Another very nice week and what it did is put everything back on track. Back on track for what you might be asking? Making new high’s!! All 3 of our primary indexes made new high’s this week, S&P 500, Small Cap, and International Index. Indexes that I watch but do not talk about here very often, also marched to new high’s confirming the current trend, NASDAQ, Russell 3000, and the Dow Transportation. Even the majority of the Sector Select Spider funds followed along. Some will argue that with everything making high’s that it is time to bailout and wait for another opening. I have a few problems with that thought process and they go like this. If you get out, how and when do you get back in? Most trends continue in that direction and are difficult to reverse when new high’s are being made. I have bailout points and I will stay the course until those levels are met.
Do you remember the measured move out of a Bullflag that we talked about in July? You can find it HERE. I still feel those levels can and will be reached because we had another Bullflag breakout inside that measured move this week. $1783 was the target from July and now that target is $1800. Let’s look at the S&P 500 daily to support this move.
Lot’s of pretty line but they are there to help you understand what I see and give me the points that I have to make moves. It also helps me stay in the trends. First thing I want to point out is that all the warnings of August are all off and price is safely established above the new CBL, that is now moving up, the 50 day moving average, and the Intermediate Uptrend line. Price closed Friday at $1709 and current the bailout zone for next week is $1646 – $1651. Percentage wise, if price was to reverse to those levels, it would equal about a 3.4% pullback. No I do not want to give it back, but I know I will never get out at the top or get in at the bottom. I will ride and get the meat out of the middle and miss the major downtrends. Those our my goals and mission.
The current Bullflag breakout is shown with the downward sloping red line. The yellow line is the last move up prior to the Bullflag drop. That measures 149 point. We add that to the point of the breakout on 9/5/13 and it indicates $1800. That is almost where the last measure move pointed to, so let’s remember that range of $1783 – $1800 and see what happens.
Does that Small Cap chart above look like the S&P500? Why yes it does. First things first, price is currently safely above the CBL, 50 day, and uptrend line. Bailout is $861 – $866, which is about 6.7% pullback. Ouch! that would hurt, but that is zone. The measured move based on the Bullflag breakout is $997 or another 8% higher than the current price of $923. Nothing to do here, but watch.
The International Index in my eye is just starting it’s breakout move. Price recently as Wednesday of last week broke the resistance level of $63.66. Now that resistance is support and we need to hold that level or higher. Even if we do not, price is currently safe above the CBL, 50 day, and current short term uptrend. Second if we agree that we are in an uptrend, we could also use the measured move here. $66.49 would be that measured move and we hit a high of $65.11 and that is within 2%. So technically, this run could be over. This does cause me a little concern and it is something that I will be watching closely. No matter, we have levels to watch and will bailout when those levels are met.
Bonds are a tale of two different trading strategies, one short trade and long term. The daily chart on Wednesday fired a buy signal because it crossed the CBL, 50 day moving average, and downtrend line. Thursday and Friday it held above the CBL even though it floated lower each day. At least here, you have a real reason to get into bonds. It is as close to a bottom fishing move that I would make.
The Second chart is the monthly chart and it is not even close to firing a buy signal. So long term it doesn’t look good, but you that it appears things are changing.
I think if stocks did rollover here that I would dip a toe into bonds and see if I could get a little more gain than I would sitting in the G-fund.
Overall conclusion is that sit tight in the C,S, and I wait to see what happens. I see no reason to bail on anything as of Friday close at 4pm.
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