stocks move back to highs. If however it just hangs out above 20 then I would think a much deeper correction for stocks is ahead.

Both the VIX and stocks showed breakouts/breakdowns and then subsequent throw-backs to key levels. The most important thing to do is keep an open mind and just be ready depending on whichever way it goes. 

Portfolio Review

Despite the action this week we saw little change in our Portfolio. Most names bounced around a bit, but we received no new Exits. How you are reacting to this correction depends on your investment timeframe; my more aggressive accounts are mostly all cash currently, I lost a couple holdings this week but most of the cash was raised over the past month. My more conservative accounts (like the Blog Portfolio) focus on the weekly timeframe and they remain roughly 40% stocks, 10% bonds, and 50% cash.

If you only looked at the positions in our portfolio, you might actually think the market is on quite solid footing. Its when you look at the other 70 SP500 Sector Stocks that things don't look so rosy.


Stop: 20 WMA and just below the breakout level

Stop: Weekly close below this week's low price.

Stop: Below $130.90

Stop: Adjusted to $175.50 or just below the rising 20 WMA

Stop: Near $49 

Stop: 20 WMA and breakout level ~$93

Stop: 20 WMA and below $93

Our stocks are performing very well relative to the overall market and are all still in clearly defined uptrends. These are what leading stocks look like. While the market is correcting substantially, these leaders are very near their highs. If the market finds its footing here these will be the stocks that break back to new highs and they are the ones you want to focus your capital on.

While our positions look healthy, participation in the broader market uptrend is waning significantly. Of the 90 stocks I track for our watchlist, 27 remain in uptrends (Above their rising 20 WMA's) and 63 are below and making lower lows. This is not a good ratio and if we are going to see any sort of sustained recovery to new highs there is going to need to be much more participation from the underlying stocks.

It is a "market of stocks". Meaning if the health of the individual stocks that make up the market begin to weaken, it is only a matter of time until the market as a whole succumbs to the negative pressure.

Sunday, October 12, 2014

It Looks Different This Time

Which One Doesn't Belong?

SP500 Weekly Bars

Over the past 18-months we have seen 5 pullbacks in the market. Each one ended with a similar trading pattern called a HammerThere have been 4 consecutive weekly Hammer confirmations to this point in the rally. For a Hammer pattern to trigger you need to see a follow-through green bar after the Hammer bar is present. The previous 4 tests of the 20 WMA have produced this, the most recent one however did not.

The pattern has changed and the market is telling us that it may have new intentions going forward. The playbook for more than a year now has been to buy the dip into the 20 WMA. We would see exhausted selling form the "Hammer" and off we would go to new highs. This time has given a very different signal, a signal of failure. When a pattern formation that everyone expects to play out all of a sudden does not, things can get very interesting. "From failed moves come fast moves" is the saying. When everyone is leaning the same way a little too far, the market does its best to give the herd a good jolt of reality. We may be seeing the beginning of that right now.

SP500 Wave3 weekly bars

This is also the first time since the Wave3 rally began in mid-2011 that we have seen a lower weekly closing swing low in the uptrend (1,925 was the prior higher closing low). The very definition of an uptrend is higher highs and higher lows. Once you make a lower low your uptrend begins to degrade and risk becomes elevated.

It appears that the SP500 Wave count has completed the Wave3 rally.

Now a Wave4 correction seems likely. Typically we would expect the Wave4 correction to be roughly similar to the size of Wave2. From peak to trough Wave2 lost approx. 21%. A similar correction would suggest a move to near 1,600, which if you would recall was within 25 points of the prior all-time highs from 2007. A move down to 1,600 would also retrace 50% of the Wave3 rally. This is not meant to be thought of as a prediction, it is simply a road-map using common patterns present in all markets.

The bright side of this whole mess is that typically patterns of this nature tend to move in 5-wave sequences. That would suggest that a potential Wave5 would follow and accelerate the market well beyond its current highs. The theory is that in a 5-wave move Waves 1, 3, and 5 are "with the trend" moves, and Waves 2 and 4 are "counter-trend" correction moves. Wave 3 should be the longest wave and Wave 5 should be the most powerful wave.

