Markets were a bit dull Tuesday as the daily slog continues. Slightly noteworthy may have been the weakness in the Russell 2000 falling .3% and potentially damaging the current flag formation. It needs to get going quickly and the doji candle on Monday may have been some foreshadowing. The Dow which we rarely focus on did touch the round 23000 number and it is has now rose 12 of the last 15 sessions (all three lower days lost less than .15%). The Nasdaq recorded its own doji candle Monday, and remember these are just warning signs, that one could look back on and play Monday morning quarterback. They are useful though and can be used to shave positions and buy back on weakness. As always there are a few things to be concerned about as I read the Barron’s this weekend and almost every money manager was bullish. Sentiment as well is a poor market timer but something to be aware of.
Looking into individual groups Tuesday, winners were led by healthcare with the XLV higher by 1.3%. The ETF has an unorthodox looking bull flag, if you find a perfect one let me know and I will short it or at least avoid it. A move above 83.50 would carry a measured move to the round 90 number and notice how the flag commenced with a bullish engulfing candle on 8/21. On the other end of the spectrum one cautionary tale is the action in a subsector of the industrials, the transports. The IYT registered a bearish engulfing candle on 10/13 and is nearing a test of a cup base breakout trigger of 175.85, originally taken out on 9/26. Given the timid session Tuesday it was surprising that only 4 major S&P sectors advanced. Lagging today were the financials that fell .5% via the XLF. GS is the second financial to record a bearish reversal after earnings showing a bearish engulfing candle today. C did so last week, and now GS is off a quick 8% from most recent 52 week highs after a bearish evening star pattern was completed on 10/9.
We are always on the look out for strong action in somewhat recent IPOs as they are often under followed and can offer superior returns for that reason. Below is the chart of MTCH and how it appeared in our Tuesday 9/19 Game Plan, and it has now advanced 71% since inception almost 2 years ago. Volume trends have been very bullish and it has registered plenty of nice advances including weeks ending 9/1, 9/15 and 10.6 which jumped 18.1, 6.2 and 9.4%. I am a big proponent of the round number theory and this name had some relevance with the very round 20 figure, being stopped there the weeks ending 10/28/16 and again 5/5-6/2/17, before blasting above on a CLOSING basis week of 9/1. It was a bullish ascending triangle as well with lows made near 15 the week ending 3/30 and it already achieved its measured move to 25, but keep in mind the measured moves are like guidelines. This chart is showing just how forceful “love” can be bringing back memories of Huey Lewis’s ’85 song “The Power of Love”.