Markets put in another boring session Wednesday with the major averages all mildly red. The Dow, S&P 500 and Nasdaq all slipped in the .1% neighborhood (the Nasdaq and S&P 500 never saw green on the day, but the Dow did so briefly). They seem to be showing some potential stalling, most notably in the S&P 500 which Tuesday recorded a doji candle which often tends to signal the prevailing trend is losing steam. Keep in mind Januarys then last several years tend to be volatile and one should not be surprised to see the S&P 500 slip 100 handles from here which would be a move back to its rising 50 day SMA. That would also put an end to the chatter of not seeing a 3-5% pullback in over a year, and quite frankly would be productive. The Nasdaq’s health is imperative here, and a good dose of medicine for it will be a strengthening of the semiconductors. Their has been some negative headlines with INTC recently, but the group was undergoing weakness beforehand. Keep a keen eye on the SMH, INTC is its second largest component, and the round 100 number. The ETF is showing follow through, falling 1.3% Wednesday, after Tuesday’s bearish engulfing candle, which made a rough double top with the same type of candle on 11/22. Quite alarming to see former best of breed names LRCX and SWKS lower by 13 and 16% from their respective 52 week highs, as the SMH is just 4% off its own.

Looking at individual groups it was clear who was the winners as financials added .8%. Sure the big news of the day was China talking about treasuries which helped yields gain, which of course in turn puts wind behind the group. The XLF chart is a thing of beauty as it has gained 14 of the last 17 weeks, and by another 1.4% this week so far (8 of those weekly gains have been by 1.5% or more), and trades relatively taut and makes gradual price advances. Three of the four weekly losses in that time frame fell less than 1%. On the flip side it was the utilities, which tend to act in an inverse fashion to the financials, which can not seem to get out of their own way. The XLU slid another 1.1% and is now 11% off most recent 52 week highs. The staples were the third worst performer with the XLP dropping .5%, and they are one to watch to the upside in my humble opinion as the last 5 weeks have all CLOSED within just .34 of each other. That type of tight trade can lead to big moves if taken out to the upside.

We have been pounding the table recently about the strength in the paper and packaging plays and how they could be a harbinger for future economic strength. Jamie Dimon was just quoted as saying he thinks we could see a 4% GDP print this year and I do not think that is an outlandish statement at all. The names we have been discussing the last few weeks have all been domestic names like IP, PKG, GPK and WRK to name a few. But below is a Brazilian name, and how it appeared in our Wednesday 1/3 Game Plan, whose chart is packing some bullish traits, pun intended. It is showing nice relative strength this week higher by nearly 5% heading into Thursday and just recaptured its 50 day SMA after spending 5 weeks below it. The chart does have some negative aspects with a falling 50 day, but those looking for some international exposure who are trimming some US positions after a healthy run, may find it is a nice place to deploy capital. Keep an eye going forward on the next add on point above a double bottom trigger of 16.72.

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