Markets acted poorly Thursday with the major averages surrendering decent early gains, classic bearish behavior of going out on lows. The Dow reversed 160 handles from intraday highs and recorded a bearish engulfing candle. It is still higher by .7% for the week headed into Friday and currently sits 1000 handles above its rising 50 day SMA. The Nasdaq fell .3% and again met a brick wall right at the round 6900 number, and if it can register a CLOSE above there soon perhaps Santa will come out and play. For the week thus far it is modestly higher by .2% and it has a decent look on the weekly and it tomorrow were to finish around here it would make 3 very tight weekly finishes. The S&P 500 is UNCH on the week and it dropped .4% Thursday and most concerning was the action in the Russell 2000 which for a fifth straight day CLOSED at lows for the day and is now threatening to undercut its 50 day SMA which is beginning to flatline. It did just that in early August and felt some pain spending nearly the entire month below that line. If it were to occur again bulls would rather see a mirroring of the slice of the 50 day in November which just lasted 2 sessions.
Looking at individual sectors Thursday the selling was broad based with just one major S&P sector managing to CLOSE in the green. That would be the cyclicals as the XLY added .3% and is now on a 6 session winning streak. It is looking for its first 6 week winning streak in 25 months as it is up .6% heading into Friday. This group has been buoyed by recent strength in the retail arena, and today was given a boost due to some M&A activity with DIS and FOXA. It certainly has been helped by leisure plays as well as consumers are spending on products within that group with examples being PII higher by 54% YTD, WGO by 73% and PLNT rising 59% thus far in 2017. We would be misleading if we did not mention the influence AMZN has had upon the XLY as it comprises nearly 17% of the ETF. Lagging today were the healthcare and materials groups both surrendering 1% and 1.1% via the XLV and XLB.
It was hard to find much to like in the action of the overall markets Thursday, but that is often a good time to see which stock showed relative strength during the weakness. Now you may have to put an asterisk next to the following transport chart that behaved in a lukewarmly bullish fashion today. Below is CP and how it was presented in our Wednesday 11/29 Game Plan. Today it CLOSED fractionally positive, and although it was helped by a price objective raise by BMO we would prefer to see names achieve new heights on no news. That shows bullish, plain vanilla institutional buying, but the price action is hard to ignore in CP. Thursday it touched heights it has not seen since mid May ’15 and is now comfortably above the suggested double bottom trigger of 176.92 taken out on 12/1. It also demonstrates how gap fills can be an excellent entry regarding the 10/17 session and that bearish candlesticks are not the best indicators when the particular stock is trading firmly. On 12/4 not seen on the chart below it registered a bearish dark cloud cover and today negated that candle.