It's a great time to know how to follow trends. Just look at the dollar, oil, gold, stocks all holding strong trends. Oil falling out of bed was not random, it has been in a strong downtrend (objectively measured by the 65m time frame) for 4 months now. Some call it capitulation or reaction to whatever news came out, I call it still in a downtrend. Nothing has changed, until oil breaks it's 65m trend with in tact swing points there is a downtrend. Same with bonds, the daily chart has been the backbone trend for this all year long. Every intraday trend that got started had the daily chart behind it with higher highs and lows and a rising 50 day moving average, nothing has changed there and now we see a new intraday trend getting started. Surprising right?
The point is a) don't fight trends b) have an
objective measuring system c) keep it simple.
The S&P had a week long consolidation while the NASDAQ headed to new highs. The Russell found some weakness with all the energy names on Friday (which are also in downtrends). In the Russell we now have two things we need to monitor for a new uptrend. First the swing low from $115, second the higher high we made barely above $118. If bulls are going to keep this going the swing low will hold and we will take out the highs from last week. If bears are going to take control they will have to take out the swing low and put it in negative territory for the year. Only thing there is to be said about S&P and NASDAQ is just watch the 30m trend and swing points just as it has been for a while now.
The watch list stays mostly the same again, seems like I say this every week but for some reason this rally picked its stocks and stuck with them and I'm not complaining. Makes for huge winners like YHOO and ESRX. A few newer ones I'm watching: MU, ADBE, TASR, LVS (above $65), SBUX (not new but working well), UA, and DE. It's not about what entries you end up taking, it's about how you manage them. If you do it right you end up with winning stocks and the losers fall off. If you end up with winning stocks you can then manage it like a winning stock, adding when it makes sense and trailing stops with discipline. Thanks for reading
-Michael
