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ChartSmarter Thursday Game Plan 8/30/18

Markets:

  • It certainly feels good to be back after a week off, and the markets seem to be enjoying themselves at the bears expense. I have seen a myriad of reasons as to why many pundits are trying to discredit, or even expensively trying to call a top in the indexes. It is just serving as fuel to the flames, and it is the Nasdaq that has once again entered the forefront. The tech rich benchmark is now making a habit of CLOSING in the upper half of the daily range the last couple weeks. Obviously a bullish sign, and this week it has added more than 2% already on top of the prior weeks jump of 1.7%. It has burst through the very round 8000 number, and do not discount the impact of the 3 weeks ending between 8/3/17, all of which CLOSED within just .27 of each other leading to this powerful advance. A great example of how tight, coiling trade should be respected.
  • The Russell 2000 is an important benchmark, as we know its small cap nature also gives traders if the feel is "risk on" or not. Just before my vacation I wrote that a couple of consecutive CLOSES above the very round 1700 number would be a positive signal and since taking it out last week it has been up, up and away. It continues to firm up, despite the lack of tariff discussion. That was the reason given as to its outperformance in relation to its peers, as the vast majority of revenues from stocks in this index are derived domestically, and therefore would be mostly unharmed by them. The VIX is trading in very tight intraday ranges, below both its 50 and 200 day SMAs. Again this type of taut trade leads to outsized moves, in either direction, although this downtrend could very well continue the current direction lower. A trend tends to persist more so, than it is to reverse.

Sectors:

  • Sector leadership was a nice recipe that the bulls relished in Wednesday. It has a "risk on" feel with cyclicals, technology and materials leading the way. Within the XLY of course is, retail and there have been some eye opening moves within the group. Some were laggards like an HIBB, now down 33% from most recent 52 week highs. It also illustrates the importance of CLOSING prices, as the day before the 8/24 plunge it traded above a 29.60 cup base trigger intraday, but was unable to finish above it. Others like FOSL were former leaders and this name is now 30% lower from just June highs. Even good looking recent breakouts falter, with both M and BKE showing good looking charts only to fall apart and are now roughly 15% off their most recent 52 week highs. 
  • Lagging Wednesday were the staples, industrials and financials. The XLP, XLI and XLF were near the UNCH neighborhood to end the day. The staples and financials have had nice runs the last few months, and both the XLP and XLF would best be served by consolidating those gains before taking off higher from a continuation pattern. The XLP is forming a handle on a cup base that began in January, but the handle is not forming in the upper half of the formation, making it faulty prone. It has filled in the 8/15 gap now, but I just feel there are better fish to fry with a more of a growth feel to them. The XLF WEEKLY chart has a very nice look and one has to admire the length of time it is taking the build the right side of a long base. The round 30 number will be a battleground between bulls and bears.

Special Situations:

  • It would be hard to ignore the seemingly incessant healthcare strength chatter recently. The groups attention is well deserved as the XLV has risen 35 of the last 45 days since 6/28, and the ETF has eclipsed it January highs and is smartly above a 91.89 cup base trigger. Surely the space is diverse and one can drill down into the sectors, and the most talked about fund, the IBB. The IBB cleared a WEEKLY bullish ascending triangle trigger, through 120 which carries a measured move of 20 handles. Below is the chart of GWPH and how it appeared in our Friday 8/10 Game Plan. This area has come into focus with cannabis news as of late with STZ, and this is perhaps the best way to play the arena. It has lifted off its 200 day SMA the last few weeks and now look to add or initiate a position above a 152.60 double bottom trigger.

