Markets ended the week on a high note Friday as the Nasdaq outperformed gaining 1.7%. The tech rich index is now higher 3 of the last 4 weeks and the last 2 CLOSED in the upper half of the weekly range. It finished just above its 50 day SMA, and bulls want to see a decisive move above, as it recouped that line on 4/17 only to see it retreat back below just 2 sessions later. It is encouraging that it attempted another break above so soon. On a WEEKLY basis it outshined its rivals with an advance of 1.3%, followed by the Russell 2000 up .6%, and the Dow and S&P 500 both fell .2% for the week. On the YTD scoreboard it still maintains a healthy lead up 4.4% in 2018, while the Russell 200o has risen 2% and the S&P 500 and Dow are lower by .4 and 1.8% respectively. The S&P 500 recorded a bullish engulfing candle Friday off its rising 200 day SMA, and one needs to watch the ongoing symmetrical triangle. A move above 2700 would be a break to the upside and carry a measured move of 340 handles. The pattern can break either way and the coiling action, as it reaches its breaking point is strong as the optimist points to the higher lows being registered and the pessimist the lower highs. The VIX fell more than 7% Friday and is now below the descending triangle trigger of 15.
Looking at individual groups Friday it was technology that led as the XLK rose by 1.9%. It was somewhat strange to see the battered staples space second best among the major S&P sectors as the XLP jumped 1.45%. But the rally was broad as all of the major sectors finished green. It was healthcare, energy and utilities that “lagged” as the XLV, XLE and XLU rose by .8, .5 and 4%. Energy continues to be an important group, and I have to admit when I opened my Barron’s this weekend I figured the XOM newspaper cover was going to put an end to it. However they put the fundamental case on it suggesting the name should be owned as it remains closer to its 52 week low than its 52 week high. If they had mentioned other names that are technically performing beautifully perhaps I would have been more worried. But again it demonstrates the lack of real belief on technical analysis and momentum. Looking under the hood in energy could have lined investors pockets with hefty profits. And if one ignored the group based on the action in XOM alone, it was downright painful. Just to give a few examples XOM is LOWER by 8% YTD as peers WLL, CRC and CLR have jumped 69, 62 and 22% thus far in 2018.
We have been vocal in our support of the discretionary group recently. It was a stand out, as some names really withstood the early 2018 correction well, and names include SFLY, ULTA and COST. To be fair some stocks that were behaving very well have begun to sour. Take TPR, the former COH, which lost more than 15% this week and avoided being lower everyday this week adding just pennies on Friday. Below is another name that has been acting frail, DLTR and how it appeared in our Friday 5/4 Game Plan, now 20% off most recent 52 week highs, and on top of that it was wobbly Friday on a very strong tape losing more than 2%. It highlights why one can never fall in love with a chart, no matter how good it looks as this witnessed a very robust name move gaining 24 of 29 weeks ending between 7/14/17-1/26. To conclude last week it also fell underneath both its 200 day SMA and a symmetrical triangle and filled in a gap to the upside on 4/18 recording a doji candle.