ChartSmarter Tuesday Game Plan 11/25/14

Markets were off to a fast start Monday to the holiday shortened week and the Nasdaq led the way with a .9% gain. It is looking now for a sixth consecutive up week. The S&P 500 rose .3% as both indexes went out on session highs. Both are now in “overbought” mode with the Nasdaq sporting a RSI of 71 and the S&P 500 a 75. Traditionally anything above the 70 figure is considered stretched, but this market has been anything but ordinary. The oversold indicator at the 30 RSI number tends to work better as markets generally have a long bias. That is not to say the market can not correct at any point, and remember the RSI is a secondary indicator to the all important price. Retail was one of the winning groups Monday and a look at the XRT shows that technical analysis is not a perfect sport. If it were all technicians would be billionaires, but in my eye it remains a much more valuable tool as it gives you precise entry and more importantly exits to limit damage. The XRT took out a 90.09 cup base trigger on 11/9 rising almost 2% in robust volume. The pattern had a V shape to it which are failure prone but this ETF looks as if it wants to thrive. Notice how the round numbers theory came into play here at the very important 90 handle. It came within one penny of of taking it out on 9/18 before retreating and to demonstrate that former resistance becomes support on 11/18 it went back to test the breakout trigger and did so almost exactly with a low of 90.03 on 11/18 before bouncing.