ChartSmarter Wednesday Game Plan 1/18/17

Markets displayed some clear bifurcation Tuesday to open up the holiday shortened week, which are generally upbeat, and it was the Russell 2000 with its heavy weighting in the financials feeling the most pain declining 1.4%. The Nasdaq which has been trying to establish itself as a leader faltered Monday too lower by .6%, and CLOSING well into the lower half of its daily range, a rarity thus far in ’17. The S&P 500 is beginning to show some negative divergence on the RSI and it slipped .3%. It would be prudent for the benchmark to test its rising 50 day SMA which lies about 2% from here (keep in mind it is just 1% off most recent all time highs). Looking at groups that led, it was not encouraging for the bulls with the staples and utilities seeing the most love, obviously very defensive groups, as the XLP and XLU rose by 1.4 and 1.1% respectively. Lets remember it was the staples sector the vast majority of market “gurus” said to avoid this year, I believe in a recent Barron’s roundtable. At the other end of the spectrum is was the banks that disappointed, even with some decent earnings reports this morning most notably from MS. This group has been a very crowded trade and it felt like many were running for the exit at the same time Monday. Energy perked up somewhat today with the XLE rising by .6% on some upgrades and M&A activity. CWEI was taken out at a very nice premium by NBL and this name was a single digit stock not long ago trading just above 6 dollars just 8 months ago and today is north of the 140 number. 2016 was the year that banks with heavy exposure to debt with energy names were supposed to flounder and this year I feel could be the year of consolidation within. On soft sessions such as Monday one should look for names that shrugged off the weakness. A fine example of that was DLB, and the chart below is how the idea was presented in our Thursday 1/12 Game Plan.