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ChartSmarter Thursday Game Plan 5/17/18

Markets put in a stubbornly bullish session Wednesday, and did so despite the ten year yield heading higher (remember Tuesdays melancholy mood was because of it so tune out the media noise and respect PRICE). They were led by the Russell 2000 which powered higher by 1%, and much more importantly CLOSED above 1610. This could put it on a path to reach a measured move of 175 handles. The Nasdaq is finally taking some shape into a semblance of a pattern as it is now 3 days into a handle on its current cup base. I did read a quote this weekend in Barron's that said the indexes were thrown a lot of bad news at it and it bent, but did not break. That was very well said and indicative of recent action. Will this continue on as the most hated bull market in history? No one knows of course, but time is healing the pain of the February correction and we have to remember with all the hype over the old adage to sell in May, the month is higher 5 of the last 5 years (h/t Ryan Detrick).

Looking at individual groups Wednesday the leadership was decent with materials and cyclicals showing the way. The XLB and XLY added 1.2 and .8%. Would I rather have seen technology, financials or even energy show some force? Of course, but overall price action had to be respected. The XLP was the third best actor, and this ETF is looking for a third very taut weekly CLOSE and is forming a bear flag pattern in conjunction with the very round 50 figure. Keep in mind breaks away from these very tight congestions tend to be explosive. Lagging were the utilities which is becoming common these days as the XLU slipped .8%, and was the only major S&P group to finish in the red today. It has declined 2% this week already, a big move for the defensive group, on top of the 2.2% descent last week.

Its been hard to overlook the momentum in energy as the XLE is now enjoying a 9 session winning streak, and former best of breed names like PXD and EOG have reclaimed that status. Below is the chart of PXD and it did have some round number theory come into play with a cup base breakout above a 190.05 trigger on 4/15 which was successfully retested on 5/3-4 and 5/8, a good sign. Looking further back left it was stopped at the 200 figure the week ending 2/171/7, coming within just .17 of the number. On a WEEKLY basis last week, it was the first to CLOSE above 200 and this week looks as if it is seeing some follow through gaining 1.9% heading into Thursday. Look for 200 to be your new floor. Encouraging is the action on its weekly chart as its 50 day SMA climbed back above its 200 day SMA recording a bullish golden cross.

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ChartSmarter Wednesday Game Plan 5/16/18

Markets began Tuesday soft and continued to bleed throughout the day. The Dow, Nasdaq and S&P 500 all lost near the .7-.8% range, and the Russell 2000 was resilient finishing UNCH. Concerning on the Russell was todays spinning top candle after Monday's bearish engulfing candle at all time highs, which could signal some upcoming fatigue after a 90 handle run since May 1. The indexes have had a strong run and its premature to start turning bearish, but recent candles on the Nasdaq call for some caution. Mondays bearish shooting star was preceded by Fridays spinning top after a 450 point move following a bullish hammer off the round 7000 number on 5/3. A big tell for technology overall will be to see how AAPL defends its 179.04 double bottom trigger that was taken out on 5/4, if it retests it at all. The VIX followed through impressively, surging more than 14%, after yesterdays bullish harami cross and recaptured its 200 day SMA in the process. Volatility is not going away, especially after todays break above a bull flag on the $TNX at above 3 which carries a measured move to 3.25%.

Looking at individual groups it was easy to see it was a heavy day as all 9 of the major S&P sectors fell. Energy was the "best" performer as the XLE fell by three pennies, as it hesitates near the 78 level where it has twice in the last year and a half, and it also ended a 7 session winning streak. More importantly lagging were technology and healthcare as the XLK and XLV slumped by .9 and 1.3% respectively. The XLV just can not seem to gain much traction above its 50 day SMA recently. It CLOSED above that line marginally on 2/16, again 2/26-27, then between 3/9-14, and then a couple one or day day spurts above before falling back underneath, obviously a bearish sign. The descending triangle that aligns with the round 80 number still exists and a break below carries a measured move lower of a dozen handles.

