S&P 500 Continues Rally But Possibly Overextended; XLY, TAN, DXJ

S&P 500 Continues Rally But Possibly Overextended

I generally don't like to try to call tops but to follow the trend until it declares itself changed.  That change has not happened yet, so I remain long the market as it climbs a wall of worry sprinkled with signs the economy is regaining strength. 

The market tends to be strong around Memorial Day which is approaching, but weak during this 6-month period, so expect the unexpected during summer.   The market is up almost 17% for the year which would be a very good year if we stopped now but unfortunately markets don't work that way - there will be so many stinker years that if you don't catch the 30-40% surges you will badly underperform.  It ain't over 'til it's over and the market will tell us when it is tired and needs to consolidate or worse. 

Solar energy (TAN @ 25.90) is an interesting play.  I watched it lurch up and down, so it's more of a trade than an investment, but I bought the pull-back in April following the penetration of the 20-day high.  The huge volume and spike high on April 8 could not be ignored - someone was accumulating these shares and the pull back was on extremely light volume.   It's up 52% since my buy point in only 4 weeks!  I wish I was usually this smart or that I had taken out a larger position, but this is a very exciting space with only a few players so when interest builds, it has a tendency to explode.  Sell stop at the 10 day trailing low, currently 19.58, but likely to move higher very soon.

A play on an economic recovery, XLY was behaving a bit better than the SPY itself, so I moved back in after taking profits earlier during the upmove.  It is absolutely critical as a trader that you can buy back shares at a higher price than you sold them and that you understand that no price is too high to buy or too low to sell.   Stop at trailing 10-day low currently 55.61.  

I owe this next trade to Barron's.  During the Annual Roundtable, this ETF was mentioned, a dollar-hedged Japan fund (so that it rises even if the yen weakens relative to the dollar).  It's been a fantastic success, rising 63% since its November breakout with periods of consolidation, occasional brief forays across a rising trendline, then nice orderly consolidation and breakout.  The fundamental story is fantastic:  a new Japanese government pledged to reflating the Japanese economy by swelling the money supply.  It seems to be working.   Sell stop at 48.11 (10-day trailing low).