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ChartSmarter Wednesday Game Plan 8/15/18

Markets:

  • Turnaround Tuesday was in force today and it was the risk on indexes that fared best. The Nasdaq and Russell 2000 rose by .6 and 1% respectively, and the latter is honing in on its nemesis, the round 1700 figure. I come away impressed with its tenacity and its continued touches upon the line in my opinion will only weakens the bears resolve there. Of course the final arbiter is PRICE alone and keep in mind a break above 1700 would be a move through a bull flag, which has a measured move to 160 handles.
  • The bond market usually give clues ahead of the overall stock market direction. Thats the belief as the smart money is there and its much larger. Looking at the 10 year yield it is within the confines of a symmetrical triangle. Notice the trouble with the "round" 3 number as it was resistance on 6/13 and 8/1. The pattern began with the completion of a classic evening star pattern on 5/18, which resulted in a 50 basis point plunge in just 6 sessions. The JNK is showing a "risk on" appetite and sports a bull flag formation. Last weeks loss interrupted a 5 week winning streak, its first such feat in 10 months. 

Sectors:

  • The rally was broad Tuesday and it was the cyclicals that impressed the most with the XLY higher by 1%. The diverse group has been pushed upward by traditional retail names and others such as casual diners. The brick and mortar plays have been helped by a vibrant consumer and the combination of unprofitable stores being closed down. Restaurants are of course benefitting from the stronger economy and stocks like CMG and WING and wing are sitting deliciously right smack at 52 week highs, pun intended.
  • Lagging Tuesday, but still advancing were the energy and utility sectors. The XLE needs to hold 73.98 to continue the lower highs and higher highs within its current symmetrical triangle that began in May. The XLU is trading very sloppy, but on its weekly chart things look a bit better as there is the possibility of a bullish 3 week tight pattern to emerge. The ETF is higher 6 of the last 9 weeks and consolidating the 4 week winning streak ending between 6/15-7/6 which added a combined 8.8%. The right side of its cup base is looking healthy as it grinds higher gradually, and has a potential trigger of 57.33.

Special Situations:

  • Retail names have been doing plenty of the heavy lifting for the overall markets this year, as the XRT is now decisively above the very round 50 number. The ETF rose 2.3% today and the group is very diverse and it is not hard to find leaders within. Below is the chart of BOOT and how it appeared in our Friday 8/10 Game Plan. This name broke above 26.35 cup base trigger on 8/8, and immediately reversed the next session recording an ugly shooting star candle showing that although they are useful, PRICE action reigns supreme. To add to the bullish narrative the trigger for the short cup base could have been interpreted as a handle in a much larger base that began the week ending 7/17/15. This name should be pulled magnetically toward those all time highs in the mid 34's toward the end of the year.

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ChartSmarter Tuesday Game Plan 8/14/18

Markets:

  • There is a saying that cash is king. In an uncertain market, when is it not, it can be considered a valuable position. I am not disputing the statement, but one has to realize that some funds MUST have capital deployed. And I only make this point as the US markets may be the best place to put money to work. Keep in mind money is put to work where it is treated best and that by far is here at home, as returns firmly suggest. We raised this argument last week and it is a valid one if domestic benchmarks can carry the entire weight. Only time will tell, but the ankle weights on the US benchmarks are starting to show some fatigue.
  • The Nasdaq managed to show a bit of strength Monday, but it was muted as the tech heavy index still lost .25%, but outperformed the major averages. Concerning is the Russell 2000's recent action. The round 1700 number has been a stern roadblock and Monday slumped by .7%. Its 50 day SMA is getting plenty of PRICE attention, but the bulls are still in control as its 50 and 200 day SMAs are sloping higher. The VIX recorded its third straight winning session, its first in 2 months, and it did CLOSE above its 200 day SMA. 

Sectors:

  • Strength was very select among the major S&P sectors as the defensive utilities group was the leader with the XLU rising a frail .2%. Healthcare, technology and staples were not far behind being the only other groups that came within the UNCH mark Monday. The XLV has the possibility of forming a 3 week tight pattern, as the last 2 weeks CLOSED very taut within just .18 of each other. In my humble opinion, that is bullish as it fights with the very round 90 number and trying to avoid a double top. The last time 90 was touched was in late January, before a rapid descent. The fact that it is not shying away this time around speaks volumes.
  • Lagging Monday were the financials, materials and energy. The XLF did complete a bullish 3 week tight pattern last Friday as the previous 3 all CLOSED within just .16 of each other. This week is obviously off to a poor start as the ETF was lower by 1% today, but the week is still young and the set up is still in play. Looking at the XLE since breaking below its 50 day SMA on 6/15 it has been unable to show any consistency staying above it. Additionally now the line is sloping lower for the first time since mid April, even as GDP put a recent impressive print. 