On weak sessions like Tuesday I always like to see which names withstood the selling best. Below is the chart of FAST and how it appeared in our Tuesday 4/24 Game Plan. It has been pushed lower partly for its inclusion in the weak industrial space. But we are big proponents of round number theory and the very round 50 figure came into play here. On its weekly chart, the four weeks ending between 4/13-5/4 all traded below 50 on an intraweek basis, but all four CLOSED above the number and its 200 day SMA was close to 50 too. The 40 number came into play as it commenced a big takeoff there as the stock gained 19 of 23 weeks ending between 8/25/17-1/26. FAST was up 1.4% today and now one can add to or initiate a position with a buy stop above the 50 day SMA at 53 and then through a cup base trigger of 58.84.

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ChartSmarter Tuesday Game Plan 5/15/18

Markets held their own to open the week Monday as the Nasdaq and S&P 500 finished near the UNCH mark, the Dow was up .3% and the Russell 2000 fell by .4%. Interestingly the VIX registered a bullish harami cross, with today registering a doji candle which could indicate a weakening of the recent downtrend. Retail and semiconductors acted firm and that is a good sign, that discretionary and technology will continue to power this move higher. The SMH did break above its double bottom trigger of 106.24 intraday, but did reverse to end up a stick lower from intraday highs, but ended up one penny above the trigger. Of course there will be bumps along the way, but PRICE action is beginning to firm. On the Russell 2000 I would really like to see a move and CLOSE above 1610 for a confirmation of this uptrend, as it is a leading indicator. Today it was above 1610 intraday once again but the chart recorded a bullish engulfing candle hitting an almost precise double top near 1615 at all time highs from the 1/24 session. The greenback has now completed a handle on its cup base and the potential trigger is 24.62 in a 7 month pattern. That of course could put headwinds on names that have big international exposure.

Looking at individual groups Monday it was energy and healthcare that led. The XLE rose by .7% and its dominance comes as no surprise and the XLV added to last weeks 2.5% gain, higher by .65% today. The XLE is at a critical juncture here as it is nearing the 78 number, last touched in December '16 and January '18, which is either going to end up being a triple top or a bullish ascending triangle breakout. The bulls are in control and the burden of proof remains with the bears who have been on the wrong side of the trade now after being emboldened with a 14% plus drop the two weeks ending between 2/2-9. The right sectors were lagging for bulls as the staples and utilities made up 2 of the worst 3 acting groups. The XLU is still battling at the very round 50 number which it has CLOSED below just 4 times since recapturing the number on 3/27. The XLP looks hapless lower 10 of the last 15 weeks and 16% off most recent 52 week highs.

The consumer is one of the best tests for how the economy is performing. GDP is 2/3rds consumer spending so to see how the charts in the space reflect how they are feeling is often a good tell. The XRT has a nice complexion as it gradually constructs the right side of a potential good looking cup base, just how you want to see it. If the right side of any cup base it built to rapidly it  failure prone. Below is the chart of GPS and how it appeared in our Wednesday 5/9 Game Plan. Keep in mind this stock REPORTS earnings in ten days, but so far it is doing pretty much everything right. It did not venture to far below its rising 200 day SMA and it did recoup that long term line Monday in impressive fashion rising more than 4% on a pedestrian tape. It also broke above a bullish falling wedge today that aligned with the round 30 figure. Looking left on the chart it has not been comforting as it was resistance in March-April '16, November '16 and again in September-October '17. I am not embarrassed to admit I shop in their Old Navy shops sometimes.

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ChartSmarter Monday Game Plan 5/14/18

Markets concluded the week in a quiet fashion with the Dow higher by .4, the S&P 500 and Russell 2000 by .2% and the Nasdaq finished the day fractionally lower. The Dow is on a 7 session winning streak and all four of the aforementioned indexes are now above their 50 day SMAs, and comfortably so. For the week they all scored solid gains and as always it was good to see the Nasdaq outshine with a gain of 2.7%, the Russell added 2.6, the S&P 500 2.4 and the Dow 2.3%. On a YTD basis all four are also now in positive territory with the Nasdaq leading higher by 7%, the Russell 2000 by 4.6%, the S&P 500 by 2% and the Dow marginally up by .45%. The transports via the IYT is sporting a bullish ascending triangle with a trigger of 196, which if taken out carries a measured move to 215. The IBB has held the very round par number this year the weeks ending 4/6 and 5/4 and is now more than 6% above that level. It was important as 100 was resistance in August-September '16 and March '17, until a huge 9.6% weekly gain the week ending 6/23/17 that was accompanied by the largest weekly volume in the last year and a half.