So its not all doom and gloom around here. The sun always shines after a storm...or something like that : )

So What's the Strategy Now?

Fortunately you all have not gotten to go through a corrective market with me since we began this blog in late 2012. But now we may be on the cusp of one and we need to understand how we deal with them to best protect our capital and maximize our returns. I have 3 general rules to deal with corrective markets:

1. Continue to run winning positions as long as individual uptrends are intact
2. Cut positions that signal lower lows and/or failed breakouts
3. Take no new Long signals while the SP500 is below its 20 WMA

On that note lets take a look at our Exits this week as the market gave everyone a good shake.


Time Warner was unable to handle the rejection from highs a few months ago and seems here that it at least wants to move back into the prior range for some time. Price violated the swing low from the failed Fox buyout offer and that was enough for me. It is now trading firmly below the 20 WMA and risk is too much for me right here.

Long-term I still like the setup. Provided the lows around $62 hold, the base formation seems intact. We will keep it firmly on the watchlist but for now we will wait on the sidelines.

I had my stop placed at the $108.25 swing lows but the failed breakout signal along with taking out last week's recovery lows AND slicing right through the 20 WMA was plenty evidence to protect capital and get out of the way.

The uptrend is still technically intact, but this is what we do in corrective markets. You weed out anything showing vulnerability first and ask questions later. We can always get back in, but now is not the time to try to be a hero.

International Paper couldn't quite make the push and is now firmly back within the prior trading range. I have no interest in watching my money get chopped back and forth. We will take our exit here and wait to see if any actual resolution of the range can occur.

This is another longer-term play that I like the prospects of and as long as its above the range lows near $43, I still like the potential for upside in the future.

Wells is another one where my previous stop was not actually hit but the trading action dictated further action to protect gains. This has been my longest standing position in my personal accounts and in the blog Portfolio. WFC has displayed perfect uptrend action for almost 2 years now, but the recent action has me concerned about the near term prospects for the stock. Simply it looks like a failed breakout move from last month that sliced the 20 WMA and the 2-year uptrend support line. We have hefty gains across the board in WFC and I think it is time to harvest some of that profit.

If the lows can hold and the prior highs can be taken out I will gladly get back in. But for now we will take our gains and wait patiently.

Of our remaining 9 holdings, 5 were up on Friday's follow-through selloff. Those 5 were TLT, KO, BMY, UNH, and NKE. This is the reason we don't just dump our positions when the overall market fails. Theoretically if we have been listening to the market appropriately, some stocks were signaling strength and rotation while the market was beginning to correct. Those positions were telling us that they would hold up best should the market continue lower; money was being rotated into those "safer" names.
The only thing that determines whether a stock goes up or down is whether more shares are being bought or sold. If more shares are being purchased than being sold, the stock will go up.

This is how money rotates. It comes into the more "value" areas and leaves the more "expensive" areas. This flow continues in a mostly seamless action. Each individual stock should be held on its own merits and as long as they are holding their uptrends we will continue to own them.

For my portfolios I choose however to not take new entry signals while the SPX is in corrective mode (trading below its 20 WMA). The odds of trade success decreases dramatically when the market is undergoing a correction. This may sound a bit hypocritical to hold current positions based on their individual merits while at the same time deferring to the broad market for new entry signals. But I find trying to trade new positions against the tide of the major market indexes leads to more failures than successes. Like I said before though, you should have already received proper defensive trade signals prior to when the market ultimately fails it's uptrend. We saw this with new entry signals in NKE, KO, and BMY.

It comes back to the idea that you can be much more particular about choosing which new entries to take than you can be about current open positions (active risk). When it comes to active risk you need to defer to the price action of the individual name. But when you are choosing new investments you can be very selective and make sure all indicators are aligned to suggest the highest possibility of success. The broad market trading in an uptrend is my primary indicator for probable success. 4 out of 5 stocks trade with the overall market, so fighting that wave is very difficult to do. This I refer to as investing with the wind at your back vs blowing right in your face. You want to be adding risk when the wind is at your back-when the market is in a uptrend. Again we can continue to hold current positions until they fail, but adding more risk to our portfolio is not how I approach downtrends.

