ChartSmarter Wednesday Game Plan 5/11/16

Markets powered higher Tuesday with broad participation from a variety of sectors. It was pretty uniform across the board with the Nasdaq, S&P 500 and the Dow all rising by 1.25%. It was energy, materials and the industrial groups that produced the best gains, and what bulls like the three lagging groups came from the defensive staples, healthcare and utilities (they all advanced Tuesday). We could provide any number of adages, like “bull markets will not let you in”, “fear of missing out”, but in the end it really just boils down to price action. One can put the fanciest charts out there with the most exotic indicators, however PRICE action is all that is relevant. Monday we spoke of the markets clever ability to dodge pitfalls and thrust higher (below is the chart of GPS which was highlighted in our Tuesday 4/19 Game Plan). Headlines recently have included the big hedge fund managers out there, be it Carl Ichan who reportedly has a massive short position, Druckenmiller pleading with investors to buy gold. Perhaps the one thing that worries me the most is the volatility in crude. It seems to go higher or lower to the tune of 2-3% each day and that type of erratic trade is normally associated with market tops. If the correlation with crude is to continue this is something investors should keep in the back of their minds. One could argue that oil is elevating on non economic news, whether it is the Canadian fires, or Nigerian supplies dwindling on regional unrest, or Saudi policy changes, but again PRICE action is all that matters. If crude is topping, and that is a big IF, it could put a wrench in the indexes climb, but for the time being one must respect probably one of the oldest adages, “the trend is your friend”. Anyone who would like a full copy of Wednesdays Game Plan email me at chartsmarterblog@gmail.com.