Special Situations:

  • One should always keep a close eye of recent new issues, ones that go public in the last 2 years, as these can prove to be big winners going forward. Below is the chart of YEXT and how it appeared in our Tuesday 7/10 Game Plan. It came public in April '17 and had been trading between 11-15 its first year of trading. It took off after breaking above 15 the week ending 6/1 on a CLOSING basis, with a huge move of more than 14%, and overall has moved 50% since June. Not surprisingly it had some problems with the very round 20 number, touching it for the first time between this June-July, before busting above the week ending 7/27 screaming higher by almost 17%. The stock broke above a bull flag and now looks to be forming another one and add to wit a buy stop, and as always CLOSE, above 23.

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ChartSmarter Monday Game Plan 8/13/18

Markets:

  • As the saying goes when the US catches a cold the rest of the world sneezes, but the worry this week is can the domestic benchmarks continue to carry the load achieving the lion share of gains. The dispersion is widening as for example the S&P 500 is up 6% YTD and Germany is now in correction mode down 10%. Friday it was the Russell 2000 that "outperformed" losing .2%, but it was higher during market hours at one point. That small cap benchmark is UP 10% YTD, and three days this week it came within 5 handles of the line in the sand mark of 1700 before shying away. That should be the level to watch again next week.
  • On a weekly basis the Russell 2000 gained .8%, the Nasdaq .3, the S&P 500 lost .2 and the Dow fell .6%. The S&P 500 came within 9 handles of touching all time highs before backing off, and one has to wonder if it is heading back once again to touch its magic 2800 figure. That number has been touched plenty since breaking above on 7/13, and the argument there is whether the abundance of contact strengthens or weakens it. The good news for the bulls is that the upward sloping 50 day SMA is catching up to 2800 now and that should give an advantage to the bulls. The leading Nasdaq did record a bearish shooting star this week, although the length of the candle was very small.
  • The VIX came alive Friday as it jumped nearly 17%, demonstrating solid follow through after Thursdays bullish hammer candle. Its bullish falling wedge is alive and well, but it was stopped on a CLOSING basis at its downward sloping 50 day SMA, after coming very near its upward sloping 200 day SMA. The latter line has been stubborn resistance the last 4 weeks, and on its RSI is now in the bullish zone above 50 at 53. Since March it has struggled when contacting 60. Next week should be very interesting indeed.

Sectors:

  • Energy was the only major S&P sector to advance Friday with the XLE higher by .6%. The ETF CLOSED in the lower half of the weekly range for the second straight week, but to be fair this week fell by two pennies. The fund still looks on the weekly chart bullish with a bull flag pattern. The multitude of negative earnings reactions would have me leaning bearish but again, there is nothing to do until a breakout to this upside occurs. The weekly candles lean bearish as well, but as we all know markets attempt to confound the most.
  • On a weekly basis it was the staples that were hardest hit with the XLP dropping 1.9%. Its lost ground 4 straight sessions after the bearish evening star pattern which was completed Tuesday after a doji candle was recorded Monday. The ETF still remains above its 200 day SMA, and its chart looks similar to the USB daily chart. It remains 10% off most recent 52 week highs and volume was soft but it needs to charge higher next week as the uptrend is still intact but it does not want to undercut both its 50/200 day SMAs that lie in close proximity.

Special Situations:

  • Technical analysis is far from a science and like any other strategy there is plenty of room for failure. One of the huge benefits however is that is gives investors a clear out to limit losses. Keeping losers small is key to capital preservation and below is an excellent example. Here is MTCH and how it was presented in our Tuesday 7/31 Game Plan. We viewed it as a short as it broke decisively underneath a symmetrical triangle. It reacted to earnings on 8/8 and for a FIFTH consecutive time advanced this most recent time by 17.3% on 8/8. If one wants to Monday morning quarterback it could say it overreacted to the FB announcement of entering the dating space on 5/1 cratering more than 22% on gigantic trade. The loss was small due to a tight stop and those that did not adhere to discipline had to endure a 34% gain this week.

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ChartSmarter Friday Game Plan 8/10/18

Markets:

  • The Nasdaq made it eight straight advances Thursday, albeit barely. It rose less than 4 handles today and just missed CLOSING above the 7900 number. The S&P 500 continues to trade in such a tight fashion, its chart looks like a stock that has been bought out. Remarkably for the third consecutive day its daily range was within 10 handles. And not to be left out of the bullish discussion, the Dow even though it is 4% off most recent all time highs, is acting well this week. Heading into Friday it is up .2% for the week, looking for a SIXTH straight weekly gain. If that happens would be the first since an 8 week streak between last September-November.
  • The VIX seems to have found a floor here near the very round 10 number, today coming with .17 of touching the actual number precisely. For the third straight session it CLOSED well off its lows with yet another bottoming candle Thursday, a powerful bullish hammer. This instrument is certainly in a downtrend, but like a wounded animal one has to be careful of its bite. It can be volatile as it approached to very round 20 number this April-June before quickly reversing. It should remain constrained near these levels for sometime, but I am getting the feeling that something is brewing.

