Trend picture improves, but staying skeptical
It’s now a mixed picture on the weekly trend analysis page after last week’s strong rally. This remains consistent with the skeptical view that the current rally is most likely part of a larger downtrend or corrective phase in the market.
That said, I wouldn’t want to underestimate the upside potential from here – the market appears to be have plenty of room to rally further. But right now I agree with Larry McMillan (The Option Strategist), who said this in his latest (free) weekly commentary:
This short-term breakout should carry the averages up to at least the early June highs — about 1290 on $SPX. The jury is still out on what happens after that. It is possible that an intermediate-term rally will take place, but we are not jumping on that bandwagon yet. The June lows are eventually going to be retested, we’re sure, even if it takes several months to do so.
Sector ETF highlights
Of the nine sector SPDR ETFs I follow on the trend analysis page, Consumer Staples (XLP) is currently one of the most positive:
As is Energy (XLE), which is back to an all green trend spectrum (although I would be leery of jumping into this sector at this point):
Utilities (XLU) is also still positive, but showing less conviction:
Two sectors tie for “worst performing” – one of which is Health Care (XLV):
The other, of course, is Technology (XLK):
New positions
Fresh Del Monte (FDP) – Last week I sold July 17 1/2 calls against my long position in this stock as it rallied up toward 18.
This brings my net cost basis in FDP down to just below 16.
Watchlist
Some interesting stocks showing up on this week’s “upside strength” scans include American Home Mortgage (AHM), AnnTaylor Stores (ANN), Cummins (CMI), Dillards (DDS), Duke Energy (DUK), Harley Davidson (HDI), Intuit (INTU), Kroger (KR), and Winnebago Industries (WGO).
On the downside, some familiar “beaten down” names are continuing to pop up: Analog Devices (ADI), Brunswick Corp. (BC), Home Depot (HD), Health Management Associates (HMA), Medtronic (MDT), Triad Hospitals (TRI), and Wm. Wrigley Jr. Company (WWY).
