ChartSmarter Wednesday Game Plan 5/30/18

Markets began the holiday shortened week on the wrong side of the bed. Futures were up Monday night, then were off a good amount premarket Tuesday and one had to think this would be a good test to the stamina of the bull market. If it could open hard lower and rally into the CLOSE that would have been very positive. The test failed. A mild late day move higher still witnessed the Dow take the worst of the hit down 1.6%. It was followed by the S&P 500 lower by 1.2%, the Nasdaq by .5% and true to form the Russell 2000 held up best falling .2% (it was up in the early going but was unable to finish green). The Russell 2000 was able to CLOSE in the upper half of its daily range Tuesday, and has now done so 8 of the last 10 days. The VIX which reversed hard last Wednesday-Thursday before a bullish engulfing candle on Friday romped higher today to the tune of more than 30%.

Looking at individual sectors it was more of the same from last week as the utilities and staples "outperformed". The XLU and XLP were the best actors UNCH and down by 2.2%, and the XLU did preserve much of last weeks 3.1% advance. Both of the aforementioned ETFs are battling with the very round 50 number and the XLP has now recorded seventeen straight CLOSES beneath 50. On a weekly basis the last 4 weeks have recorded four straight very tight WEEKLY CLOSES as they have all finished within just .34 of each other. Could it be similar to the 4 week period ending between 11/11-12/2/16 near the 50 number as well which went on to see a lukewarm liftoff? I would say probably not as the 2016 period all CLOSED above 50, the opposite of the last 4 weeks. Lagging Tuesday were the financials as the XLF lost 3.4% on huge trade, Tuesday was accompanied by volume equal to the last 3 days of last week, undercutting its 200 day SMA. It has declined 9 of the last 12 days and now sits firmly in correction mode down 11% from most recent 52 week highs.

I do not happen to be a big fan of stocks moving on events, as I much prefer good old fashioned plain, organic buying on strong volume. Often times the move will be false and the stock reverses lower. However is you can find a name that did break higher on certain news and hold the break then you may have something. Below is the chart of SGMS and how it appeared in our Wednesday 5/15 Game Plan (it responded powerfully on 5/14 following Supreme Court legislation). The stock rushed past a 56.55 cup base trigger that day too, and the move has held firm. It has now CLOSED above the round 60 number for two consecutive weeks, with both finishing very taut within just five cents of each other. If this Friday can end up tight again it could potentially record an explosive move higher.

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Chugging Along

The transports are a closely watched group as they are a good barometer of economic health, as good purchased need to obviously be driven, flown or shipped places. I am monitoring the IYT overall and came away impressed last week how the ETF overcame a bearish engulfing candle on 5/22. It is on its first 3 week winning streak since the weeks ending 11/24-12/8/17 gaining more than 5% and all three weeks CLOSED at the top of their weekly range. Volume was soft but this action came as crude prices were going higher, of course until the end of last week. Below we take a look at a best in breed rail play CNI, first how it was presented in our Tuesday 5/1 Game Plan and then we take a present look.

Rails showing decent charts include CSX and CP, both off just 2 and 3% from there most recent 52 week highs. CNI is a Canadian transport play lower by 6% YTD and higher by 7% over the last one year period and sports a dividend yield of 1.8%. Earnings have been very negatively consistent with FIVE consecutive losses of .7, 1, 2, 1.9 and 3.4% on 4/24, 1/24, 10/25, 7/26 and 4/25/17. The stock is on a current 5 week winning streak which has risen more then 10%, but was immediately preceded bu a 9 of 11 week losing streak the weeks ending between 1/12-3/23 and now sits 9% off most recent 52 week highs. Enter CNI on a buy stop above its 200 day SMA at 78.75.

Trigger CNI 78.75.  Stop 76.25.

