Markets scored big gains Tuesday as the S&P 500 and Russell 2000 led with gains of 1 and 1.5%. The Dow finished near highs, up 1.1%, after a brief slip following a missile test in North Korea, and the Nasdaq lagged as the tech heavy benchmark finished the session with gains of .5%. The S&P 500 continues to defend the round 2600 number which served as a bull flag breakout and the Russell 2000 broke above a bull flag of its own Tuesday, although the pattern was short in duration. There were some long upper tails the last few days which was erased with todays breakout, which is the opposite of what was seen as it bottomed between 11/8-15 with a flurry of long lower tails on the small cap average. Leadership has gone under some changes as I chart through hundreds of names I see the likes of former generals like DPZ, ULTA and REGN now in bear market mode off 22, 31 and 33% respectively (REGN has fallen 28 of the last 36 sessions). The XRT looks like a bull flag here and new names are taking over with stocks like WMT, FIVE, KORS, VFC and PVH remaining firm.
Looking at individual sectors it was a pretty broad based rally with all nine major S&P sectors gaining ground. It was the financial that scored the best move Tuesday adding 2.6%. “Lagging” was technology which still rose by 3%. The XLK was affected by the weak action in its fourth largest component GOOGL. The tech heavyweight recorded a nice looking break above a bull flag trigger of 1065 on Friday, which would have had a measured move of 85 handles, and today reversed to CLOSE underneath the pivot. It is most concerning, as we know the best breakouts will work often right away, and certainly a slump the day after a promising move must be met with caution. The bulls are now presented with the burden of proof argument, meaning steer clear of long exposure until the trigger is reclaimed. I am not recommending a short here, but now there are certainly better fish to fry in the stock universe.
Financials have been trying to swim upstream and although the run has been higher, the path has not been smooth. The XLF has repeatedly bounced off its own 50 day SMA since 11/9 and has now climbed back above the bull flag breakout from the 10/20 session. Once instruments, either individual stocks or ETFs successfully retest breakouts it is often a good sign. The group is very diverse and below is the chart of VNTV, a payment play with very strong peers in V and PYPL to name a few, and how it was posted in our Wednesday 11/15 Game Plan. It had taken a prudent pause after a strong move higher after a big move the two weeks ending 8/11-18 which rose by more than 12% (week ending 8/11 jumped more than 9% in the best weekly volume in more than five years). Presently it now trades at all time highs and this best of breed play is now back above its rising 50 day SMA and today CLOSED above an add on trigger of 73.24, although a bearish shooting star was recorded.