ChartSmarter Monday Game Plan 8/15/16

Markets put in some very slight bifurcation to end the week Friday with the Nasdaq higher by .1% and the S&P 500 lower by the same margin. For the week both mustered small gains with the Nasdaq now advancing 7 consecutive weeks gaining .2% and the S&P 500 eking out a .05% rise. Trade continues to be very taut with the S&P 500 CLOSING each day this past week within 10 handles of each other. Is the action here stalling or just a pause to catch its breath before another powerful thrust higher? There are some warnings signs that a short term top in the benchmark may be upon us, which could be healthy, with a couple of doji candles on Tuesday and Friday of this week which may indicate some fatigue from the prior trend. Remember however that digestive periods do normally continue in the direction in which they came from and trends are more likely to persist than reverse. Looking at the Bollinger Bands on the S&P 500 show a “squeeze” where the bands are the tightest they have been within the last 6 months. This usually signals a powerful move ahead, but the direction is not known (chart below). Looking at sector performance this week it was the energy group which was a clear leader with the XLE’s gain of 1.7% almost doubling the second best behaving staples. Interesting is retails resilience in the face of crude trying to mount a comeback. The XRT is right at a double bottom with handle trigger of 45.60 which one could interpret it as a bullish inverse head and shoulders formation too. A breakout would have a measured move to the round 50 number, a level that weighed down the ETF between the months of March-July 2015.