ChartSmarter Tuesday Game Plan 6/28/16

Markets spent the entire session well underwater but did finish mildly off intraday lows. It was not entirely unexpected as 6 of the last 7 times the S&P 500 CLOSED lower by more than 3% on a Friday the following Monday was fell by an average of an additional 2.3%. The S&P 500 did manage to end right at the very round 2000 number, for those who have been under a rock the last few days it is not the 2100 handle we were focusing on recently. The Nasdaq took the brunt of the drop Monday as it slumped 2.4% and its weakness continues as it now trades 12% off recent 52 week highs, double the S&P 500 which is just 6% off its. Both benchmarks are now firmly underneath their 200 day SMAs and it is a time to play defense. The art of picking exact bottoms does not exist and it is safer to look for some bottoming patterns with candlesticks being my favorite before venturing back in. If one needs to deploy cash, the utilities shined once again Monday as the only major S&P sector to gain ground by .9% and we did discuss the potential for a strong move above the 51 number Friday. Looking back on the decline earlier this year the S&P 500 recorded a bullish hammer candle on 1/20 which was retested on 2/11 for good measure before markets caught a good footing. The Russell 2000 completed a bullish morning star pattern on 2/12 before it lifted off. The market is not forgiving and the way it has dismantled some best of breed names should put investors on the sidelines for the time being. Take for example PVH which has lost 18% in just the last 2 sessions alone and is now 30% off recent 52 week highs. It was the energy and materials groups which both fell more than 3% Monday (finnies were not far behind with the XLF dropping 2.8%) which were the worst performers courtesy of a strong greenback. Too many were one one side of the ship there and that trade may need some time to unwind which should continue to put pressure on the risk on names. The UUP however did stop at a declining 200 day SMA Monday which potentially could stall anymore short covering.