ChartSmarter Wednesday Game Plan 5/25/16

Markets started Tuesdays session in firm ground and just kept gaining altitude. The Nasdaq made the strongest impression rising 2%, and a powerful move by that index as well as the the Russell 2000 up 2.1% is a very welcome sign for the bulls. It is seen as a “risk on” environment. The tech rich benchmark is looking to outperform the S&P 500 for a third consecutive week with a gain of 1.9% compared to the S&P 500’s 1.1% rise so far this week. The Nasdaq chart can now be interpreted in a positive fashion with todays move above the 50 and 200 day SMAs now looking like an inverse head and shoulders pattern with a slanted neckline that began last November. One gets the sense that the abundance of cash on the sidelines along with the capital that has been non stop flowing out of equites and into bonds may be on the verge of reversing itself. In short it is called FOMO. The groups which have been strong as of late were the laggards Tuesday with the energy and material sectors being left behind. Perhaps this could be the beginning of a rotation out of these names and into technology. This is healthy action as diverse groups at one time or another have led, be it the transports or the utilities and staples. Money seems to be flowing into the financial space too and this space has a large ecosystem. Whether it be the credit cards, banks, or exchanges to name a few, the sectors recent strength is a bullish development. Below is the chart of NDAQ which we highlighted in our Thursday 5/5 Game Plan as we were fond of the bullish engulfing candle on 5/2. Today it burst above its 50 day SMA taking out a double bottom trigger of 65.35. One can now add through a cup base trigger of 67.71 which would be an all time high if taken out.