ChartSmarter Thursday Game Plan 2/18/16

Markets put in a powerful third consecutive session of gains Wednesday and once again the Nasdaq outperformed. The tech rich benchmark rose by 2.2% while the S&P 500 tacked on 1.65%. One gets the sense that investors have been accustomed to one or two session rallies and then a swift return to the nasty downturn. To be sure plenty of technical damage has been done, but lets keep in mind within bear markets some of the most violent upswings will expose themselves. Looking back at past bear markets, rallies have a typical duration of 2-3 months in which they can motor higher between 10-20%. If we take the S&P 500 lows at 1810 a 10% advance would put us just under the very round 2000 number. Energy and materials were the leaders and once again the defensive utilities lagged. Today revealed why Saudi Arabia has become more cooperative in regards to oil output as Moody’s sliced its credit ratings 2 levels. Oil gushed higher on the news by 5.5%, pun intended. Another sector that I feel should be garnering more attention is the action in the transports. Many subsectors in the group are acting bullishly whether it be the airlines, rails, truckers or the logistic plays (below is the chart of LSTR how it was written in our Tuesday 2/9 Game Plan). Looking at the IYT it is striving for a 5th consecutive weekly gain and the last 4 have all CLOSED in the upper half of their weekly ranges gaining gradually to the tune of 1-2%. This week volume is exploding and it has risen 4% already. Lets keep in mind this is the sector that was the canary in the coal mine, perhaps early, but it tipped off the markets to future softness. The group started to underperform after a bearish weekly shooting star candle the week ending 11/28/14. Is their emergence recently as a burgeoning leader giving us some clues that this rally may have some stronger quadriceps than we think?