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ChartSmarter Friday Game Plan 9/7/18

Markets:

  • For the second straight day it was the dodgy Dow that eked out a fractional advance, and the Nasdaq and Russell 2000 underperforming as they dropped .9 and .8% respectively. It was the semiconductors that once again traded soft. The SMH, which bearishly trades wide and loose, is off by 2.4% this week so far. Since the week ending 3/16 it is still making lower highs and higher lows as the ETF coils. One can make the case for a symmetrical triangle, but its weekly RSI is holding the bullish zone threshold 50 figure since February. It has been in contact with that number multiple times since February, perhaps too many. Many names in the group have been weak, with AVGO down almost a quarter of its value from most recent 52 week highs. KLAC, another name that trades anything but taut lost nearly 10% Thursday. LRCX is 32% off most recent 52 week highs, and I think you get the picture. The spaces weakness is NOT a nascent development.
  • The VIX is still CLOSING off session highs, but looks like it is coming alive. It CLOSED pennies below its 200 day SMA, a line it has finished above just twice in the last 2 months. On its weekly chart is has the look of a bullish falling wedge pattern, and it feels like the proverbial beachball held under water. The transports via the IYT are still sporting a bull flag formation, and the last 3 weeks have CLOSED tight all within just 1.50 of each other. It is attempting to post a ninth weekly gain in the last 10 up .5% heading into Friday. With tech beginning to feel heavy I have a feeling this group is going to have to contribute more than it is accustomed to. 

Sectors:

  • It was the utilities arena that led, and it is becoming an all to familiar habit. The argument that investors are searching for yield as they have been unable to generate it in the fixed income market is valid. Again I do not focus on the why, just the PRICE action and it can not be ignored. The XLU rose .6%, double the next two strongest competitors Thursday with the staples and industrials gaining .3%. The ETF is looking for its sixth 2% weekly gain in just the last 3 months as it is higher by 2.3% heading into Friday. It is now just below a WEEKLY cup with handle trigger of 54.86 in a pattern that began the week ending 11/17/17.
  • Lagging Thursday was technology and energy. The XLK slipped .7% and the XLE by a whopping 1.8%. The XLE  is lower by 2.1% so far this week and the triple top in the 78-79 dating back to December '16 looks solidified. It is now nearing correction mode off by 8% from most recent 52 week highs, and looking left on its chart it has been soft since recording an ugly bearish engulfing candle the week ending 5/25 slumping 4.5% in active volume. It is 1% away from testing its still upward sloping 200 day SMA, but is also doing so so quickly doing so on 8/15. The 5 day losing streak has been accompanied by bulging trade. 

Special Situations:

  • The retail group now looks like it will be asked to do the heavy lifting for the markets. One can throw in transports as well, and after all they move around goods consumers purchase. The group is becoming a bit more bifurcated recently, as today we witnessed pedestrian gains in GIII and TIF. On the flip side weakness was seen in stocks like URBN RH DLTH and TLYS. Below is the chart of CROX and how it appeared in our Thursday 7/12 Game Plan. It has recorded a wonderful turnaround since June '17, and is looking for an eight weekly gain in the last nine. Since breaking above the very round 20 number on 8/21 it has seen just one CLOSE underneath it. On that same session it broke above a 19.64 cup base trigger and has minded its own business, gradually churning higher. The bulls have a good grip on this play, just like the soles of the shoes the company produces. 

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ChartSmarter Thursday Game Plan 9/6/18

Markets:

  • Benchmarks were on the defensive Wednesday, and were unable to dismiss overseas weakness. The DAX, CAC and FTSE all lost more than 1%, and although it did not affect the Dow which was essentially flat, the Nasdaq fell 1.2%. The S&P 500 and Russell 2000 lost .3%. Software the firmest tech space was responsible for the softness as stocks like WDAY plummeted 9.2% after earnings, although coming into today had risen 22 of the last 25 days. NOW slipped almost 5% after it showed hesitation at the very round 200 number recently. This group needs to solidify itself as we know semis have been shaky at times in 2018. If both start to slump that could have a profound effect on the averages.
  • The VIX recorded a spinning top candle, which often signals fatigue, and it has enjoyed a nearly 40% run since the bullish hammer off the round 10 figure in mid August. It has yet to show any follow through after 8/30 rose more than 10%. The bears will highlight it has not broken down either. Commodities are showing some interesting divergences. Crude which has acted well throughout times this year, bounced nicely off its rising 200 day SMA in mid August, and is now flirting with a double bottom trigger that aligns with the round 70 figure. Todays move below the 50 day SMA was not productive. Yet copper, which China is the largest consumer of, is now in bear market mode 22% off most recent 52 week highs. Perhaps the ETF could see some strength after touching the round 40 number on 8/15 and 9/4. 

