ChartSmarter Monday Game Plan 2/1/16

Markets ended the month of January Friday on a very high note as the S&P 500 jumped 2.5% and the Nasdaq 2.4%. For the week the S&P 500 vastly outperformed the Nasdaq rising 1.7 to .5% margin. Not surprisingly on a YTD basis it is acting better down 4.9% while the Nasdaq is off by 7.6%. The benchmarks did endure the worst start to a year ever this January, but the impressive finish to the week has not dampened the enthusiasm of bears. There are an abundance of players who are calling for markets to fall, whether it be a Gundlach or even a Demark, who called the low almost to the hour last on 1/20. He called for a retracement, suggesting a 5-8% countertrend rally, where if you do the math from the 1812 lows to Fridays close has up 7%. I look at the Nasdaq weekly chart, that produced a second consecutive bullish weekly hammer which has been very positive in the past (the chart below is from last Mondays Game Plan showing the behavior after a weekly hammer candle). Remember when the majority of market participants have almost a consensus view that we will quickly be revisiting the August lows, and perhaps beyond, the opposite has a greater probability of happening. The S&P 500 which took out the August lows could potentially be setting up a nice double bottom pattern. Do not get me wrong. I remain in the bearish camp as plenty of damage has been done, but one has to keep openminded and investors can be ill served by following the herd. The only sectors to finish higher in January were not the most racy with the utility, telcos and consumer staples.