Markets began the holiday shortened week in lukewarm fashion. The big three major indexes were near the UNCH line, the Dow ended up .3%, but it was the Russell 2000 that once again proved formidable advancing .7%. Of course this renewed strength is nascent, but the pause was well deserved. It recorded a couple of giant moves after the election late last year and this August-September. The good sign was the action between 11-8/15 which witnessed nearly every session CLOSE near highs for the day after early softness and within reach of its still upward sloping 50 day SMA. It recaptured the round 1500 number Monday and is now honing in on the 1510 level which would record a double bottom breakout if taken out. There was a good article in Forbes recently stating the concern over the high yield and S&P 500 correlation, but it rightly pointed out it was not as accurate as many pointed out. Its connection should be associated more with the Russell 2000 as high yield generally is sold by smaller cap companies.
Looking at individual sectors it was the financials, industrials and technology that were the best performers. The XLF continues to catch its breath along an upward sloping 50 day SMA. The subsector broker dealers behaved very well pushing the group higher as evidenced by the IAI. The ETF is illiquid, but the price action is undeniable. It has CLOSED the last 7 weeks all within just .50 of each other and this type of tight trade can lead to explosive moves, typically in the prevailing direction. CBOE has essentially doubled over the last year beginning at the round 60 number last October and is nearly touching the 120 figure. It has lost ground just 12 weeks so far in ’17 and 8 of the 12 lost less than 1% and the other 4 lost no more than 1.8%. Lagging today were the utilities, energy and healthcare. The XLV is trading right at a bearish head and shoulders neckline of 81 and the XLE is not off to a good start following its 3.2% dump last week.
We did mention this weekend their were some bearish engulfing candles recorded at all time highs from tech heavyweights AMZN and GOOGL. Now keep in mind candlesticks act as warning signs and come secondary to PRICE action. If anything they could be used to trade around core positions and shave some long exposure. Perhaps one can add back stock that they shaved off on an AMZN for example on a retest near the cup base breakout trigger of 1083.41 taken out on 10/27. The same can be done with GOOGL where one can reenter near a gap fill at 1007 from the 10/26 session. Below is the chart of INTC and how it appeared in our Wednesday 11/8 Game Plan. The semiconductor giant recorded a bearish engulfing candle on 11/3 and did not participate in the groups strength Monday. Again it is suggested to repurchase as INTC did register the candle 20% above its rising 50 day SMA. Let it come to you.