Who's In Charge?

Stocks stumbled this week and finished sharply lower thanks to Thursday and Friday's persistent selling. However, late date buying on Friday at important technical support areas kept the bears in check and under control. For now.

These are the charts I'll be paying close attention heading into next week:

The S&P 500 (SPY) held above January's highs which was successfully tested in September and is now visiting the area for a second time. Late day buying on Friday came in right where it was suppose to for those who watch areas of technical significance.

The Russell 2000 or small-cap stocks (IWM) have lagged large-caps significantly over the last few weeks. However, they did find buyers at the end of the week right at the 200 day moving average and January's highs. Another area where you'd expect some buying to occur.

Only one of the five FAANG stocks has managed to make new highs recently (AAPL). This is well worth paying attention to as these mega-cap stocks have been the fuel for this bull market. If they suddenly catch a cold it could easily spread to other sectors and industries.

Below is a combined chart of FAANG (FB+AAPL+AMZN+NFLX+GOOGL) showing a potential double top but like the above charts support is holding and keeping the bullish tone alive.

This is an interesting graphic when it comes to initial public offerings. The percentage number of unprofitable companies going public has now surpassed the dot-com highs. Something to keep in mind.

Corrections like last week are a great time to review your current holdings and make sure you understand what you own and why. This will help prevent you from selling good stocks in a correction and keep a closer eye on more speculative positions you might not want to hold if the selling starts to intensify.


Below are five of the stronger trending stocks on my CM50 (Canadian MegaTrends) & UM50 (US MegaTrends) lists. 

Stocks in both Canada and the US experienced significant selling on Thursday and Friday of last week. Many of the strongest trending stocks suffered 5% or better corrections.

There were still a surprising number of stocks showing relative strength and were unaffected by the selling to end the week. 

Remember that chasing stocks higher is not recommended and even the strongest trending stocks can experience significant drawdowns.