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ChartSmarter Tuesday Game Plan 8/21/18

Markets:

  • Bulls have to be watching the Nasdaq's relative weakness recently, as Monday it again lagged the big three. Keep in mind it was the only one of them, the Dow and S&P 500, to CLOSE lower last week. It was positive in a very fractional manner as the Dow and S&P 500 added .4%. The S&P 500 is nearing 52 week highs, and is nearing yet another cup with handle trigger just above 2864. It filled in a gap to the upside from the 8/9 session and is now a half of a percent from all time highs. The Dow recorded a bearish hanging man candle today but the range was small, and the last 4 days have risen 800 handles top to bottom.
  • The Russell 2000 touched the important round 1700 number for the first time in four weeks, but was unable to CLOSE above it. This index is a good barometer of what is happening domestically, as they vast majority or revenues from stocks in the benchmark come from the USA. We are all well aware of the dispersion between here and abroad and investors looking to exploit that difference will park there capital accordingly. But PRICE action is paramount, and one wants to witness consecutive CLOSES above 1700 before becoming too excited. Remember 6/20, 7/9 and 7/19 all did so, only to lose the 1700 figure the very next day.

Sectors:

  • Leading the way to start the week was a near quadruple photo finish with the cyclicals, industrials, energy and materials all gaining in the .7% neighborhood. The retailers propelled the cyclicals as evidenced by the XRT rising more than 1% today in strong volume. The ETF is looking for a third consecutive weekly gain (would have been 4 but the week ending 8/3 CLOSED at 49.99) and the very round 50 number could be seen as a durable floor, where it was prior resistance. The XLE has burned many recently, and the last 3 days have traded in a very taut range and within the 8/14's 3.5% loss. It did find support at its 200 day SMA and could be readying itself for another run into the 79 area in the fall which is a huge level. A potential double bottom trigger of 78.10 is setting up. More aggressive traders could enter here with a tight stop below 71.50. 
  • Looking at what lagged Monday was an interesting trio that does not normally trade in tandem. It was the staples, technology and the utilities that were the only three major S&P sectors to lose ground. The staples I though would have benefitted from some M&A announced this morning with PEP taking a liking to SODA. Sure on 8/1 it screamed higher by more than 26% after a well received earnings report, but one has to wonder if someone knew something prior to todays big news as it rose 14 of the previous 14 sessions.

Special Situations:

  • The transports have always had plenty of attention put on them as the often have a genuine pulse of the health of the economy. It is a broad group with rails sandwiched in, both of which deliver goods across the globe. UPS is on a current 6 week winning streak, its first since early '16, and its chart for the first time in a long time looks better than chief rival FDX. The IYT is chugging along toward a 206.83 cup base trigger, pun intended, as it looks confident above the very round 200 figure. Below is the chart of UAL and how it appeared in our Tuesday 8/7 Game Plan. It has flown above a bull flag trigger of 82.25 on 8/7 and then fell back toward the round 80 number before taking off again, multitude of puns tonight. The last 3 weeks all CLOSED very tight within .67 of each other which often leads to explosive moves.

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ChartSmarter Monday Game Plan 8/20/18

Markets:

  • For a third consecutive session the Nasdaq lagged, as the tech heavy benchmark rose just .1%. It did CLOSE off intraday lows, and bounced off 50 day SMA support for the second time in the last 3 days. We touched on FB yesterday and its weekly chart looks ugly with double digit losses of 13.9 and 16.7% the weeks ending 3/23 and 7/27, both in the largest weekly volume in over 4 years. NFLX, lower everyday this week, is now lower by 25% off most recent 52 week highs. AAPL on the other hand is at all time highs, and GOOGL today filled in a gap from the 7/23 session, and in the process retested an 8 month cup base breakout trigger that aligned with the round 1200 figure. And some still say stock picking is dead. 
  • On a weekly basis it was the Dow showing muscle adding 1.4%, the S&P 500 and Russell 2000 rose .6 and .4%, and the Nasdaq FELL .3%. The semiconductors have been a big reason with the SMH in correction mode down 10%, compare that to software lower by 4% from most recent 52 week highs. Growth has been leading value for 10 years now, and is a big trend change upon us? I still think there is too much chatter about it, but the move is nascent so the legs are fresh and could have more room to run. The VIX gave a brief thrill after this week, but CLOSED below both its 50 and 200 day SMAs Friday. Remember it registered a bullish weekly hammer candle off the very round 10 number the week ending 8/10.