 We must continue to protect our capital AND run our winning trades. If those positions begin to fail we will exit and dial back our risk even further.

Oh And One More Thing

Russell 2000 (RUT) monthly bars
The Russell 2000 Small Caps Index is signalling my "crash" indicator currently and will need to recover back above the 20 month moving average in the next couple weeks to not confirm the signal. This signal has triggered 3 previous times in the last 15 years. Of those 3 signals, 2 lead to significant bear markets with losses of 35% and 50%. The 3rd signal turned out to be a false signal and bottomed shortly after and lead to a relentless 100% rally.

Which will this one turn out to be? Its impossible to say, but we do need to be aware that big problems don't arise until these conditions are in place. When the confluence of these indicators does not occur, the market remains on strong footing and in generally in "rally mode". When they do trigger however a couple different outcomes can occur. You could lose up to 50% of your investment OR it might be a failed signal and a new buy setup would form in the near future as occurred in 2012.

The bottom line here is that all pullbacks start out exactly the same and its impossible to know which is a true signal and which is false. But from my view the worst case scenario of acting on this pattern is you end up buying back in after a new buy signal is triggered and the market rallies significantly (there is that "failed move=fast move" only in reverse this time). And the best case is that you protect your account from a potentially life altering drawdown that forces you to rethink your future. To me its always better to protect your capital in high risk situations and this looks like one of those moments.

Saturday, October 4, 2014

Stick with the Plan

Quite a roller-coaster ride this week. Whew! It was another volatile week for the major indexes and at one point it appeared that we were on the cusp of a significant trend reversal. Wednesday was a challenging day for investors as our collective mettle was tested throughout the session. At one point I had gotten emotional to the extent that I had to put pen to paper and discuss my "feelings". Essentially what it had amounted to was that I (and my Portfolio) was reaching the maximum pain threshold. The market has a way of convincing your emotional side (the fear and greed side) that you can make it all go away, all you have to do is click that little "sell" button. Click that button and the pain goes away.  

But the market is designed to extract your money and pass it to someone else. Its a perfect manipulator of your worst decision making tendencies. And on Wednesday it had almost gotten me to join the rest of the lemmings into the abyss. What it took for me to get myself squared back away was to simply get my emotions out onto paper and reassess the "plan" that is in place for just such an occasion.

Most people don't have any sort of plan to circle the wagons in times of high emotional stress. It is exactly why we get these max pain, capitulation moments when everything looks its worst. The herd acts with no plan, they are emotional and rely highly on their "gut" reactions. Unfortunately gut reactions are typically created from common emotional responses to stress. Your emotional bias will trigger these "feelings" and you will then act on them, convincing yourself that it is in your best interest to do so.

 I have remarked in my journal before how it is astonishing to me that my trading strategy (which I developed) can be right with so much more accuracy than I can act on my own thoughts and instincts. If I created something it should reflect more or less my collective knowledge of market movements and how to respond to those movements. Yet time and again, without fail my trading plan continues to dramatically outperform my decisions made in the heat of the moment.

The key takeaway it that trading and investing without a plan WILL (not can, WILL) be detrimental to your long-term returns. Keeping yourself from getting emotional in the market is the primary key to whether you make money or not. You need to have a strong foundation to fall back on to keep you from trading like the majority who lose money regularly with their ill timed decisions.

All that being said, the market once again make a stick-save right at key uptrend support on Thursday and followed through very strongly on Friday. As we enter the weekend we only lost one position for the portfolio, but we will be adding one as well . We lost Enbridge due to continued weakness and a failure to bounce back with the market Friday. We also received a new entry signal for Coca Cola (KO) on its breakout to new 16-year highs.

Going forward we need to continue to stick to our trade strategy and continue to take the signals generated by that plan. Just because the market staged a recovery doesn't mean everything is dandy again; the market doesn't ring a bell to indicate all is clear. But the important takeaway is that we are still in an uptrend and need to observe our stop levels as well as keeping an eye out for any new opportunities that come our way.

SP500 (weekly view)

Lets take a look at our portfolio after this week's action to see exactly what we are dealing with going forward.

