ChartSmarter Thursday Game Plan 2/25/16

Markets recorded powerful reversals Wednesday and once again it was the Nasdaq outperforming. In fact tech was the best behaved group among all the S&P major sectors (consumer discretionary third), so those questioning the shaky leadership were unable to use that excuse today. Materials and financials were the only industries lower Wednesday. The Nasdaq rose more than double that of the S&P 500 higher by .9%. The markets job is to confound the most and it did so brilliantly today as the benchmarks displayed bull market traits starting on lows on going out near session highs. After Tuesday weakness and an anemic start today one would have not blamed the indexes rolling over. The averages took their cue form the rebound in crude and at their worst levels the benchmarks were lower almost 2%. Energy along with tech did most of the heavy lifting today and as we looked at the energy ETF earlier this week, lets delve into a sub group within tech, the semiconductors. Glancing at the SMH it is now grappling with a big round number of 50 on the upside (XLE’s bounce began at that figure the week ending 1/22). Some names in the space acted well Wednesday including AVGO SWKS MXIM and NXPI. The SMH chart completed a bullish morning star pattern last week with a nice hammer candle. Looking back further on the weekly downturns were well telegraphed with bearish engulfing weeks ending 6/5 and 12/11 falling 3.9 and 4.3% respectively (notice the 3/9 week met resistance at the round 60 handle). Today the chart recorded a bullish engulfing candle stopping just short of both the round 50 number and its declining to day SMA. The bears remain in control until a CLOSE above 50 for a few sessions.