Markets once again put in a lackluster session with some mild softness Thursday as the Nasdaq dropped .5%, the S&P 500 by .3% and the Russell 2000 was down .1%. The Nasdaq should be given some credit for overcoming a deficit of .75% early on. This traditionally is a tough week for the major averages and perhaps the indexes have not made up their minds yet on how they will react to the Fed unraveling its balance sheet. Curiously the VIX CLOSED below the round 10 number for a second consecutive session and looks to be forming a bullish falling wedge pattern. Heading into Friday the Nasdaq is lower by .4%, the S&P 500 is UNCH and the Dow has gained .4%.
Looking at individual sectors Thursday the financial and industrial groups were the winners with the XLI and XLF adding .3% and .2% respectively. The XLI is now trading at all time highs and comfortably above a 69.68 cup based trigger taken out on 9/18 and has gained ground everyday this week. The prevailing belief that GDP will continue to strengthen going forward is the wind behind the back of the ETF. It sports a dividend yield of 2.3% If the largest component, dead money GE can ever get going, it is 24% off most recent 52 week highs, perhaps that could give the fund an even bigger boost. The XLI is cruising along comfortably as 3 of the top 5 holdings BA, HON and UNP are currently trading at fresh 52 week highs.
Technology is obviously a key component to the health of any rally and with the Nasdaq hesitation at the 6450 number there should be some concerns. Each night we produce several ideas that I think have potential for some decent appreciation. However no one knows what any stock will do on a particular day and we are big believers in PRICE confirmation. Keep in mind here we like to usually mention a idea that worked out, we are WRONG too, but below we look at why moving through pivots is crucial. Here is a name we profiled in our Wednesday 9/20 Game Plan LITE that had been flirting with not only its 50 day SMA with a couple of CLOSES above, but the round 60 number too. Anyone that attempted the front run the idea is now underwater as the 60.25 trigger was never taken out and is now off 20% from recent 52 week highs and dropped just more than 7% the last 2 days. Now a likely scenario would be an entry at the 200 day SMA, which is still upward sloping and has been touched successfully five time since the line began in May ’16. Not to mention is also aligns with the very round 50 number.