Markets began the new week on a strong note Monday as the second half of December kicks off, a traditionally powerful time of year. I read things this morning on CNBC, “For the first time in at least 11 years, more than half of the respondents to the survey rated the economy as good or excellent.” Then tweets that stated “the S&P 500 is now higher by 20% YTD, and it could be the 19th time since ’50 it has done that. Looking at the previous 18 times it was up 20%, the next year was higher 16 times with 10 of those finishing up double digits” (h/t Ryan Detrick). We have to be somewhat careful when things seem so euphoric, but the bull train seems to want higher and let PRICE action take its course. When it is time to get out the charts will tell you so. The Russell 2000 was the best performer up 1.2%, demonstrating nice follow through after 12/15’s bullish engulfing candle. The Nasdaq rose .8% and touched the very round 7000 number. Looking back 6000 was not a roadblock and held firm when retested on 5/17-18. Will we see similar action? No one knows and if anyone says they do run as fast from that charlatan as you can.
Looking at individual groups the materials group showed strength with the XLB higher by 1.5%. The ETF has enjoyed a nice smooth ride along an upward sloping 50 day SMA for more than a year (it has seen brief bouts below the line but they were quickly recaptured, a bullish trait). Today it came into contact with the round 60 number, almost a year since breaking above the very round 50 number last December, but was unable to CLOSE above. Utilities were the worst performer on the day with the XLU falling more than 1%. It is just 5% off most recent 52 week highs, but lower 8 of the last 13 sessions and looks likely to have a meeting with its 200 day SMA which is still rising. A rebound off that line still would maintain higher highs and lows since last November. The staples recorded a bearish shooting star after a bull flag breakout on 12/15 and should be interesting to see how that holds up.
Energy displayed a little bit of life Monday with the XLE approaching the round 70 number once again, and ended a 4 session losing streak. There has been some volatility in the group for traders for capture, but some names have remained resolute as the space backed off and that must be respected. Below is the chart of HP and how it was profiled in our Wednesday 10/25 Game Plan and this stock held up firm as energy has bobbed up and down. Below shows a bull flag that developed underneath the 200 day SMA but its 50 day was beginning to curl higher. It ignored a bearish engulfing candle on 9/28 and dojis on 10/10 and 10/24. Taking a current look at the chart, it now shows a bullish inverse head and shoulders formation with a neckline that coincides with the round 60 figure. There has been just one CLOSE above the round 60 number since 5/1, on 5/19 by a whopping 4 pennies. It was rejected there on 12/1-4 after being above intraday and a break above the formation has a measured move of 18 handles which would put it in range of the 80 figure where the year began.