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ChartSmarter Monday Game Plan 11/6/17

Markets all finished well into the green today with technology leading, as the Nasdaq did record its 8th consecutive Friday advance rising by three quarters of 1%. Of course AAPL had a lot to do with that as it now higher by more than 10% the last 2 weeks and gained 2.6% after reporting earnings Thursdays afternoon. Technology on a weekly basis is demonstrating good relative strength, as for the second straight week it performed better than the S&P 500 and Dow with the week ending 10/27 bested the other three rising 1.1%. Friday did see a bit of divergence in the small caps with the Russell 2000 falling fractionally by .1%, but on the weekly look it lost a glaring .9%. The flag that has been talked about incessantly is becoming long in the tooth, but time is letting the rising 50 day SMA catch up, currently just 2% from todays close. This was the small cap benchmarks first weekly CLOSE below the round 1500 number in the last six, and lets see if that is just a bear trap going into year end.

Looking at individual groups Friday healthcare and technology shared the top spot as the XLV and XLK both rose by .8%. The only sectors that fell among the major S&P group were the cyclicals, materials and financials. The XLK is just taking a well needed pause after a recent flag breakout and has traded very taut with the last 11 sessions ALL trading within an intraday range of just .43. On a weekly basis there were two notable standouts with energy, via the XLE, adding 2% and the XLK advancing by 1.5%. There is something for both the bulls and bears to feast upon with that data as the bulls can justifiably state it is very healthy to have tech lead, and the bears will state that energy showing its might is faulty leadership.

As we have mentioned "old tech" names have really began the flex their muscles. INTC for its normal slow moving self seemingly has gone parabolic, and is on a current 10 week winning streak and higher by almost 14% the last 2 alone. The last 2 weeks have also both traded more than 200 million shares, a feat not seen in almost 2 years dating back to the week ending 1/15/16. VMW has advanced 14 of the last 18 weeks and MSFT is on a 6 week winning streak of its own and this week added fractionally AFTER the prior week rose by more than 6%. As always is the case there will be some exceptions with JNPR stinking up the joint, down 21% from most recent 52 week highs. Below is the chart of IBM and how it was profiled in our Friday 11/3 Game Plan. The earnings related euphoria lasted just a couple of sessions after 10/18, and it has given back more than 6.5% the last 2 weeks. It is lower 8 of the last 10 days and has plenty of room yet to run before its measured move is completed.

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ChartSmarter Friday Game Plan

Markets went out on highs for the session Thursday with the Dow leading the way higher by .4%. It CLOSED just above a 23500 flag trigger and recorded a bullish hammer candle in the process. Shows why candlesticks are secondary to price action. The Russell 2000 is trying to heal itself somewhat after yesterdays failed flag breakout and it rose by .3%. The Nasdaq and S&P 500 finished near the UNCH mark with the Nasdaq lower by almost .6% at it worst for the day, a decent recovery. Of course AAPL reports numbers after the close and we will see how that impacts the tech rich benchmark tomorrow. Keep in mind the Nasdaq is looking for its EIGHT consecutive Friday advance. For the week heading into Friday the Dow is the best actor up .4%, the Nasdaq by .2% and the S&P 500 is UNCH looking for a third consecutive very taut weekly CLOSE. The S&P 500 is potentially setting up for and eight straight weekly gain, which has occurred just once in last 14 years.

Looking at individual groups the financials deposited the best gains Thursday with the XLF higher by 1%. There was some bifurcation as their normally is within the major S&P sectors and the cyclicals and materials both slumped by .7%. Drilling deeper into the cyclicals though witnessed strength with consumer names. There were some absolute disasters with NWL reporting earnings, and coming into this week was already down 12 of the last 15 weeks and this week heading into Friday has lost a quarter of its value, and making it crystal clear that trends in motion tend to stay that way either up or down. APRN which should have never came public and never recorded a weekly CLOSE above the 10 number is now 66% off its recent highs, not a typo. On the other hand retail names RL and LB did gain 2.6 and 8% respectively.