Looking at individual sectors, what came to the forefront for me was the performance of the financials. For the week the important group rallied 3.6%, its fourth best weekly gain in the last 17 months (the week ending 6/9/17 also rose 3.6%). The only weeks that outdid this one were gains of 5.2, 4.7 and 4.4% the weeks ending 12/1/17, 2/16 and 3/9. Friday halted a 5 session winning streak and did so at the top of a bullish falling wedge. Look for the ETF to regroup and attempt a breakout again perhaps next week. A break above 28.50 carries a measured move of 3 1/2 handles, more than 10% so not insignificant. The finnies were only outdone of course by energy on a weekly basis as the XLE powered higher by 3.9%, on weekly volume the third best in the 11 months. On the daily look Friday healthcare was a clear winner with the XLV advancing 1.5%, while the other 8 major S&P sectors were clumped together ranging in gains of .2 to losses of .1%.

We spoke about the financials a few times this week and most recently in the paragraph above. The group is acting well and with interest rates still historically low, but climbing they are as the 10 year is still hugging 3%. That "magic" number was CLOSED above on 4/25 and 5/9, but the very next session both times went right back beneath. Below is the chart of BLK and how it appeared in our Thursday 4/26 Game Plan. Now this emphasizes the importance of CLOSING prices and also why we admire round number theory. We spotted a bearish descending triangle pattern with a potential sell stop below the bottom horizontal that aligned with the very round 500 figure. It bounced off that number exactly on 2/9 and did so again on 5/3 but never penetrated the level or came close to CLOSING below it. Any investor who attempted to get cute and front run the trigger is now in the red by 40 handles. A lesson well learned.

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ChartSmarter Friday Game Plan 5/11/18

Markets put in yet another positive session Thursday as it seems many that have been caught on the wrong side of the trade are now in the process of unwinding. The Dow, S&P 500 and Nasdaq all gained in the .8-.9% neighborhood. For the week headed into Friday the Nasdaq is higher by 2.6%, after the prior weeks 1.3% advance (the last 2 weeks have CLOSED at the top of their weekly ranges recording bullish hammer candles). The S&P 500 and Dow have risen 2.2 and 1.9% so far this week and if these weekly stats stand it would be the second straight week the Nasdaq outperforms and thats a very healthy sign. The Russell 2000 is on a 5 day winning streak and was halted at the 1610 number today, which has given it trouble with resistance there on 1/23-24 and 3/13 previously (one does not want to see this turn into a triple top). The VIX CLOSED below its 200 day SMA which it has been above since mid January and it is a long way from the very round 50 figure which put a stop to an explosive move on 2/6. That day touched 50 and CLOSED just pennies below the round 30 number in an extremely volatile session.

Looking at individual groups Thursday all of the major nine S&P sectors rose, with leadership emanating from the healthcare and utilities with the XLV and XLU rising 1.4%. The XLV is holding the round 80 number well and that is important as it is the bottom line in a bearish descending triangle formation. A sustained move above 83 could prove very strong as it would be the OPPOSITE of what it traditionally does and would catch many off guard and force them to cover shorts. Rounding out the top four groups, were technology and financials as the XLK and XLF advanced by 1.3 and .8% respectively. The XLK is rapidly building the right side of a cup base with a potential trigger of 71.44, which would negate the ugly bearish engulfing candle from 3/13 (notice the doji candle the session before which was good foreshadowing of imminent weakness). Lagging today was the discretionary group as the XLY rose by .4%, but its chart is sporting a bull flag formation and a CLOSE above 105 would carry a measured move to 113.

The transports are a very important overall group to many market participants. For old timers it is crucial in Dow Theory, but just in general when the space is rolling along, pun intended, it speaks good things about the economy. Of course we know that a good economy does not always equate with a good stock market and that is why one should always make decisions based on PRICE action primarily. Below is a best in breed rail play CSX, and how it appeared in our Wednesday 5/2 Game Plan. To start one has to be impressed as this name did not back off as it was the subject of takeover rumors not to long ago. The stock was also stopped cold at the round 60 number initially on 1/16 before seeing a very rapid trip to the very round 50 number just 3 weeks later. It did break above 60 on its most recent earnings reaction on 4/18 before retreating back below it slightly and almost filling in a gap from 4/17. On Wednesday this week it flew past a bull flag trigger of 61 and look for a measured move to 68.

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