Sectors:

  • Utilities and staples were your leaders Wednesday with the XLU and XLP advancing 1.4 and 1.1%. Utilities were near the top of the sector leaderboard for a second straight session, and it is certainly a small sample but one does not want to see them emerge as winners once again. For the last week the staples and utilities are the best performers, in fact the only ones of the major 9 S&P sectors to gain ground. Technology happens to be the worst with the XLK lower by 1.8% over the same one week period. 
  • Lagging clearly today were just the spaces you want to see if you are bullish with the cyclicals and technology weak. The XLY and XLK were off by 1.1 and 1.2% respectively. AAPL contributed to techs decline as it recorded its fourth consecutive bearish candlestick today, beginning with a bearish shooting star last Thursday and an engulfing candle today. The stock sits nearly 30 handles above its 50 day SMA, which gave it comfort just one month ago. A pullback seems responsible and purchasable. NFLX did not help either as it is nearing bear market territory now 19% off most recent 52 week highs and has found resistance at its downward sloping 50 day SMA.

Special Situations:

  • It always pays to see which names shrugged off weakness. Below is the chart of ATR and how it appeared in our Tuesday 8/7 Game Plan. Now todays weakness was largely due to technology, and this chart is of a packager (ULTA strength has not hurt), but this chart has a lot to like. The name has advanced 9 of the last 10 weeks, and since the week ending 2/16's 11.8% romp it has not recorded a week of distribution. To be fair it trades a bit on the illiquid side, but one would think that would make it prone to volatile behavior. It has proved to be just the opposite with very taut trade, a hallmark bullish characteristic. On 8/15 it bounced precisely off the very round 100 number, and this week heading into Thursday is higher by more than 3%. Respect strength.

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ChartSmarter Wednesday Game Plan 9/5/18

Markets:

  • The major averages were a bit volatile intraday, to be expected as many traders arrived back on their desks following the holidays and the slow summer month of August. Give the benchmarks credit for bouncing off a decent double bottom just after lunchtime. Although I do not give much credence to intraday noise, it was impressive. The chatter of the weak seasonality that September brings could easily pose a threat to the indexes, but the uptrends are still solidly intact. One could easily see a pullback for the S&P 500 to its rising 50 day SMA, about 2.5% away currently, and even a retest of the round 2800 number, that could be a healthy event. If that number is broken perhaps one can begin to worry. The good news is that the last 3 months of the year tend to be the strongest. Lengthen your time horizon some.
  • The Russell 2000 was the worst actor today as it fell by .4%. Their have been some dubious candles recently, but again a prudent pullback toward the 1700 number which was very tough to get through would be a nice test. The bulls certainly like to see former resistance become support. The VIX showed a bearish reversal right near its 200 day SMA, a line that has been stubborn for the instrument. The upper tail was not as long as the 8/17 session, but the weeks following the move saw it fall more than 10%. Lets see if that is some foreshadowing here. The emerging markets pain continued with Brazil slipping 4.5% and the EWZ is now lower by 35% from most recent 52 week highs. Mexico in the news last week, undercut its 200 day SMA, via the EWW, and the very round 50 number. That was the level of a bull flag breakout in late July that quickly fizzled out.  

Sectors:

  • Leading the way to begin the holiday shortened week Tuesday were the financials, utilities and cyclicals. For the finnies which have not garnered a whole lot of attention, give the chart credit for holding the bullish falling wedge breakout in late July which coincided with the ETF moving back above its rising 200 day SMA. Additionally it looks imminent that a bullish golden cross could occur shortly as its 50 day SMA is curling upward once again. Look for the XLF to be pulled magnetically toward the round 30 number and a potential break above a cup base trigger of 30.43 sometime in the fall. If that were to materialize that would obviously benefit the overall market.
  • Lagging today were the materials and healthcare groups. The XLV recorded its first three day losing streak since late June, although the 8/30-31 sessions lost a total of NINE pennies. Keep in mind on 8/30 it did register a doji candle after a nice run, which often signals exhaustion of the prevailing trend. BMRN, which I was WRONG about recently thinking it was going to successfully fill in a gap from 8/6 the session at the very round 100 number fell nearly 4% Tuesday. The 100 figure was staunch resistance dating back to the first week of 2016, until moving above the week ending 7/13. The brief move above could very well have been a bull trap. Among material names, old time favorite for many traders FCX is now lower 5 of the last 7 weeks and is 33% off most recent 52 week highs. Notice the round 20 number was a roadblock for the name this January with three weeks trading above intraweek, but no CLOSES above (no daily finishes north of 20 either). 