The old adage goes "the best breakouts work right away", and of course their are exceptions but it is pretty much the rule. One certainly does not want to see a breakdown quickly following a breakout as that is a red flag and a sell first and ask questions later attitude. There will be situations where a breakout will consolidate and digest and although this is acceptable one really wants to see momentum develop almost immediately after. Below is a prime example of this with the healthcare play NBIX and it is the chart from the Friday 9/1 Game Plan. The 55.32 cup with handle trigger was taken out on 8/31 advancing more than 5% on hefty trade and it has never looked back. The chart is a bit different than one normally sees within the healthcare sector as it has traded tight and made small staircase moves up and today took the elevator UP after a well received earnings report which saw the stock fly higher by nearly 20%. Volume is energetic as this week already with one more session to go has already recorded the best weekly trade in 5 months.

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ChartSmarter Thursday Game Plan 11/2/17

Markets finished off session highs Wednesday and it was the Nasdaq that put up a lukewarm ascent in the early going up almost .5% and turning that into a loss of .2%. It did recover from a .5% loss so buyers did step in, but unenthusiastically. The Russell 2000 was energetic to to begin today and was above a bull flag trigger which was unable to show much follow through at all as the day wore on. The bull flag is still flying, but these type of continuation patterns often want to break out in tidy fashion, and the longer they linger the more failure prone they become. The Dow did poke its head above its own flag, but ended up recording a doji candle which could indicate at least a pause in the uptrend is upon us. Its flag looks much better than the Russell 2000's as it is shorter and tighter in duration. Earnings this evening and tomorrow morning for tech which could have an impact Thursday include FB TSLA QRVO SYMC and BABA.

Looking at individual groups it was energy and staples that showed vigor for a second straight session Wednesday. The XLE rose more than 1.1%, doubling its nearest major S&P sector competitor in the materials that advanced .5%. The XLE is now on a 5 session winning streak since recording a bullish harami candle at 200 day SMA support last Thursday. It bounced off the 45 number on the RSI recently where leaders will tend to bottom and is on the verge of a potential bullish MACD crossover. That just gives a little extra confidence as all indicators come secondary to PRICE. The ETF would welcome some volume as there has not been a week up or down in stronger than normal trade since June. Lagging on hump day were the utilities as the XLU fell by .6%. It is for the moment digesting a 4 week winning streak and this week has traded extremely taut so far with the first 3 sessions all moving within just .51.

We talk frequently about PRICE confirmation, as our investment decisions are made purely from that. Seeing names spurt above intraday only to CLOSE below them is often a harbinger of danger lurking around the corner. Other times people will try and front run the idea, as it is ingrained in many that we should buy things cheaply. If one likes a stock at a price of 60 and its at 59, why not try and capture that extra dollar before the breakout. Below is an example of that with the chart of LUV and how it was profiled in our Wednesday 10/18 Game Plan. A bull flag had formed just below the round 60 number and as potential cup base was taking shape. The trigger was never hit, therefore no entry should have ever been done. If one wanted to do Monday morning quarterbacking they could point to the long upper wicks on 10/4, 10/6, 10/17 and 10/23 as to why the issue climbing above 60. It does not matter, the price never did. Perhaps what is holding the airlines back at the moment is the emergence of crude strength? Maybe that normal relationship is coming back, who would have figured we would be using the word normal with anything regarding the markets anymore. Last week the stock lost almost 9%, giving back more than half of the prior 7 week winning streak, in the strongest weekly volume in all of '17 so far.

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ChartSmarter Wednesday Game Plan 11/1/17

Markets rose across the board with some clear winners as the Russell 2000 continues to confound, but to those who keep things simple its uptrend is firmly intact. There seems to be a floor at the 1490 level and a ceiling at the 1510 number. It will resolve itself very shortly and could give important clues as to the direction of the overall benchmarks. The Nasdaq is now higher by more than 200 handles from its rising 50 day SMA and perhaps a rush into names that managers were not exposed to to save face into year end window dressing is about to commence. As we mentioned yesterday November tends to be a positive month historically, and maybe investors are becoming to complacent with the expectation of gains going forward. Now is a better time than ever to turn off the media and just focus purely and simply on the direction of the major averages.

