ChartSmarter Thursday Game Plan 5/10/18

Markets showed nice strength Wednesday, and again it was good to see the Nasdaq outperform as it rose 1%, and for the fifth consecutive session CLOSED in the upper half of the daily range. The tech heavy index, is now on a four day winning streak, its first such move since a 7 day streak between 3/2-12, which was abruptly ended at all time highs the next day with a nasty bearish engulfing candle on 3/13. The Russell 2000 is now comfortably ahead of a symmetrical triangle breakout trigger of 1585, and the measured move is another 170 handles which would be more than 10% from here. It was interesting to see the S&P 500 climb back above its 50 day SMA today, but being stopped right at the very round 2700 number. The VIX lost more than 7% Wednesday and is now resting upon its upwards loping 200 day SMA, but well below its bearish descending triangle breakdown trigger of 15.

Looking at individual groups it was once again it was energy that impressed the most as accumulation continues. The XLE rose 2%, just its seventh such move in 2018, and the best gain was the 4/10 session that rose 3.3%. The latter broke above its 50 and 200 day SMA, after spending almost 10 weeks below the 200 day. It also broke above a 3 week tight pattern as the last 3 weeks all CLOSED within just .55 of each other and that type of action can lead to very powerful moves. It was good to see the financials act well with the XLF being the second best performer with a gain of 1.5%, and the materials rose by 1.4%. Showing how broad the rally was it was technology and industrials rounding out the top five with a gain of 1.2 and 1.1% for the XLK and XLI. Perhaps even more bullish was the groups that were shunned today as the two worst acting sectors the staples and utilities both lagged with the XLP up .1% and the XLU falling .7%.

The finnies overall have not been swimming very smoothly upstream. The XLF however is showing some sign of life as the ETF is on its first four session winning streak in three months. Bulls would like to see more volume however as the last accumulation week ending 12/1/17 rose by more than 5%. It is lower 8 of the last 14 weeks after being stopped near the round 30 figure in late January and early February, but is up 2.9% this week so far. Of course the financial universe is very diverse and below is a chart of a broker IBKR and how it appeared in our Monday 5/7 Game Plan. It is on a current 6 week winning streak and adding another 5.6% this week headed into Thursday. This name tends to be streaky, and when it does the moves can be very rewarding last witnessed by the 29 of 34 week winning streak the weeks ending between 4/21-12/8/17. It recently broke above a bull flag trigger and the measured move is to 87.

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ChartSmarter Wednesday Game Plan 5/9/18

Markets put in a lackluster session Tuesday as the Russell 2000 was a clear winner higher by .5%, and this index is often seen as a leading indicator and demonstrates investors risk tolerance. So it is good to see it acting well. It is now pushing on the top line of a symmetrical triangle and the three prior touches of the line turned out to be bearish with engulfing candles on 1/24 and 3/13 and a shooting star on 4/18. The Dow, Nasdaq and S&P 500 ended up in the UNCH neighborhood, and the Dow and S&P 500 were stopped at their downward sloping 50 day SMAs. The Nasdaq which has now CLOSED above its 50 day SMA for a second consecutive day, but needs to remain above this line. The tech heavy index did finish north of that line for three days between 4/17-19 before slipping back underneath. It is still early but it is encouraging to see the Nasdaq CLOSE in the upper half of its daily range for the last 4 days. Interesting today was the bullish hammer candle registered by the corporate bond ETF LQD which could signal a potential end to the weakness as it is currently on a 5 week losing streak. It created a short double bottom with the 5/1 session, but a move below todays low would be interpreted as a bear flag breakdown.

Looking at individual sectors there was clear bifurcation Tuesday as energy, industrials and financials all rose between .7-.8%. The only other group to gain ground was technology with the XLK higher by .2%. Energy was a hot topic today with the Iran announcement this afternoon, and the XLE reversed higher rising .8% on the best daily volume in more than 3 months (it did so as crude lost nearly 2.5% as well). The ETF is looking for a FIFTH consecutive weekly advance, a feat it has not accomplished since a 6 week winning streak the weeks ending between 8/25-9/29/17. More importantly it is approaching the 78.50 level that would be a breakout above a bullish ascending triangle that began the week ending 12/16/16. Clear laggards came from the healthcare and utilities with the XLV off by .8% and the XLU by 2.5%. The XLU never made much progress after a break above a bullish inverse head and shoulders trigger of 51 and it is important to note the 200 day SMA is sloping lower.

One of the bright spots we have been witnessing is the nascent technology leadership. It is a welcome sign with some of the big cap tech names acting well including AAPL. I am still a bit skeptical even though it jumped higher by more than 13% last week on big volume and it is hard to ignore the PRICE action however and it currently trades above a double bottom trigger of 179.04. When the earnings announcement was made, it seemed most attributed the gains to buybacks and dividend increases, and then received another lift with the Buffett announcement. But like I said just focus on PRICE and below is the chart of SQ and how it appeared in our Monday 5/7 Game Plan. It broke above the very round 50 figure that same day and today ended with a CLOSE above an add on double bottom trigger of 52.60.

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ChartSmarter Monday Game Plan 5/7/18

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.