Special Situations:

  • We should all be very aware that consumer spending represents 2/3rd's of GDP, which has been sporting 4 handles as of late. The discretionary group has done plenty of heavy lifting in the overall markets as witnessed by the performance in the XRT. Disappointments have been growing, but we did see healthy numbers from F this morning. One also has to factor in management when looking at how individual names behave. Take for instance the discount players. One has to peer no further than OLLI, up now 13 sessions in a row, or ROST and BURL both sitting just off 52 week highs. Why then is DLTR more than 30% off its most recent highs? Is inferior brass responsible for the action that produced three straight double digit losing reactions to earnings, very consistent falling between 14-15% on 8/30, 5/31 and 3/7? Who knows, but PRICE action is painting the narrative. Other plays are fighting hard to hold their breakouts, we prefer to see strong moves POST breakouts, as the best ones tend to work out right away. Below is BBY and how it was presented in our Monday 8/13 Game Plan. Since the break above the triangle trade has become wide and loose, bearish traits, but a weekly CLOSE above the round 80 number this Friday would have the bulls feeling jolly.

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ChartSmarter Tuesday Game Plan 9/4/18

Markets:

  • The major averages were slightly bifurcated Friday with the Dow losing less than .1%, the S&P 500 essentially flat, and the Nasdaq and Russell 2000 leading the way up .3 and .5% respectively. The latter two indexes strength has become a regular occurrence and that is giving the bulls confidence. For the week the Nasdaq rose 2.1%, on top of the prior weeks gain of 1.7%. The only caveat was the lack of volume. The Nasdaq, which has risen 20 of the last 23 MONTHS, is benefitting from some "old tech" names like CSCO higher by 3.1% this week, AAPL which lost value just 4 times in all of August, and AMD which rose 5% this week displaying excellent follow through from the prior weeks huge advance of 21.3%. This week broke ABOVE a bearish rising wedge, and moves in the opposite direction of what they are perceived to do often are forceful.
  • On a weekly basis the Nasdaq was the leader, doubling the gains of the S&P 500, Dow and Russell 2000 advancing between .7-9%. The Nasdaq also holds a clear advantage on a YTD basis up 17.5%, compared with the Russell 2000, S&P 500 and Dow up 13.4, 8 and 5% respectively. For Dow Theorists the transports will be one to watch as they are somewhat stalling near their previous January highs. The IYT is attempting to digest the big move in the interim and bears will say double top as the ETF hit intraday highs of 206.73 and 206.90 on 1/16 and 8/23. I am in the bull camp as it is not shying away from the level as it has hovered here 9 sessions where as the January encounter was quick to fizzle. It does have the look of a bull flag formation and a decisive break above 207 carries a measured move of more than 20 handles.

Sectors:

  • Friday witnessed modest gains among the major S&P sectors and just three managed to gain ground. The cyclicals, technology and industrials all rose in lukewarm fashion, with the latter two just fractionally. The XLY, deserves some credit as I have been somewhat pessimistic headlining the losers, but there have been winners too. LULU, ULTA and SFIX come to mind with strong moves today of 13.1, 6.4 and 5.3% respectively. The XRT has now recorded four consecutive weekly CLOSES above to very round 50 figure, a level which has proved problematic in the past. Technology, via the XLK which rose 1.8% this week tied for the best showing with the XLY, is on a current 5 week winning streak, its first in nearly 10 months.
  • Lagging Friday were the utilities and energy. In fact bulls are going into the holiday weekend feeling a bit fresh knowing that the only three groups to fall on a weekly basis were the staples, utilities and energy, although the losses were pedestrian with none of them slipping more than .5%. Of the three just mentioned I still see the weakest being the staples now trading 9% off most recent 52 week highs. PG and KO, the two largest components in the ETF, are looking somewhat soft. KO is lower 8 of the last 9 sessions, with all nine CLOSING at or in the lower half of the daily range. I was looking for the gap fill from the 7/24 to hold but that was not the case. PG broke below an extremely tight 12 day period with all of them CLOSING .66 of each other.