Looking at individual sectors it was a rare win for the staples group with the XLP posting a .8% advance, the best actor Tuesday. The ETF is on the verge of registering a bearish death cross, although the validity of that event is not as potent as many make it out to be. The XLE was the third best performer as it rose by .3% and it seems to be following crude's lead which has been acting very well since WTI broke above a bullish inverse head and shoulders formation which aligned with the very round 50 number. Tuesday the ETF found nice support at a rising 50 day SMA which also was retest of a long downtrend break to the upside (bears seemed to be unable to press much to the downside). Lagging, but ever so slightly were healthcare, financials and industrials which are all in need of a prudent pause.

The markets have been shunning defensive plays, with the exception of the utilities, but keeping an eye on what names are outperforming could be fruitful. Specifically in the food space since the AMZN purchase of WFM, many in the arena have traded rottenly. Below is the chart of TSN and how it was profiled in our Wednesday 10/25 Game Plan. It has out shined peers such as HRL which still sits in bear market mode lower by 20% from most recent 52 week highs (FDP is now off more than 34% off most recent 52 week highs). TSN is a name that continues to march northward and today rose above a bull flag trigger of 72.25 which carries a measured move to the round 80 number. Keep in mind measured moves are just guidelines where investors could shave positions and a glance on the weekly chart shows this name sniffing out a 14 month cup base trigger of 77.15 which began the week ending 9/9/16. A break above would record an all time highs. Regardless of the industry your name is among, monitor the PRICE action alone to dictate what your trading decisions may be.

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ChartSmarter Tuesday Game Plan 10/31/17

Markets began the week in somewhat bifurcating fashion as the Nasdaq stubbornly refused to give back any of the huge gains last Friday, finishing essentially UNCH. It was the Russell 2000 that suffered the biggest hit losing 1.1%, and doing serious damage to the bull flag formation. It could now see a retest of the former cup base trigger at the rough 1450 level which is about 3% away from at the moment. That would also serve as an benign entry at an initial test of a rising 50 day SMA after a recent breakout. Interestingly the "boring" Dow is now sporting a bull flag of its own which is looking much better than the Russell's, and the flag pole is 1100 handles long which would make for a serious year end measured move if taken out. Keep in mind seasonality is a bright spot as Ari Wald mentioned in his weekend note since 1950 the S&P 500 has averaged a gain in November of 2.2% and rose 72% of the time in November. December is even better rising 78% of the time averaging a slightly less advance of 1.8%.

Looking into individual sectors energy clearly was the winner as the XLE rose by .5%, well ahead of its second best performer in the technology via the XLK rose by .2%, and the utilities were up by one penny. These three aforementioned groups were the only of the nine S&P major sectors to advance. Lagging were the industrials, staples and healthcare spaces with the XLV losing more than 1%. Last week the XLV recorded its first drop of more than 2% falling 2.1% and it was its largest weekly drop in exactly one year dating back to the week ending 10/28/15. Last week also registered a bearish engulfing weekly candle and Monday extended its losing streak to 6 sessions and undercut its 50 day SMA in the process. It now sits 4% off most recent all time highs. The staples are now off more than double that as the XLP is 8% off its most recent 52 week highs and it is rapidly approaching the very round 50 number which was support all throughout last November and will be critical to hold as that level was resistance the first 10 months of 2015 and longs in the space will not like to see that number crack and act as a headwind once again.

The semiconductor group has been a staple in the diet of this ongoing rally and it would be foolhardy to try and bet against it. There have been laggard names within the group, but trying to short them would be akin to portfolio suicide. Any other group is still worthy of playing pairs. But sticking to the semis, look at perennial dawdler CREE which has put up two big volume double digit weekly gains in the last 5 weeks as evidence of the point I am attempting to get across. Below is another name that was not keeping pace with the overall group. Her is the chart and how it appeared in our Monday 10/23 Game Plan which we highlighted as a potential short below a symmetrical triangle. The trigger was never hit, and is a good example of being patient for PRICE confirmation as it has advanced by almost 7% the last 2 sessions and has now broke to the UPSIDE of the triangle (symmetrical triangles can break in either direction). It REPORTS earnings this week and a move above the round 80 number would be a first in 15 months and can be interpreted as a cup base breakout above a 79.44 trigger which began the first week of June.

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