America is at All-Time Highs

The market once again closed at a new all-time high this week. If its not apparent by now that new highs are not a bearish indicator then nothing I can show will convince you. I have been writing about new stock market highs since early 2013 and the market has continued to produce them routinely for over a year. Most ordinary investor folk believe that when the market is at highs it is time to sell; they believe "stocks have gone up too much". The statistics however simply do not support selling into new all-time highs, or even new 52-week highs for that matter. New highs lead to more new highs; by their definition when a stock or market makes a new high that is a positive sign, a sign that things are working and should not be a signal to sell.

Since early 2013, when the market made its first new high in over 6 years, the SP500 has continued to rally another 400 points or 25% from the original breakout. If you take your advice from ordinary investors or the financial media you likely have missed that move in fear of some unfounded scare tactic.

The point is that America is at all-time highs. Most people will not acknowledge that as truthful either. There is a quote that says, "the world continues to improve, yet people believe that things are always getting worse". This flaw in thinking is usually caused by some political or emotional bias based on some preconceived ideas of conspiracy or malfeasance directed at the government. Any number of popular theories can lead to these ideas:

-The Fed is artificially inflating our currency and economy to sure future disaster
-Democrats or Republicans are ruining the country for any number of reasons
-Some sort of war will erupt and destroy life as we know it
-All data supplied by the government is corrupt and intended to deceive our confidence
-An individual has an opinion and regardless of facts, their opinion is all that matters

These flawed ideas are typically created by some form of recency bias, be it the 2000 and 2009 stock market crashes, recent political elections, some "very believable movie plot", opinions of their parents/friends, etc.

If you constantly live waiting for the next disaster or think that everything you read or see is an intentional deceit, you will simply not live a very fulfilling life. But if you step away from opinion and bias and just observe facts you will see what is actually going on right in front of you. Here are just a few facts showing that things are really not so bad:

-Life expectancy in the US is 79.8 years, an all-time high
-Infant mortality rates in the US are 5.2 deaths per 1,000 live births. By comparison in 1980-85 the number was double that.
-Percentage of the US population with a college education is 43.1%, an all-time high

People will assign blame to any number of exterior causes to explain their "bad luck" or struggles in life. But the simple facts are we are living longer, our country is more educated than it has ever been, the survival rate of our offspring is at its highest in human history and our best economic indicator (stock market) is at all-time highs.

You can argue with that all you want, but those are the facts. The other "doom and gloom" theories are just that, theories. They have little backing in the data and simply don't matter to day-to-day life. What good has hating the president or Federal Reserve gotten you financially over the last 6 years? If you acted against the status quo, you likely have not benefitted in any way by one of the largest market rallies of our history and don't have anything to show for it except sour grapes and how "you will be proven right at some point". Good luck with that. I will continue to observe the facts and adjust my lifestyle and choices accordingly.

SP500

Its really been impressive, the most recent bounce back from the October low. The relentless bid continues as any sign of weakness is bought. I have to imagine that a pullback is in the near future, but there isn't much reason in trying to anticipate it. The market has to be given the benefit of the doubt and as long as the SP500 can stay above about 1,900 there isn't much to worry about.

My sector data continues to gain strength as the stocks trading above the 20 WMA moved from 60 last week to 62 this week. This suggests that the trend is still likely headed higher and positive support for the market is in place.

We have two new entries for our Portfolio this week. They should both be familiar to you if you have been following this blog for any amount of time. This week we are entering PPG and SBUX.

+Entering PPG (PPG)

PPG is one of my favorite stocks, so when it acts right I like to be an owner of the shares. Since taking our exit on August 1st, the stock has traded erratically. First moving to a low near $170, to trading at an all-time high at $215 just 5 weeks later. Fortunately for us PPG did take a little pause and built a nice swing point to put a stop against right at the $197 level. This little swing low allows us to own this stock as it keeps our stop only about 8% below our entry price.

You can see this swing point better on the Daily chart:

The pivot created on November 4th emphasizes a solid support zone going back to the previous support last summer. This will give us plenty of clarity on the stocks future direction by how it handles a test of this previously important support level. Above that swing the stock is in full breakout mode and below it the trend becomes more muddled and risky.

My two favorite confirmation indicators look tight on the weekly chart, giving more confidence to a strong entry at these levels.

+Entering Starbucks (SBUX)

Since our previous failed trade, the stock has been forming another higher low. This week price was able to break above the most recent swing high and seems ready to resume to the upside. For initial stop placement I am leaning toward the major low that was formed in October. Stops should be placed at $73.35, but can soon be moved to the $77 area.

Lets not forget why we like this one:

I hope we are going to see a similar resolution of this wedge pattern as we saw in late 2012. The last time the stock acted this way it went on to rally 100% over a 1-year period. I believe we could see that happen again.

Our indicators look solid here as well:

With this week's new entries, that brings us to 13 holdings:

UNH    +22%
NKE     +18.7%
BMY    +14%
HAIN   +12.3%
BRKB  +11.6%
GILD    +5.6%
TLT      +4.8%
GS        +2.4%
IP          +1.3%
PPG       0%
SBUX    0%
PCG      -.06%
UPS       -1%

Continue to let those winners run and keep any losses as small as possible.


Chart of the Week

So you want to make a bet against the price of oil rising? But you are uncomfortable shorting in the market, so making an outright bet against oil prices seems unlikely...Then how can we take advantage of weaker oil prices without directly shorting oil?

Look no further than Carnival Corp (yes the cruise ship company)!

Carnival Corp (CCL)

As you are likely aware the cruise industry hasn't exactly been hitting it out of the park for the last 10 years or so. Something to do with being toxic waste dumps, stranded sinking death traps, or petri-dishes teaming with ebola/noro/"insert sickness of your choice". Pool that all together and you get some negative news flow and hesitant consumers, which tend to equal lower profits.

Yet if you look at the stock something interesting has been happening. Despite the negative news, CCL has continued to make higher lows since the '09 market crash. Also what is very interesting to me is if you flip the monthly chart of CCL over, it begins to look very similar to the chart of oil:

OIL

With oil breaking down from its multi-year support range, the price to do business for the cruise industry is decreased substantially. A company like Carnival is set to profit big from lower oil prices as their costs decrease AND their customer base has extra discretionary spending due to the savings at the pump.

If one wishes to participate in falling oil prices and wants an easy way to play it, CCL seems like a good fit. They have costs on their side for the foreseeable future and have a consumer with a steady tailwind to their backs. That pairing equals profits.

CCL:OIL

Don't believe me that CCL likes falling oil prices? Just one look at this chart showing CCL vs OIL should say it all. Relative to OIL, Carnival is making a monster multi-year breakout and should set up an excellent risk/reward trade for the intermediate term.

Any longer term position should be based on a stop at the most recent swing low on the Monthly chart. $36 is where the stock should hold on any pullback. If that level were to fail, this analysis is no longer valid and defensive measures should be strongly considered.