Markets began the New Year with some intraday bearish reversals, but a late session rally witnessed both the S&P 500 and Nasdaq rising .85%. Looking back upon last week over the weekend as I was abroad one could see the negative candles the benchmarks were producing. The Nasdaq recorded a bearish shooting star on Tuesday at the round 5500 number and Wednesday registered a bearish engulfing candle. Both these sessions did so at all time highs and add to that the failed breakout above a bull flag for the Nasdaq and one comes away with the belief that a pause is in order. Last week the S&P 500 fell 1.1% and the Nasdaq by 1.5% on holiday shortened weeks which tend to be positive. There is a saying that “as goes January as go the markets” and that is precisely why one needs to put the utmost importance on PRICE action. Obviously this year has just begun but looking at the previous three Januarys which all fell by 5.1, 3.1 and 3.6% in ’16, ’15 and ’14 respectively they each went on to end the year higher. There were some standout sectors Tuesday with healthcare, 2016’s worst performing group, advancing the strongest today with the XLV higher by 1.3%, followed by energy with the XLE up 1.1% (was the best performing sector in 2016). Some retail names have just been brutalized and among them are the casual diners which should feel the pain that consumers are experiencing. Below is the chart of DPZ and how it appeared in our Wednesday 12/21 Game Plan. It has long been a best of breed name in the sector, yet all good things must come to an end. Today it recorded its 15th consecutive day CLOSING below its 50 day SMA which is now beginning to curl lower for the first time since last April. To its credit it did fill in a gap on 11/14 from the 10/17 session and rally but volume trends have begun to sour and trade which was once tight and clean has now become bearishly loose and sloppy.
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