Sectors:

  • The staples were firm Friday rising .8%, and it was the second straight day it was the best major S&P sector performer (on Wednesday it was the second best actor). The materials, industrials and utilities rounded out the top four best groups. Lagging, but still finishing in the green, were technology and the cyclicals which both advanced in the .1% neighborhood. Looking at the XLK chart, volume trends have been suspect, with just 6 accumulation days since early February. Give the ETF credit for trading just 1% off most recent 52 week highs and enjoying the comforts on rising 50 day SMA support.
  • On a weekly basis it was easy to spot the winners as again the staples were the best performers as the XLP jumped 3.3%, its third best weekly gain of the year behind 3.5% advances the weeks ending 2/16 and 3/30. The utilities were the second best weekly gainer as the XLU rose by 2.8%. The move into defensive natured spaces is nothing new, although, the talk about them is incessant. The utilities on a 3 and 6 month basis has been the strongest major S&P sector, and on a one month look it has been led by the healthcare arena with the XLV up 4.3%, followed up by the utilities and staples. I may be wrong here, but I believe that the Barron's Roundtable at the beginning of the year talking to the investment "gurus", showed almost everyone mentioned to avoid these areas.

Special Situations:

  • The chemicals group has not been one discussed much, and that could lead to some undiscovered possible gems. To be clear I like to buy strength, but there will be some set ups that prove to be potentially very worthwhile. One scenario could be the chart of ALB below and here is how it was profiled in our Tuesday 8/14 Game Plan. This was a former best of breed play that now rests 34% off most recent 52 week highs. It could be building the right side of a long cup base that began last November near the round 140 number. Since the first week of March it has encountered problems CLOSING above the very round par number, doing so just three times. Looking on a shorter time frame it has held the important round 90 number well and filled in a gap on 8/15 from the 8/7 session.

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ChartSmarter Friday Game Plan 8/17/18

Markets:

  • The Dow's best performer Thursday, was also its highest priced, BA, giving the index a nice boost as it rose by more than 4%. It showed wonderful follow through after Wednesday bullish hammer off its rising 50 day SMA and the very round 25000 figure. All but three names in the benchmark fell today, and it was DIS, MSFT and INTC which fell ever so fractionally. Top to bottom it has gained 600 handles the last 2 sessions and that type of volatility can be considered bearish, as wide and loose trade is not preferred compared to taut and tight action. But one has to give credit where it is due as the futures were firm early on, and the markets not only refused to relinquish them but added throughout the day.
  • The Nasdaq was somewhat heavy Thursday as the index rose just .4%, half of that of the S&P 500 and Russell 2000 which rose by .8 and .9%. That was even with AAPL, the supertanker, hitting all time highs and the stock has lost ground just 2 days in August thus far. The bearish engulfing candle from 8/7 is now in the rear view mirror. Looking back it was recorded on weak volume and that day was down less than 1%, nothing to be alarmed about. On a weekly basis, so far heading into Friday it has fell .4%, as the S&P 500 is up by .2% and the Dow has achieved a nice 1% gain. Looking outside the box the weakness in some recent IPOs should be monitored. Some conclude the amount of new issues could mark a top, I am not one of them, but CWK and SONO are down this week by 2.9 and 6.2%. 

Sectors:

  • Leadership was somewhat suspect with the staples leading the way as the XLP rose by 1.5% Thursday, and the utilities were among the top 4 of the major S&P major sectors as well. I did have a conversation with someone today trying to convince me that the staples can be looked at, in a small way, as technology with all the innovations in the space. I am not buying it, but one would be foolish to deny the ETFs PRICE action. One could make the case for a cup with handle breakout, but the handle did not form in the upper half of the base which makes it failure prone. WMT, the fourth largest component in the fund did skew the return today, but PG the largest weighting in the ETF is looking for its 12th weekly gain in the last 15.
  • Lagging today were groups that have carried the load recently with the cyclicals and technology, still higher but displaying poor relative strength as the XLY and XLK rose by .5 and .4% respectively. FB sure did not help the technology group as it is back in bear market mode, 20% off most recent 52 weeks highs, and the fact that it undercut its 200 day SMA so quickly after recouping it is certainly concerning. Other "old tech" plays, besides CSCO which ramped up 3%, like AMD and MU were RED on the day. AMD is doing battle with round number theory at the 20 figure, managing just one CLOSE above in 2018 on Tuesday by 2 pennies. MU is now off by 27% from most recent 52 week highs as the round 50 figure was pierced on Wednesday which doubled as 200 day SMA support too. As the saying goes nothing good happens underneath the 200 day, so a rapid recapture of that line is essential for the name. 

