Markets slogged into the weekend with the Dow, Nasdaq and S&P 500 all declining very modestly in the .1% neighborhood. The Russell fell .3%. For the week the “big three” had similar returns as well all gaining between .3-.4% and the Russell 2000 added .8%. All of the four aforementioned benchmarks now have the look of tight bull flags, I would like to see them have a few more days in duration, but it is hard to knock the price action here. We are heading into two consecutive holiday shortened weeks which tend to be positive, and with just one week left in ’18 without any major moves the Nasdaq will end up outperforming the S&P 500 and Dow, and it would be the fifth year in the last 6 it has done so. All four have moves that are admirable thus far this year with the Nasdaq higher by 29.3, the Dow 25.3, the S&P 500 19.8 and the Russell 2000 by 13.7%. Key next week would be moves above round numbers of 7000 and 2700 for the Nasdaq and S&P 500. Wishing everyone an excellent end to the year and a healthy and prosperous 2018.
Looking at individual sectors there were no outsized winners or losers today as all 9 major S&P groups all finished within .7% of each other. Energy just missed out on a third straight day of the strongest group with the XLE rising .2% compared to the materials higher by .4%. “Lagging” today were the financials and healthcare with the XLF and XLV dropping .3%. The XLU snapped a 6 session losing streak Friday, albeit fractionally, but did complete a bullish harami cross pattern just underneath its 200 day SMA. For the week it slumped 4.7% in active volume, its worst weekly loss since the week ending 9/4/15. In fact the last 2 weeks have slipped more than 6%, with both weeks accompanied in the strongest weekly trade in 9 months. On a weekly basis energy was the best actor by a long shot with the XLE jumping 4.8%, its best weekly gain in 20 months. With the current momentum of energy, going forward its going to be harder and harder to complain about a laggard showing leadership. It has earned that distinction and should be respected.
We are big on PRICE confirmation with CLOSING prices, and below is a wonderful example why. APC was a laggard in an already soft space until the overall group caught fire recently. The jury was out on which way this space was going to move for the last 3 months, but with this weeks stance bulls have to be pretty excited going into year end. Here is the chart of APC and how it appeared in our Tuesday 12/12 Game Plan. There was a picturesque bearish head and shoulders setting up and the round 50 number played a role in both of the clavicles. If one thought he would be smart and proceed with a premature short and add to with a break underneath the neckline learned an expensive, but hopefully worthwhile lesson. The trigger was never hit and it is now on a 5 day winning streak up 11.4% for the week. Keep in mind we did discuss how moves can be powerful when a break occurs in the OPPOSITE direction of where one would traditionally break. There is nothing to do here now, there are better fish to fry, but put this one firmly in your memory bank for the next time you try and outsmart the market.