ChartSmarter Wednesday Game Plan 10/1/14

Markets displayed more erratic behavior on Tuesday and settled lower with the Nasdaq and S&P 500 down by .3%. Both the Nasdaq and S&P 500 were lower by almost one half percent twice in the session, and both went positive briefly in the late morning. As we discussed in yesterdays opening paragraph the defensive staples and utilities were among the winners today, actually they were the only major sectors that eked out a gain. At the expense of sounding like a broken record energy and materials were hit the hardest today. The XLB broke below a bearish rising wedge we pointed out last Friday (chart below). We noticed perhaps some tiring in the top performing transport sector today, and that can be a warning sign of future, sustained weakness. Did I use the word sustained with the word weakness? I can hear the gasps. Looking at the IYT it closed today just above the round 150 handle, which aligns with the 50 day SMA. Five of the last 8 sessions finished strongly upon their lows. Some of the names in the retail space are experiencing difficulty. FINL which recorded a beautiful breakout above a 30.43 cup with handle trigger on 9/11 is a quick 21% off recent highs. Exactly the opposite of what you want to see, as we know the best breakouts work out right away. Lets not forget the woes of KATE and KORS, down 39 and 29% from their recent 52 week highs. Stocks on sale very often turn into value traps. Ironic that those two aforementioned names are luxury goods.