ChartSmarter Tuesday Game Plan 10/11/16

Markets began the week in firm fashion as futures were higher by triple digits and bullishly held for the most part, almost akin to a horse going wire to wire. Bulls tend to prefer a soft open and a sturdy close and bears salivate with a decent open and frail finish. When I did see the futures up I thought to myself there would be a good possibility they would be surrendered by 4pm, as the prior 3 Mondays both the Nasdaq and S&P 500 fell. The S&P 500 still can not make the quantum leap above the 50 day SMA, but if it does it will break ABOVE a bearish head and shoulders pattern and moves that break in the opposite direction of how they normally should can be powerful. Seasonality does suggest that Octobers tend to find bottoms early in the month and one can assume algorithms may be programmed to take advantage. Energy and technology were among the winning sectors of the day and the XLE today briefly rose above a double top ever so slightly with intraweek highs of 71.93 and 71.94 ending 11/6/15 and 9/9/16 respectively. Looking at the longer term view of the ETF it shows how the round numbers came into play with the very round par number halting its progress the seven weeks ending between 6/20-8/1/14 (all 7 traded above 100 intraweek, but only 3 CLOSED above and the week ending 8/1 slipped 4% and did not find a bottom until hitting the very round 50 figure the week ending 1/22/16. Is it inconceivable to think the XLE could not make a round trip to 100 over the couple of quarters? I think not. Defensive groups continue to languish and remain under pressure and the utilities are a great example, even though it showed a bit of strength Monday, as the second best performer among the top 11 S&P sectors. The XLU is no flagging underneath its 200 day SMA and although I am not inclined to do anything on the short side and one has to think that many big funds are unwinding positions that went against them. The staples rose marginally although they were one of the worst performing groups. Bears still have sections of the market to hang their hats on. Restaurants, select retail names and homebuilders look dicey. Below is the chart of former best of breed DHI and how it was presented in our Thursday Game Plan last week and is now flirting with losing a bear flag pattern.