Special Situations:

  • Retail names have been having some big moves on earnings, some good and some bad. Of course WMT comes to mind today with a huge move for the behemoth up more than 9%, and was stopped by the very round par figure. That is probably temporary as it carves out the right side of a cup base pattern with a potential trigger of 110.08. On the flip side there was M which cratered 16% on Wednesday, a day after breaking above a bullish ascending triangle. Below is the chart of FL and how it was profiled in our Wednesday 8/1 Game Plan, and it REPORTS next Friday before the open. It still trades 16% off most recent 52 week highs and filled in a gap that was also a retest of a bullish inverse head and shoulders formation with a downward sloping neckline. It is setting up a double bottom pattern with a potential trigger just of 53.57, and one could enter now above its rising 50 day SMA.

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ChartSmarter Thursday Game Plan 8/16/18

Markets:

  • The major benchmarks fell Wednesday but did bounce, and did so at key moving averages. The Nasdaq kissed it upward sloping 50 day SMA precisely, like it did in both June and July. The tech heavy index did spend four sessions feeling if the retest of the important line was for real before resuming its powerful uptrend the last couple months. Time will tell if that happens once again. The S&P 500 did not come into contact with its 50 day but did register a bullish hammer candle within just 2 handles of the meaningful round number. Advantage bulls, as the break point the bears were given today was unable to be capitalized upon. The S&P 500 is looking at a possible back to back weekly decline, and it is still very premature but the index has not recorded a three week losing streak in near 26 months.
  • The Russell 2000 is now back below its 50 day SMA, which has been a rare occurrence since early April. There is a real tug of war continuing at the very round 1700 number with no weekly CLOSES above the level, with FOUR of the last eight trading above intraweek. Gold which many believe should be thriving in this type of uncertain environment lost 1.6% Wednesday and is looking like a sixth consecutive weekly decline is likely as the GLD is off by 3% heading into Thursday. The ETF is 14% off most recent 52 week highs, and has not registered an accumulation week since the week ending 2/6.

Sectors:

  • Utilities and staples were the winners today as the XLU and XLP advanced by .8 and .4% respectively. The XLU is up by 1.3% this week so far, and 7 of the last 9 weeks the ETF CLOSED in the upper half of its weekly range (the only weeks it did not lost a very pedestrian .5 and .6% the weeks ending 7/20 and 8/10). Healthcare was the third best actor among the major S&P sectors and the XLV fell by .2%. Today completed another handle on a cup base with a potential trigger of 90.48. The 3 week tight pattern looks likely as the last 2 CLOSED within just .18 of each other and this week so far is within that range.
  • Lagging in a very sizable manner Wednesday was energy as the XLE slumped more than 3%. That was due to three of the four largest components losing between 4-6%. EOG which makes up nearly 5% of the ETF, cratered more than 6% after a 128.06 cup with handle breakout lasted just 5 sessions. Breakouts that crumble that rapidly are a very bearish sign and it is now in correction territory 12% off most recent 52 week highs. CVX the second largest component slipped almost 4% and undercut its 200 day SMA for the first time in 4 months.

Special Situations:

  • On sessions like Wednesday it always pays to search for names that shrugged off the weakness. Below is the chart of SCI and how it appeared in our Wednesday Game Plan this week. It emanates from a dreary funeral business, but it is one that is constantly in need. These types of defensive plays have come into vogue recently, but this name has been acting well on a current 6 week winning streak and most likely will make that 7 as it has advanced 3.3% this week headed into Thursday. SCI also brings round number theory into play as the 40 figure was resistance the two weeks ending between 1/26-2/2. During that time span it managed just one CLOSE above 40 on 2/1, but after today it has finished FOUR straight days above the number. It recorded a break above a 6 month cup base trigger of 40.38 on 8/13, and the move looks far from dead, pun intended.

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