Special Situations:

  • They saying goes only losers average down. Conversely productive traders tend to average up, or add to winning trades. This is easy do to in theory, but hard in practice. No one likes to see solid gains turn negative, and that is what trailing stops are for, but to keep it simple leading stocks will very often offer additional add on opportunities. Below is a good example of the chart of SEAS and how it was presented in our Thursday 8/16 Game Plan. In fact astute traders who look left on the chart would have seen an even earlier entry with a buy stop through a 15 month cup base trigger of 20.23, in a base that began the week ending 3/3/17 and taken out the week ending 6/8/18. It has nearly achieved its measured move and one has to respect the very taut overall trade. The stock is on a current 4 week winning streak up more than a combined 30%. Let your winners run or swim, pun intended.

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ChartSmarter Friday Game Plan 8/31/18

Markets:

  • Benchmarks were rattled somewhat Thursday after tariff announcements, but the Nasdaq and Russell 2000 "outperformed". The Nasdaq which did record a bearish harami, ending a 4 day winning streak fell .3% (Russell 2000 lost .1%). But on a WEEKLY basis is higher by 1.8%, which doubles that of the S&P 500 and Dow up .9 and .8% respectively. AAPL shrugged off any frailness that market exhibited adding almost 1% today, and is looking at a potential THIRD 4% or more weekly gain in the last 5. NFLX also gained ground as its momentum continues following its bullish engulfing candle on 8/20. The stock came close to touching its 200 day SMA in late August, but it has not directly contacted the secular line in almost 2 years now.
  • Yesterday we mentioned the VIX and how a big move was to be anticipated, the direction unknown, and today it delivered with a jump of more than 10%. It is still swimming underneath its 200 day SMA, a line that is rising, and its 50 day is looking like it wants to curl higher as well. The instrument is now back to the death cross in early July, and the bulls need not temper their enthusiasm until a couple of CLOSES above the 200 day occur. In the last 8 weeks there have been just TWO finishes above. The thirst for treasuries, as investors around the globe search in vain for yield, has not been quenched as the yield was once again abruptly turned back at its declining 50 day SMA via the 10 year yield. 

Sectors:

  • Groups that acted best Thursday were defensive in nature as the utilities and healthcare "led". The XLU rose fractionally by .1% and the XLV fell by .1%. The XLU still has the look of a cup with handle pattern in a base nearly 10 months long (longer the base the greater the space upon the breakout). The potential trigger there would be above a 54.86 trigger. The XLV recorded a bearish harami candle today, but is still comfortably above its 91.89 cup base breakout pivot. The ETF has gained 1% this week heading into Friday, but volume has remained cool which bears would highlight, and the bulls would counter with the summer doldrums as the reason. It is likely to retest that 91.89 entry soon, and does have some cushion underneath as well with the 90.48 cup with handle trigger taken out on 8/16.
  • Lagging today were the materials, industrials, financials and cyclicals. That made it two sessions in a row that the finnies and industrials were weak. Peering into the weekly XLI chart one sees the rounding bottoming pattern still in construction, but volume trends remain a bit of a concern. There was plenty of distribution, most notably 8 weeks ending between 2/2-6/22 which fell at least 2% in greater than average weekly trade (two slumped more than 5%). Bulls want to see volume return with conviction as traders return from holiday. The XLY has some more retail names that were under pressure today, a trend that is becoming somewhat problematic, with DLTR, ANF, and MIK all declining by double digits Thursday.

Special Situations:

  • Consumer staples have backed off slightly after a nice run since May, as the XLP is lower 8 of the last 10 sessions. It is important to monitor which names rode that wave and which were left behind. Stocks that are not helped by a rising sector tide are apt to fall harder once a downtrend materializes. Below is a good example of TAP and how it was presented in our Wednesday 7/18 Game Plan. This name has long been rumored as a takeover candidate, and how many times have we seen names that were near being acquired and it never happened. This name has now filled in a gap to the upside THREE times from the 5/1 session, which happened to align with the round 70 number. Its 200 day SMA is still sloping lower and that Rocky mountain high has lost its fizz, pun intended.

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