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ChartSmarter Friday Game Plan 5/4/18

Markets have to be given credit for the nice reversal Thursday as the Dow for one registered a 400 handle reversal and CLOSED back above its 200 day SMA after being underneath intraday, reminiscent of the 4/2 session. Its chart has the look of a bearish descending triangle we have spoke about, but if it should break to the UPSIDE the move could be very powerful. At the very least investors now have a line in the sand with a quadruple bottom near the 23500 level, on a CLOSING basis. The Nasdaq bounced right off the round 7000 number today and it has defended that figure like it did on 4/24-25 CLOSING above it. On its RSI the symmetrical triangle is really coiling as the signal line spoons the critical 50 number. The Russell 2000 recorded its third consecutive hammer candle today, Wednesday was an inverted one, as it clings to 50 day SMA support. The VIX hit its intraday high at 11am and made a steady decline for the rest of the day and was once again smacked down at its now declining 50 day SMA, like it did on 4/24-25. The descending triangle with a 15 trigger looms large. It has been hard to find many bulls, myself included, and that could be a reason for a continued rally attempt. Will it be a dead cat bounce or have legs? The old adage goes "sell in May and go away", but keep in mind we have been higher the last 5 Mays.

Looking at individual groups Thursday it was led by suspect sectors once again. Today it was the materials and industrials with the XLB and XLI advancing .4 and .2%, and put the staples in there rounding out the top 4 (although the XLP did lose ground fractionally today) and it would be hard to paint a pretty picture for the day. Both the XLB and XLI recently undercut their 200 day SMAs which they had both been above since March 2016. Lagging was the cyclicals, financials and healthcare, the latter two by .9%. The XBI among the healthcare arena is now 12% off most recent 52 week highs after an almost precise double top the weeks ending 2/2 and 3/16, both of which recorded bearish dark cloud cover candles at all time highs. The ETF has declined 6 of the last 7 weeks, and is down another 2.6% this week heading into Friday.

The energy space has confounded many investors this year and the move may or not be over. As always respect price. In the meantime when names lag in a strong sector, I do not care what the fundamentals tell you, be very wary. Below is a prime example of COG and how it was presented in our Monday FREE GAME PLAN this week. It still sits in bear market mode down 22% from most recent 52 week highs, as the overall group has flourished. The rising tide was unable to lift this submerged vessel, and volume trends remain weak as one would have to go back to the week ending 11/21/17 to see a week of accumulation. Conversely it is easy to see distribution as the weeks ending 2/9 and 3/23 fell 6.1 and 5.9% respectively in nearly double average weekly trade. If the 23 level which has been holding firm since February breaks this stock could become a wreck at the bottom of the ocean.

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ChartSmarter Thursday Game Plan 5/3/18

Markets acted poorly Wednesday as the Dow and S&P 500 fell .7%, the Nasdaq dropped .4% and the Russell 2000 stood out, in a good way, advancing .3%. It was distressing that the Nasdaq could not act better, given the 800lb gorilla AAPL having a stellar session and it rapidly approaching the double bottom trigger of 179.04. It rose 4.4% after a well received earnings report and is nearing the round 180 number which has given the stock fits dating back to 1/18 (3/12 was the only CLOSE above the figure and the next day registered a bearish engulfing candle at all time highs). FB also added 1.3% so to see the tech rich index CLOSE hard upon its lows was concerning. Outside of tech we did mention the weakness shown in some best of breed names Tuesday in MTCH and STX, and today one could include EL. It registered one of its worst days in sometime cratering almost 9%. The hangover for TAP is one for the record books as the name sits 38% off most recent 52 week highs, and has been chopped nearly in half since the week ending 10/21/16. Since then it has declined 48 of 80 weeks and this week has lost fizz to the tune of nearly 16% heading into Thursday, pun intended. The VIX was not partying at all today suggesting perhaps the downside from here could be somewhat limited.

Looking at individual sectors Wednesday it was energy, utilities (sounding right a broken record there) and technology that "led". The XLE rose by .4%, after being higher by more than 1% intraday, and has been relentless since a double bottom nearly 2 months apart just below 65 on 2/9 and 4/2. Today completed its handle on a cup base with a potential trigger of 74.77. The ETF is looking at a fourth straight weekly gain, lower by .2% so far with two days left. The XLK was unable to produce solid follow through after Tuesday bullish engulfing candle as it was stopped at its 50 day SMA, which it has been underneath now for all of just three days since undercutting the line on 3/22. It is not surprising that it was stopped at that line, but lets give it to the end of the week as a second attempt may prove successful. Lagging today were the staples which again proves that things in motion are more likely to persist than reverse. The XLP slipped another 2%, and this week is off 3.4% and is looking for a SEVENTH 2% or more weekly decline in the last three months alone. So much for safety.

The industrials have been soft witnessed most recently with last weeks drubbing by the XLI lower by more than 3% and this week heading into Thursday is off another 2.6%. The ETF is now below its 200 day SMA but one can be mildly positive with the hammer candle on 5/1 and inverted hammer today. Below is the chart of a leading industrial name, TXT and how it appeared in our Monday 4/23 Game Plan. Keep in mind names that outperform their groups are most apt to lead right out of the gate, when and if the group can catch steam again. This is a name to watch, and to be fair this name was stopped out as the stop was too tight, but it does not mean one should take it completely off their radar. Of course technical analysts are human and get things wrong plenty, but it is now filling in a gap from the 4/17 session and successfully retested the recent symmetrical triangle breakout and acted relatively well Wednesday.

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