Taking a current view CNI the stock is now higher 8 of the last 9 weeks, with the lone lower week ending 5/4 losing just 5 pennies. It has gradually built the right side of its cup base, more success prone, and now sits just 2% off its most recent all time highs. Some may see a handle on the cup base but it is trading sideways, which has created a bull flag pattern.

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ChartSmarter Tuesday Game Plan 5/29/18

Markets for the most part finished in a lackluster fashion Friday heading into the long holiday weekend. The Nasdaq was the only of the big four indexes to gain and it did so tepidly, and it did shy away after coming within just 5 handles of a bull flag breakout. The Dow and S&P 500 lost .2% and the Russell 2000 fell .1%, and the latter has CLOSED the last 3 sessions extremely taut all within less than 2 handles. Falling rates on the 10 year with the TNX dropping 4 of the last 5 days since the bearish evening star pattern was completed on 5/18 failed to ignite stocks. Of course to begin with stocks tend to do well as rates are rising as it is a sign the economy is growing. Keep in mind that the TNX is touching its rising 50 day SMA for the initial time following its recent double bottom breakout, often an ideal entry point for a long. On a weekly basis it was good to see the Nasdaq lead with a 1.1% advance followed by the S&P 500 up .3%, the Dow .1% and the Russell 2000 was UNCH. On a YTD basis not much has changed as the Nasdaq still maintains a comfortable lead with a 7.7% jump so far. The Russell 2000 is in close pursuit up 5.9%, the S&P 500 by 1.8% and the Dow by a scant .1%.

Looking at individual groups Friday it was utilities that led once again and that is becoming a little bit to familiar. The XLU rose .4% and today it was the staples that were runners up as the XLP gained .2%, not the kind of one-two punch bulls would have liked to seen. Cyclicals via the XLY rose .15%, the only other major S&P sector to gain ground. Lagging badly yet again was energy as the XLE plummeted 2.6% as crude was hammered. I never speculate on what may have caused a move, but this could very well have been technically driven as the XLE had run into the 78 level that we have talked about for a few weeks now and failed as it it did in late '16 and early this year. On a weekly basis it was the same scenario as it was Friday with the XLU jumping 3.1% and scored its third 3% plus weekly gain since the week ending 2/16. To see how rare they are one would have to go back a year to see another move higher of that magnitude with a 4.1% gain the week ending 2/24/17. On the downside it was the XLE that was easily the biggest laggard lower by 4.5% for the week. It abruptly stopped a 6 week winning streak recording an ugly bearish engulfing candle in the process.

Software names have been anything but for awhile, and if tech can continue to lead the overall group will obviously benefit. One of the subsectors within software that have been resolute have been cyber security, with the exception of SYMC which is now lower by 38% off its most recent 52 week highs. Peers which have been contributing to the solid performance include FTNT and CYBR. Below is the chart of PANW and how it was presented in our Monday 4/9 Game Plan. The saying goes the longer the base the bigger the space (upon the breakout) and this stock cleared a 200.65 cup base trigger in a base nearly 3 years long. This week recorded its third weekly CLOSE above the very round 200 number, and if one "looks left" on the base they would see when the base began the stock was coming off an incredible run after bouncing off the round 40 number in November of '13. That is a pretty secure move, pun intended.

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ChartSmarter Friday Game Plan 5/25/18

Bears would be hard pressed to come up with ways to explain the PRICE action the last couple days with anything but bullish tones. The Nasdaq for one recorded a nice bullish engulfing candle Wednesday CLOSING nearly 100 handles off intraday lows and again Thursday it went out on highs, ending UNCH, but a hammer candle was registered. The bull flag is alive and well. The Russell 2000 is still lingering below Tuesdays bearish engulfing candle, but if has made a powerful run as of late and the action there can be forgiven. The VIX for a second straight day was above its 200 day SMA, yet finished 10% off intraday highs. For the week headed into Friday the Nasdaq is leading advancing .9% so far, followed by the S&P 500 and Dow rising .5 and .4% respectively.

