Markets:
The old saying goes “never sell a dull market”. Of course it is August and things tend to slow down, but many would argue that would add to volatility. The major indexes have been trading in very tight daily ranges. The Nasdaq on Tuesday had a range of less than 30 handles. The S&P 500 on Tuesday recorded its tightest trading day of 2018, (h/t Jonathan Krinsky). For the benchmarks to be doing this right near all time highs has to be considered bullish in my opinion. The Nasdaq seems to be pulled toward the very round 8000 number, which is just less than 1.5% away.
The Russell 2000 is sneakily doing well as it registered its fifth consecutive CLOSE above the line, with nearly all of them coming into contact with it. Most likely this is demonstrating institutional support. Remember it has not had back to back CLOSES above the round 1700 number, and it will be critical next time around to decisively break through. The small cap index did finish above the figure on 6/20, 7/9 and 7/19 with all of the next sessions ending below 1700. A fourth time around may be to much on bulls patience.
Sectors:
“Leading” the way Wednesday were technology and cyclicals as the XLK and XLY rising .3 and .1%. The gains were modest, but the XLK is now in a current 7 session winning streak with a rapid V shaped recovery off its upward sloping 50 day SMA. Keep in mind its 70.52 cup with handle breakout trigger has been battle tested and has now recaptured its 72.48 cup base breakout trigger. AMZN has been a big contributor the the funds gains as it by 3.5% this week already after the prior four weeks all CLOSED very taut within just 10.26 of each other. Get your $1 Trillion AMZN hats ready.
For a second straight session it was the defensive groups that struggled with utilities, staples and energy all falling between .5-.8%. The XLP is headed for a test of its 200 day SMA, which it broke above last month having been underneath the secular line since the beginning of February. For that reason I believe it should hold. The ETF did follow through after the completion on a bearish evening star formation Tuesday, but those are more effective when happening near all time highs.
Special Situations:
The energy group continues to be in focus with the load of earnings coming in and it has not been pretty. Names like PE, APC, XEC and NBL all sported decent set ups that were never taken out. Below is the chart of WLL, another best of breed play, and how it appeared in our Thursday 8/2 Game Plan. We were WRONG, but the stop was never taken out, and it could be a failed trade, but momentum on the downside is picking up once again. It broke underneath a bearish head and shoulders formation which carries a measured move to 36. Stay short below the very round 50 number. It is looking at a potential 4 week losing streak and currently sits 16% off most recent 52 week highs.