Sectors:

  • Materials and cyclicals led the way on Thursday with the XLB posting a .5% advance. The ETF sits 7% of most recent 52 week highs and has been having issues CLOSING above the round 60 number. On a weekly basis it has achieved just one finish above 60 since the week ending 3/9. One of the better looking weekly chart ETFs is the XLY. Heading into Friday it has added 1.6% and is looking at a potential 3 week tight pattern breakout as the last 3 weeks all CLOSED within just .51 of each other. AMZN, that we spoke about yesterday, has a huge say in the XLY being its largest component at 25%. 
  • Lagging today were the financial and energy groups. The XLF and XLE lost .6 and .9% respectively. The XLE is lower by .5% this week, showing some follow through after last weeks bearish dark cloud cover candle that slipped 1.8%. Earnings from names in the space continue to flow in, pun intended, and they disappointed including OXY, MUR and FANG. Although both of the aforementioned ETFs are 6 and 7% off most recent 52 week highs, the XLF looks more attractive to me as it trades tight following the 7/20 and 7/27 weeks which both rose 2.1%.

Special Situations:

  • China has been in the news plenty as of late, and many of there names have suffered somewhat from the tariff discussion. As always technicians prefer to rely solely on PRICE action, but one can look for names that are holding up somewhat well during the struggle. Below is the chart of MOMO, and how it appeared in our Thursday 8/2 Game Plan. It has not demonstrated particular relative strength as it sits 23% off most recent 52 week highs, somewhat in line with the FXI's 20% drop. But one has to respect the technical aspects of the chart. It successfully filled in a gap from 5/25 and has held the round 40 number too. On its weekly chart it has advanced nearly 4% so far and has the look of a bullish engulfing candle.

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ChartSmarter Thursday Game Plan 8/9/18

Markets:

  • The old saying goes "never sell a dull market". Of course it is August and things tend to slow down, but many would argue that would add to volatility. The major indexes have been trading in very tight daily ranges. The Nasdaq on Tuesday had a range of less than 30 handles. The S&P 500 on Tuesday recorded its tightest trading day of 2018, (h/t Jonathan Krinsky). For the benchmarks to be doing this right near all time highs has to be considered bullish in my opinion. The Nasdaq seems to be pulled toward the very round 8000 number, which is just less than 1.5% away.
  • The Russell 2000 is sneakily doing well as it registered its fifth consecutive CLOSE above the line, with nearly all of them coming into contact with it. Most likely this is demonstrating institutional support. Remember it has not had back to back CLOSES above the round 1700 number, and it will be critical next time around to decisively break through. The small cap index did finish above the figure on 6/20, 7/9 and 7/19 with all of the next sessions ending below 1700. A fourth time around may be to much on bulls patience.

Sectors:

  • "Leading" the way Wednesday were technology and cyclicals as the XLK and XLY rising .3 and .1%. The gains were modest, but the XLK is now in a current 7 session winning streak with a rapid V shaped recovery off its upward sloping 50 day SMA. Keep in mind its 70.52 cup with handle breakout trigger has been battle tested and has now recaptured its 72.48 cup base breakout trigger. AMZN has been a big contributor the the funds gains as it by 3.5% this week already after the prior four weeks all CLOSED very taut within just 10.26 of each other. Get your $1 Trillion AMZN hats ready.
  • For a second straight session it was the defensive groups that struggled with utilities, staples and energy all falling between .5-.8%. The XLP is headed for a test of its 200 day SMA, which it broke above last month having been underneath the secular line since the beginning of February. For that reason I believe it should hold. The ETF did follow through after the completion on a bearish evening star formation Tuesday, but those are more effective when happening near all time highs. 

Special Situations:

The energy group continues to be in focus with the load of earnings coming in and it has not been pretty. Names like PE, APC, XEC and NBL all sported decent set ups that were never taken out. Below is the chart of WLL, another best of breed play, and how it appeared in our Thursday 8/2 Game Plan. We were WRONG, but the stop was never taken out, and it could be a failed trade, but momentum on the downside is picking up once again. It broke underneath a bearish head and shoulders formation which carries a measured move to 36. Stay short below the very round 50 number. It is looking at a potential 4 week losing streak and currently sits 16% off most recent 52 week highs.

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