ChartSmarter Wednesday Game Plan 7/13/16

Markets once again powered higher most likely with many still on the sidelines and encouraging is the Nasdaq which is starting to spread its wings higher 5 consecutive sessions a 9 of the last 10. Perhaps more promising is the outperformance of the Russell 2000 which nearly doubled the gains of the S&P 500 and Nasdaq advancing 1.3%. When they are acting well there is a feeling of a risk on attitude. Investors who have missed the train are certainly feeling left out and that is basically the definition of a bull market when participants are not let in. The pullback they are waiting for rarely comes in. And then you may have PM’s who are underweight equities and it is a good reminder of something I heard a few months back at a speech by Ari Wald. He stated the reason many managers never beat the S&P 500 benchmark is because they do not let there winners run. The vast majority of traders cut their best holdings to soon, and of course the S&P 500 lets its winners live, with the exception of some occasional rebalancing. Sure it has been very tough to hold through recent drawdowns, but long term bulls have to be feeling good about themselves. But lets not confuse brains with a bull market and keep in mind that the time to be cautious and vigilant is when one has experienced great success and that comes in any endeavor as one often lets their guard down during these times. It just comes down to respecting price action. The best performing groups Tuesday were the “risk on” names with energy having a rare strong session. Looking at the UUP it is at a critical juncture here with a bull flag completed BELOW its 200 day SMA, which normally makes it failure prone. The key word there is normally, as price action should always be your guide.