Markets began the new week in a moderately bullish fashion as most of the major averages posted lukewarm advances. The Nasdaq continues to show the way as it has picked up steam recently with FANG names coming back to life and rose by .3% on Monday. The S&P 500 added .1% as it looks for a ninth, not a typo, consecutive weekly gain this week. Keep in mind we just entered the stronger 6 months of the year, as the old adage implies sell in May and go away (until October). Seasonality is the tailwind for the benchmarks now one should see more traditional window dressing into big names as portfolio managers pour into big cap tech names (can not be many left). Additionally as well for tax reasons in anticipation of reform, there could be less selling of these stocks to capture more return. Are too many complacent in the belief that November and December historically perform positively? Ride the train as long as it keep in motion. It usually travels beyond what many believe to think.

Looking at individual groups it was energy that was the clear, undisputed heavyweight leader with the XLE jumping more than 2%. The ETF CLOSED above the very round 70 number and is now comfortably above a bull flag trigger of 69 which carries a measured move to 76. At the depths of the energy debacle I have to admit even I started to believe all the peak oil, 500,000 solar panels put in around the world on a daily basis, etc (no politics here just an observation) to form an opinion that these names may never recover. It is just an example and who knows what is true or not, but it is an excellent reminder to just focus on price action. How long this rally lasts no one knows, but if one has exposure to the group (I have not for a long time), let PRICE action alone dictate how you invest. Keep in mind the round numbers were instrumental with the XLE having issues with the big round par number the weeks ending between 6/20-8/1/14 and 50 provided a strong bounce the week ending 1/22/16. The staples lagged as weakness begets more weakness as the XLP lost 1.1%.

As the overall markets seem to digest recent big moves many flag have been shaped, not only on the big benchmarks with the Russell 2000 and the Dow, but many individual names as well. When one sees breakouts among former best of breed names in weak groups that have since caught fire one should play close attention. Below is the chart of EOG and how it appeared in our Wednesday 10/11 Game Plan. This former leader is reclaiming that status as it has gained ground 10 of the last 11 weeks and it formed a bull flag during a 4 week period ending between 9/29-10/20 which all CLOSED within just .65 of each other. That type of taut trade can lead to explosive moves and it jumped more than 6% last week in firm volume. It still has some room to its measured move but now is also nearing a cup base trigger of 109.47 in a base nearly one year long. Once can add to or initiate a new position above there.

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