Markets cut well into early morning losses Thursday, but one gets the feeling the burden of proof with each passing day is being handed to the bulls as benchmarks continue to hesitate near recent highs. There does seem like there is excessive pessimism and the S&P 500 did hold the 2120 range which was just above the big double bottom breakout above 2113 on 7/8. Todays intraday lows did undercut the 9/12 lows so the chart could be setting up another double bottom pattern and one has to respect todays bullish hammer candle. The Russell 2000 was the days clear laggard today as it dropped .9%. Perhaps that index can inspire some confidence like it has this May, June and September in quickly recapturing its 50 day SMA after just a few sessions. Looking on the weekly charts the Nasdaq last week recorded a bearish harami and this week just missed by 2 handles engulfing the prior 3. Heading into Friday the Nasdaq is lower by 1.6% and the S&P 500 by 1.1%. The defensive categories were the flavor with the utilities acting the strongest with the XLU higher by 1.2% followed by healthcare and staples. Lagging were the financials with the XLF falling 1% and once again the ETF did shy away from the round 20 number with a bearish gravestone doji candle on Monday. Below is the chart of ICE as it appeared in our Monday 10/3 Game Plan, and the last 3 sessions have traded below 265 which has filled in the gap from the 8/3 session which doubled up as a retest of a cup with handle breakout. Energy underwhelmed Thursday but the XLE did bounce off its rising 50 day SMA and did manage to CLOSE above the round 70 number. A CLOSE near these levels tomorrow would complete a bullish 3 week tight pattern, the last 2 both finished at 70.61, which could lead to explosive moves, a bullish play by William O’Neill.

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