Markets finished an ugly week with the major averages giving up all there early afternoon gains Friday after some weakness in the morning. The Nasdaq and Russell 2000 lost .1%, the S&P 500 .2% and the Dow by .3%. The Nasdaq is now 4% off most recent all time highs and although the index is still making higher highs and lows, it is feeling heavy as it sliced its 50 day SMA Thursday for the second time in just 6 sessions. The tech heavy benchmark fell .64% this week and has fallen four straight with all CLOSING at the lows for the weekly range. The back to back weekly doji candles on the S&P 500 ending 7/28 and 8/4 seem to be taking a toll and it fell by nearly an identical amount for the week as the Nasdaq. It seems like it wants to test the comfort of the round 2400 figure which was resistance this March, April and May. The Russell 2000 which seems to be garnering a lot of attention lately is now lower 12 of the last 18 days and although it undercut its 200 day SMA, Friday did register a spinning top candle which often forecasts changes in the direction of the recent trend. Bulls obviously want to see that index recapture its 200 day SMA which is still firmly sloping higher, something which its 50 day SMA is not doing. It is hard to blame recent weakness on the political happenings as two of the sectors that did much of the heavy lifting since the election last year, the semiconductors and transports, were acting soft for some time. The IYT is now lower by 7% from its most recent 52 week highs and has lost ground 4 of the last 5 weeks and more concerning is how quickly the good looking cup base breakout from a 173.98 trigger the week ending 7/7 fell apart (the move in the airlines has contributed greatly with JETS down 12% from recent highs). Breakouts that fall apart that fast are often a poor sign, and todays move below the 200 day SMA is yet another warning. As always it pays to be simple and wait for the trades that offer the best risk/reward. Below is the chart of NFLX, and how it appeared in out Thursday 8/17 Game Plan, which Friday recorded a bullish inverted hammer candle. One will know relatively quickly if they are wrong.
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