-Exiting Enbridge (ENB)

Enbridge had been looking quite strong up until the last two weeks and then all of a sudden lost it's bid. There was a nasty bullish reversal on Thursday of this week, however the bounce saw zero follow through Friday which was also a very strong day for the overall market. Price has closed below the prior swing lows and due to a total lack of Relative Strength we are taking our exit. Our stop was set just above $47. Until this finds support and can stabilize itself we want to remain on the sidelines.

+Entering Coca-Cola (KO)

If you have read this blog for any amount of time this setup and trigger come as no surprise. Price has consolidated for the better part of 18-months and this week made the highest weekly close in 16 years. This move is confirmed by all indicators I use and even saw exceptional trading volume on the breakout this week. To gain further perspective of the long-term implications of this position take a look at the monthly chart going back to the 90's:

What I see long term is after the bull market of the 1990's, price made a large consolidation base. This is the Cup/Handle or Rounded Bottom formation and is commonly a trend continuation pattern. Based on this formation it looks like initial targets should be in the low $60's.

The real beauty of this setup is that depending on your investment timeframe you can choose to place your stop in one of two places. If you want to be more aggressive you can use a tighter stop just below the rising 20 WMA at about $41.20. However if you wish to give this more room and make it more of a buy and hold position you can use the handle swing lows at about $37.

With two ways to play this, KO makes a very versatile opportunity. I want to own this aggressively above the $42 area ideally and will be using the tighter stop at $41.20 for sizing my own positions. Back below $42 this gets more messy and I don't want to own this stock if it fails its breakout here and resumes in its trading range.

Despite the continued demands that interest rates should be rising, they continue to trend lower. TLT looks to be resuming its effort to retest the prior highs from early 2013. Until something happens to invalidate this 10 month uptrend we want to stay the course. Stops should be below the recent swing lows at $113.

Looking like a sure stop out early in the week, TWX was able to rally back hard Thursday and Friday. There is not much more to say here other than we want to remain long above the most recent swing low near $73.

ECL was a bit of a mover this week, fortunately the only damage done was a retest of the prior breakout level. Once that line was tested, buyers swooped in and drove prices right back near all time highs. If price can make a new high we can move up stops to this week's low near $111. But for now we still need room down to $108.50 for a confirmed trend break.

This week's action is textbook breakout stuff.

Nike bucked the volatility this week and moved to new all time highs. This is leadership action. When the market is finding support, this stock is rocketing to new highs. There is nothing more to do except ride the wave. Stops are still at last week's low.

GOOG flirted with its stop area this week, but managed to close well out of danger. We are still waiting for this one to get rolling. Stops are at $566.

I thought IP was finally going to roll over this week but once again it clings to life. This stock has been on the verge of explosion for months. Considering that we keep seeing higher lows held and the upper resistance repeatedly tested, I believe this still resumes higher. Stops remain below the swing low at $47.10.

Wells looks like it could be carving out a small rounded base. We will need to see price break above the prior highs near $54 for this to resume higher. The trend is clear here and as long as the stock continues to make higher lows above $50 there are no problems.

Another very clean uptrend. Until a lower low below $80 and trend support occurs we want to stick with UNH.

While the SP500 challenged it lower trend support and violated the 20 WMA, BRKB didn't even touch it's rising 10 WMA. The outperformance is excellent here and above the consolidation zone at $130-125 this continues to look like a big winner.

BMY continues to hang out above its rising moving averages and as long as it stays above support at $49, I like the risk/reward very much

Similar to Nike, HAIN is just pegged against its all time highs and has the look of a leadership stock. Soon we will be able to move stops up to the low $90's, but for now they still need to be below our entry bar.

GS (daily)
I wanted to show the Daily chart for GS here because this is perfect breakout retest action. This is what I like to see in leading stocks. When the market is testing lower trend support, I like to see stocks that are retesting their prior breakout areas. Once the selling subsided this week, GS ripped to higher highs signalling a successful retest of the breakout area.

Stops can now be moved up to the $177 area.

GILD continues to consolidate and build a new base support. The 10 WMA is acting as an excellent trailing support and we can move our stops to the recent swing lows once price makes a new high. Currently stops can be placed just below the 20 WMA at $93.