Allan Trends Weekend Update

Courtesy of Allan Harris of AllanTrends

New Signals

DJIA Weekly Trend Model———–>LONG

SPX Weekly Trend Model————->LONG

PCLN Weekly Trend Model———–>SHORT

Weekend Market Analysis

The Sound of Silence

“In a week with no major developments in Europe’s debt crisis, and no surprising reports on the U.S. economy, the market struggled to figure out which way to go. The three indexes rose incrementally on Monday and Tuesday and were mixed on Wednesday and Thursday…..With many money managers on vacation, trading volume was low. “The sound of silence” is how Bank of America Merrill Lynch economist Ethan Harris labeled a note to clients Friday.” - AP

That does not add much credibility nor faith in the reversal of two Weekly Trend Models, but faith and credibility are not part of an objective, no questions asked, trend following trading system. Signals are accorded equal respect, despite a crumbling global financial infrastructure of historic proportions. With the DJIA and SPX reversing long on the slowest trading week since 1995, is there still a reason to hold onto a “mixed” label for the long term trend of the market?

Value Line Weekly Trend Model

NASDAQ Weekly Trend Model

NYSE Weekly Trend Model

Nonetheless, its time to prepare for the advent of a unanimous reversal to the Long side of stocks and following the discussions below, I am presenting the kinds of stocks we will be adding to the portfolio should the flashing yellow lights all turn green.

The return of the financial sector as a market leader has had a lot to do with the gains of the past six weeks. XLF bottomed in June and has stayed in a choppy uptrend into the end of this week:

XLF Daily Trend Model

Hardly an impulsive-impressive move as is reflected in it’s poster stock, GS:

GS Daily Trend Model

GS is one of those individual stocks do very well under the microscope of Elliott Wave analysis. It is tracing out an almost textbook Wave 5 Sell Signal. I’ve included the Maginot Line where Wave 4 would intrude above the low of Wave 1, thus invalidating the count. Since GS is a financial and market leader, a rise above 110 would confirm the sector Long and by inference, a broadening bull market in stocks. That line comes in at $110.07. In other words, a rise above 110 = GS Bullish, a drop below 95 = confirmed Wave 5 Sell and GS = Bearish. As goes GS, goes everything else. At GS 110, my guess is that Value Line, NYSE and Nasdaq Weekly Trends will have all gone Long. If so, there will be nothing mixed about the market any more and Bearish Case = Closed. Until then, like it or note, the market is mixed.

VXX

The Daily VXX Trend Model is now up about 40% on its June 8th SHORT Signal. As you can see from the chart below, it has been a stellar trade:

 

VXX Daily Trend Model

 

On the day of the VXX Sell, it’s inverse ETF, XIV, closed at $9.34 and has risen to $14.16 as of Friday’s close for a gain on the trade of 52%. I post these models and their signals, but I can’t make the trades for everyone, that’s up to subscribers. This has been a good trade, or as I described above, stellar. If you missed it, we know from 2 1/2 years of publication, there will be another one coming, there always is. Ditto for the VXX Hourly Trend Model below:

VXX Hourly Trend Model

GLD & SLV

GLD & SLV are still at odds, with GLD holding Long and SLV holding (just barely) Short. While mired in this uneventful deadlock, neither of their current respective trends are winning any medals. Until a consensus is reached, precious metals are also, “mixed.”

There’s Always a Bull Market

At the end of every Mad Money show, Jim Cramer ends the show by saying, “There is always a bull market somewhere.” It’s one of his few cliches that I can agree with. Some of the fastest growing stocks in America are in clearly trending bull markets, nothing mixed about it. Should the market eventually turn down in earnest, no doubt some if not most of these stocks will falter. But that is exactly how and why these Trend Models were designed. The only thing risky about investing in a fast growing company in a steeply rising stock trend is knowing when to get out when the music stops. The high flying Tech bubble of 1999-2000 ended with a 80% decline in Nasdaq by it’s low in the fall of 2002:

 

Nasdaq 1999 – 2002

 

In 2012, over decade later, Nasdaq is still down 40% from it’s 2000 high. The key to making money in the stock market is not so much knowing when the game is on, it’s knowing when it is over. AAPL and GOOG notwithstanding, cash has out performed the Nasdaq for the past 12 years. Forgive me for my caution on these indexes, I’ve seen the havoc greed can reap. When PCLN goes from $500 to $760 in three months and then drops $120 in 10 minutes after an earnings miss,  the siren song of 1999-2000 is playing in my ears.

There is a better way.

The market is made up of stocks and mixed market or not, there are under the radar stocks going up in clearly defined Daily and Weekly up trends that are far from any definition of bubble stocks.  It’s time to start adding some of these to the individual stocks portfolio, not only in anticipation of an “all clear” from the broad based averages, but in the event that “mixed” remains the new normal of broad based market averages. Below are some stocks that share the “Confirmatory Analysis” good seal of approval, strong fundamentals and strong trends. The fundamentals are based on the principals espoused in William J. O’Neil’s, How to Make Money in Stocks. The trends are based on the same algorithms that have been running our models for over 2 years. Note that as good a trend as these stocks have going up, the trend following algorithm gets out when price stumbles, avoiding a window of danger, but getting back when the bull trend resumes:

ALGN

 

RGR
UNFI
MDAS

MLNX

CRUS

BYI

LL

Finale

The emphasis should be on stocks in their own bull markets that maybe are not household names, yet trend well and have excellent fundamentals supporting their uptrends. These will be good alternatives for AAPL, AMZN, BIDU, GOOG and PCLN, as examples which all have probably already seen the best of their respective bull markets and are beginning to have “bubble” written all over them. We need some stocks that are more likely to be at the beginning of their runs, than at the end.  Look for some new symbols to be added to the stocks portfolio in the coming few weeks, either to replace a few current names, or as outright additions to the individual stocks that are being followed.

Speaking of which, this weekend’s Trends Table:

Allan’s Trend Following Model is based on his trend-following trading system for buying and selling stocks and ETFs. Most trades last for weeks to months. Learn more about Allan Trends here. 

 

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