McDonalds (MCD) All-Time High, AAPL strong in Bear Market

This will be a quick post taking stock of the week's events. First of all, looking at Stan Weinstein's indicators the weight of evidence as I see it still points to bearish on the long-term (see table below). Delving into individual sectors doesn't offer much encouragement as every sector in the US stock market has a downward sloping 50-day moving averages and recently made new 6-month lows. The remaining bullish case for stocks continues to be McDonalds (MCD) and Apple (AAPL) which are holding the weight of the DOW and the S&P500 on their shoulders. In fact, the top three industry groups over the last quarter are #1 personal computers thanks to AAPL, #2 Gold, and #3 Restaurants where MCD is has by far the largest market cap and is among the best performers.

Weinstein's Indicators

Indicator	Status	Bias
Stage Analysis	S&P 500 below MA(30)	Bearish
Advance-Decline	NYAD Below MA(30), new low last week	Bearish
Market Momentum	NYAD MA(200) made new low last week, but still above zero	Bearish/ Neutral
Highs vs Lows	NYHL negative	Bearish
World Markets	VEU is well below MA(30). Due for a rally, but trend is down.	Bearish
Market Leader	AAPL is above MA(30) and close to all-time high	Bullish
Price-to-Dividend	S&P500 dividend yield is below the 1930-2011 average, but higher than most data since 1995.	Bearish/ Neutral
Contrary Opinion	AAII sentiment survey is neutral (36% bull, 40% bear).	Neutral

Short-term, it's reasonable to expect a rally on the S&P since the recent lows have held up. I am always on the lookout for stocks showing relative strength so I collected a few in the chart below. These stocks made new highs as the market held its ground. Notice that all of these stocks were pulled down by the initial selloff, but they made higher-highs and higher-lows in the following weeks. Nitrogen fertilizer is acting strong.

• CF (CF Industries | NYSE) - manufactures and distributes nitrogen and phosphate fertilizer
• DLTR (Dollar Tree | NASDAQ) - discount variety stores in the United States and Canada
• TNH (Terra Nitrogen | NYSE) - produces and distributes nitrogen fertilizer
• HANS (Hansen Natural | NASDAQ) - beverages, brand development, e.g, Monster Energy
• MCD (McDonald's Corp. | NYSE) - 32,478 restaurants in 117 countries

The Canadian all-time high list is full of Gold, Gold, and more Gold. With the exception of a few names including:

• NZ (New Zealand Energy | TSXV)
• RMT (Raimount Energy | TSXV)
• SAT (Asian Television Network International | TSXV)

don’t forget to think for yourself...it is your money, no one is going to care about it as much as you do. ... don’t forget how to be a kind and caring person, it isn’t easy but it can mean so much more than another zero to your net worth - Brian Shannon (AlphaTrends)

Related Posts

• Is this a bull or a bear?
• Full All-Time High List
• The Priority List
• Listen to Price Action
• Focus on the Best Stocks
• Van Tharp on Stalking Your Next Trade

Listen to Price Action: AAPL vs RIMM

Apple (Nasdaq: AAPL) hit a new all-time high this week while Research in Motion (Nasdaq: RIMM; TSX: RIM) dipped to five-year lows. I happened to chat with an acquaintance who said they were still holding their RIM stocks purchased a few years ago at much higher prices. In the same conversation they remarked at how successful Apple has been. This reminded me of the importance of several keys to successful trading:

1. Listen to price action. It's nothing fancy, as Joe Fahmy said: just pay attention.
2. Know why you own stocks. As Larry Williams said: It should be to make money, no other reason.
3. Have a trading plan that explains entry and exit strategies.

If you can't do these things then you face unfriendly odds since most stocks lose money. Success is unlikely unless you seek clarity like Nicolas Darvas.

Getting back to the comparison, AAPL and RIM have been showing their hands in the charts. AAPL is a chart that illustrates strength, RIM has shown weakness. These patterns did not happen in a single day. There have been warning signs along the path. The observant traveler notices these things.

Since the overall market bottomed in early 2009 AAPL regained the characteristic uptrend pattern of short moving averages above longer MAs. Moreover, AAPL has gone on to make many new all-time highs along the way, which is a key trait of winning stocks. I've included both a Guppy Multiple Moving Average chart and a chart with a 10-ATR trailing stop. The difference in price action is quite clear.

In contrast, RIMM has never made a new all-time high since the market bottomed. Its MMA chart illustrates that it can't sustain an uptrend. Finally, once it fell below the trailing stop it never recovered.

Successful traders are rational people. Winners trade solely for the money, while losers get their kicks out of the excitement of the game. - Dr. Alexander Elder in Come Into My Trading Room

Related Posts

• The Priority List
• Full All-Time High List
• Joe Fahmy's trading advice
• Larry Williams: trade to make money
• seek clarity like Nicolas Darvas
• Dan Zanger's Trading Advice