Markets put in another lackluster, but productive session as the Nasdaq led gaining .5%. Although the last 2 weeks have declined, albeit less than 1%, the last 11 have all CLOSED in the upper half of the weekly range, a bullish trait. It is now about 2% away from the very round 7000 number which would probably surprise no one if it touched it before year end, which could be why it may not! The very round 5000 and 6000 numbers were tested and held firm after breaking through them the weeks ending 11/4/16 and 5/19/17, so if it does conquer the 7000 figure to the upside it could be a positive in a line of defense. The Russell 2000 put in a second consecutive long upper tail, a bearish quirk, and I still marvel at its strength from a technical perspective. The benchmark has recorded two V shaped cup base breakouts since September, which are often failure prone.
Looking at individual sectors it was the technology and energy groups that excelled with the XLK and XLE both gaining .8% followed up by utilities with the XLU adding .6%. The XLK is rebounding nicely off a retest of its 50 day SMA, and is on a 5 session winning streak with each successive session showing smaller volume. One would like to see a bit more conviction but it is hard to ignore the PRICE action. Energy on the other hand is once again doing battle with the round 70 number, a level is has backed away from since early November. One has to give the edge to the bulls if the bears can not push this ETF lower, and the longer it fights up here the more it looks like a continuation situation following the six week winning streak ending between 8/25-9/29 which rose a nice gradual 9.5%. Reading Barron’s this weekend I was surprised to see 5 of the 10 investment strategists making their 2018 predictions recommended energy as one of their favorite sectors. Just one advised steering away from the group. Staples, industrials and financials lagged.
As crazy as the markets having been, excluding Bitcoin, sometimes it pays to just be simplistic. Of course people try to make things look overly complicated, perhaps to demonstrate intellect, but being plain and straightforward is often the best route. There has been rotation ongoing, which is healthy, and some of this money has poured into transports and some has spilled over into select retail names. Attempting a little humor here one could have been very successful this year using a plain approach and weighting toward things we all need to survive such as food, clothing and shelter. PPC has had a nice run in the food group, and one would have to been living under a rock to not was has been going on in the homebuilder space. Below is a chart of GPS and how it was profiled in our Wednesday 11/27 Game Plan. It is another prime example of the round number theory in force as the 30 figure was a road block beginning in March ’16. The stock is now higher by 10% since the breakout and on a current 6 week winning streak. A big reason is consumers affinity for discounted goods with their Old Navy stores firing on all cylinders. It is now in the process of bull flagging on the daily and a CLOSE above 34.25 would generate a measured move higher of nine handles.