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Markets closed out the week Friday with decent gains as we go into the holiday shortened week, which are traditionally bullish in nature. The Nasdaq recorded its second 3% plus weekly gain of the year, and the 10.6% combined drop the weeks ending 1/8-15 seem a distant memory. A move next week above the 4970 level would put an end to the bears chant of lower highs and lower lows since recent all time highs. The tech heavy benchmark is now on a 4 session winning streak and has outperformed the S&P 500 for a third straight week. It still has some work to do being 6% off recent 52 week highs, whereas the S&P 500 is just 2% off its, and that should give the markets some extra stamina to continue to advance. The S&P 500 continues to have issues CLOSING above the 2100 number and next week seems crucial. An inability yet another time being rejected there would concern technicians. Financials and technology led the way Friday and these 2 groups remain the beneficiaries of healthy sector rotation. Retail has been a clear laggard and rightly so with recent earnings debacles with names like ANF, CHS, SIG, FRAN, GPS, M, and JWN. But if we can start to see these names stabilize and enjoy some capital flow into them that would energize the bulls. Some of that is beginning as we had nice reactions from ULTA and BIG and even DECK today. Earlier this month good moves followed releases from WMT, URBN, COST and BURL to name a few. One of my favorite names in the space that has yet to break out, but has held up so well in a difficult retail arena is MIK. Below is the chart of the stock how we profiled it in our Friday Game Plan.
Markets for the most part were flat Thursday, and after the last 2 sessions hefty gains it has to be viewed as bullish. More to like was the Nasdaq's outperformance, albeit small, which rose .15% compared to the S&P's flat finish. For the week headed into Friday it has jumped a robust 2.8% and is inching closing to a breakout about the bullish inverse head and shoulders pattern we spoke of earlier in the week. The S&P 500 is higher by 1.8%. Thursday marked the return of the defensive utility and staples groups, which we the best performers with the XLU gaining 1.1%. The ETF has put up back to back big volume breaches of the 50 day SMA on 4/20-21 and 5/17-18 which fell a combined 4.6 and 3.6%. Today it recouped that line but volume was limp. I have been seeing an abundance of nice bases setting up in individual stocks (such as your traditional cup with handle, double bottom, etc.) and it has been a little while since that has happened and that type of behavior is a bullish sign. Breakouts are occurring and more importantly they are holding firm. A great example is the stock of CXW which we profiled in our Monday 5/9 Game Plan. It took out a double bottom pivot point of 32.21 on 5/5 and for good measure retested that trigger on both 5/18-19 and held firm. Stocks often will go back to the breakout trigger to test its authenticity. The stock the last 2 weeks and this one thus far, has traded within the big week ending 5/6's 9.7% advance. A move above the 34 handle could be used to add to ones stake or initiate a new position.
Markets put together back to back gains Wednesday with both the Nasdaq and S&P 500 advancing .7%, a very good showing considering Tuesdays outsized gains. Remember bull markets are ones that give you the feeling you will never be let in. Today it was the energy and materials group which acted the best, after they were the 2 worst performers Tuesday (the old adage is trends tend to persist rather than reverse, but we have been range bound for almost a year now). It was the financials that were the only other major S&P sector to rise close to 1%, and the laggards today hailed from the most defensive of groups being the utilities (utilities were the only group to fall Wednesday) and staples. The S&P 500 is readying itself to a test of the round 2100 figure, a number it has CLOSED above only twice all year on 4/19-20. Speaking of the round numbers there are a couple vehicles that are grappling with them at the moment. First is crude with the very round 50 figure and AAPL with the 100 handle. If oil is able to break through and hold there is chatter that more names will be able to access the capital markets (PE did so yesterday). AAPL looks likely to break through 100 and fill in a gap to the upside from 4/25 just before the latest earnings report. AAPL and some out of favor names, notably in tech, have become investable again. QCOM fits that bill. Of course it is among the semiconductor group, some say it is just a law firm, and its inclusion in the sector will help lift its share price alone. Technically it has improved as well. Talk is cheap, and PRICE action speaks and QCOM has backed it up. Below is the chart which shows its bullish scenario now trading above its 200 day SMA for the first time since late '14.
What Readers Say
Amazing work in this piece. Truly inspirational! You gotta keep this up. Good luck next week.
On Monday I played 3 of your alerts: JACK = $110, AVD = $600, and SPW = $700. Today I played 2 more of your alerts: ALL = $300 and WYN = $280. THANK YOU!
I know Doug from the Carlin days in 1999. He’s the hardest working technical trader out there and shows no bias in his analysis. A must read in any market.
Some great setups in @chartsmarter’s service tonight. Do yourself a favor and take it for a test drive. You will be glad you did.