Markets for a second consecutive session spent almost the entire day underwater, but a late day push put the Nasdaq fractionally above the UNCH line. The S&P 500 finished marginally lower. For the holiday shortened week both the Nasdaq and S&P 500 snapped 5 week winning streaks with the Nasdaq “outperforming” down .5% compared with the S&P 500 surrendering .7%. The Nasdaq did record a bullish counterattack candle Thursday, but still significantly lags the S&P 500 on a YTD basis down 4.7% in 2016 thus far. The S&P 500 slipped back into negative territory this year, but only slightly off .4%. Risk appetite seems to be fluctuating with Thursdays best performing groups coming from the utilities and communication sectors, although energy and materials did end up in the green today. The XLE also registered a bullish counterattack candle today too (and these patterns work better at or near bottoms and the ETF is 26% off recent 52 week highs) near the round 60 handle which was support previously on a weekly basis the weeks ending 8/28 and 10/2/15 (it bounced off the round 50 figure almost precisely the week ending 1/22). Thursday El-Erian joined the bearish chorus, joining Gundlach and DeMark recently and this should act as fuel to the ongoing rally. Once they turn positive one should become more concerned. Gold is behaving like the market still wants higher as the GLD dropped 2.9% this week. The overall commodity complex seems like it has legs as the vast majority of articles I read are negative. Inflows into bonds was positive for a 13th consecutive week and that suggests enthusiasm for equities remains muted. Below is the chart of TLT that we posted yesterday in our first paragraph, and follow through from Wednesday’s breakout above a bullish falling wedge was not inspiring. Today we added the TLT:SPX ratio at the bottom of the chart which may give some clues as to the stock markets direction next week.

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