Looking at individual groups it was again shaky leadership as the utilities led as the XLU rose .8%  and the industrials were runners up with the XLI gaining .5%. The cyclicals, via the XLY being the only other major S&P sector to rise Thursday, put up a nice showing as select retail names like KSS GPS URBN and even the laggard LB all rose more than 3%. LB acted well after an initial drop after earnings and was stopped at its 50 day SMA Thursday, a line it has been underneath all year thus far. Lagging were the financials down .7% which maybe were down due to a "sell the news" regulation event, but the only problem is they have not really rallied much overall recently. Those wondering if the market could stand on its own without the inclusion of energy are believing now that it can as the XLE is now down 4 of the last 5 sessions and the XLE lagged Thursday lower by 1.6%.

The internet group has been acting well and like any other space it is assorted. Below is the chart of SFIX, and how it was originally presented in our Monday 4/2 Game Plan. The name deals with retail, which group has been on fire, but its weakness leaving it now 33% off most recent 52 week highs is very concerning. The very round 20 number has played a pivotal role here as since the 3/20 session, the have been no CLOSES below 20 even though NINE days since then have been below intraday (notice the round 30 number pushed it back hard on 12/26-27/17). Trouble was brewing once the good looking WEEKLY bull flag failed to generate any follow through and a move under the symmetrical triangle has a measured move to single digits.

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ChartSmarter Thursday Game Plan 5/24/18

Markets registered decent intraday reversals Wednesday and it was the Nasdaq that put in the best effort. After Tuesdays bearish action it was pleasant to see, and the tech heavy index is now digesting the nearly 4% advance the two weeks ending between 5/4-11 very well. The handle on the Nasdaq cup base has a much better complexion after todays and it can also be viewed as a bull flag now. A move and CLOSE above 7425 could ignite a measured move of 425 handles. There were moves of 3% plus in several Nasdaq 100 names that contributed handsomely to tech dominance including NFLX, CTRP, ALGN and MELI. The VIX reversed hard after an intraday push above its 200 day SMA, which is still sloping upward. Looking at some "risk on" ETFs the JNK is starting to coil and it could be telling us something. A look at the Bollinger Bands on this ETF shows a squeeze developing as the bands are as tight as they have been in all of 2018. Will it thrust the most hated bull market even higher?

Looking at individual groups there was some disparity among the major S&P sectors. Leadership today was somewhat suspect as the utilities rose with the XLU higher by .9%, and so far for the week headed into Thursday it is a clear winner up nearly 2%. Not far behind bulls welcomed the sight of the cyclicals and technology acting well with the XLY and XLK higher, both by .7%. Retail names were the main reason the cyclicals did well, as LOW reported a number that put the stock up more than 10% and clearing the very round 90 number which set it back a couple of times since falling below the figure on 2/28. TIF shined more than 23%, pun intended, hitting all time highs. RL added more than 14% and has now doubled since the first week of June last year. Anyone remember the phrase "Amazoned" as it related to the death or retail? Acting poorly Thursday were the financials as the XLF lost .7% and we speak of its chart in the next paragraph a bit.

The financials have been in the news plenty of late with the talk of interest rates and their overall lack of vigor recently. The XLF has fallen 6 of the last 9 sessions after a failed bull flag breakout on Wednesday. Flying under the radar in this diverse space has been the strength in the investment banking advisory names. Below is the chart of EVR and how it was presented in our Thursday 4/26 Game Plan. This name sported a double bottom trigger just underneath the very round par figure, in a base that began with a bearish evening star completed on 2/2 at all time highs. Since the breakout on 4/25 it has acted very well, and we know the best breakouts tend to work out right away, advancing 17 of the last 21 days. It is always a good sign to see peers acting well in the sector and one has to look no further than MC, which since the start of April has declined just NINE times as it traded from the very round 50 number to where it is having some issues with the 60 numbers currently.

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