ChartSmarter Monday Game Plan 10/17/16

Markets displayed classic bearish behavior to close out the week Friday starting on highs and finishing near the lows. The Nasdaq and S&P 500 CLOSED fractionally higher well off early session highs of .8% and the benchmark bulls did not want to see underperform, the Russell 2000 fell .3%. The Nasdaq met resistance almost precisely at its 50 day SMA and all three of the aforementioned indexes are below that important line (the only one who’s 50 day is curling lower presently however is the S&P 500). This week the Nasdaq lost 1.5% and finished BELOW a 3 week tight pattern, with the three ending between 9/23-10/7 ending all within less than 20 handles. Normally moves whichever way they break with that pattern could be powerful. The S&P 500 lost 1%. Friday the best performing group were the financials with the XLF higher by .5% after many money centers posted good numbers this morning. The stocks did for the most part end the day near lows with JPM WFC and C all reporting before the open. C began and concluded the week with bearish reversals at the very round 50 number. Healthcare, via the XLV, surrendered the most Friday giving up .6% and it was also the weeks worst actor sliding 3.1% in the second largest weekly trade in the last 6 months (it has declined 8 of the last 10 weeks). Friday the ETF recorded a bearish engulfing candle, however they normally work best near tops, and registered its first weekly CLOSE below its 200 day SMA since the 6/27 session. If you remove the 3 Brexit sessions in late June, one can interpret the chart as breaking below a bearish head and shoulders pattern with an upward slanting neckline in a formation that began in mid May. If markets do soften going forward one group I will continue to monitor would be the discretionary names. Here is a bullet point which I took verbatim from the Grindstone Financial Blog this morning “Consumers reporting that they may miss a credit card payment hit its highest level since 2014. Most worrisome was a real increase in those reporting concerns with incomes over $100,000 – which is indicative of a stretched high-end consumer.” I do not use this type of information in my trade executions, but the charts have been echoing a similar narrative. Four of the last six months on the XLY recorded doji candles which do indicate indecision and could warn early of a directional trend. Below is the chart of the ETFs 8th largest component, NKE, and how it was profiled in our Tuesday 9/20 Game Plan. The stock is on a current 7 week losing streak and notice the power of the 3 week tight pattern as the weeks ending between 9/9-23 all CLOSED within just .18 of each other and led to the week ending 9/30’s 4.5% slump in double average weekly trade. In Mondays Game Plan we have all short scenarios related to the retail space, the first time we have done that in years.