Markets started 2018 on a very high note which will most likely be hard to duplicate. The Nasdaq rose 3.4% for the week and was the best performer out of the major benchmarks. It also registered its best weekly gain in 13 months, and investors have more of a risk appetite when it leads. The round 7000 number was firmly taken out on Monday and the tech rich index rose everyday this week. Looking back at the previous big, round numbers the 5000 figure was retested and held on 11/4/16, and 6000 the same on 5/18/17 so it would not be out of order for it to do so once again. Of course that is just a 2% drop from here and it now trades 300 handles above its rising 50 day SMA. The S&P 500 took out its own round 2700 number with ease and a bull flag too in the process. It rose 2.6% on the week followed by the Dow up 2.3 and the Russell 2000 up 1.6%. This robust start to the year bodes well and keep in mind the Dow was up 25% in 2017 and since 1950 that has happened only 10 times. However the next year is HIGHER 8 out of the 10, with 6 of the 10 up by double digits.
Looking at individual sectors to conclude the first week of the year, only the energy and utilities dropped Friday with both the XLE and XLU by just a few pennies each. Leading today was technology as the XLK rose 1%, followed by healthcare, materials and cyclicals all rising in the .8% neighborhood. On a weekly basis the XLK advanced 3.7% to score its best gain since the week ending 12/9/16 which jumped 4.2%. Its RSI has been resolute at the important 50 number for the last 6 months to keep it in the bullish zone. Incredibly with the weekly return it was outdone by energy and materials each rising 3.8%. Other groups adding more than 3% were healthcare and discretionary, as the XLV and XLY both were up by 3.1%. The only major S&P sector to retreat was the utilities as the XLU sank 2.6% and has receded 4 of the last 5 weeks and is now in correction mode 10% off most recent 52 week highs. Apparently even some M&A activity in the group could as the laggard SCG and D teamed up. To give you an idea of how weak SCG has traded it still sits 39% off most recent 52 week highs even AFTER this weeks powerful 13.2% advance.
We have been stressing the importance of a strengthening economy recently and the many groups that could benefit. Today we will look at the paper and packaging names. Obviously if the economy is growing consumers will be making purchases which will use these stocks products. It is always important to see peers acting well as you do not want your name doing all the heavy lifting. We profiled IP GPK and others have been thriving with PKG jumping more than 6% this week alone. Below is the chart of WRK and how it appeared in our Monday 10/16 Game Plan. It broke above a 60.46 cup base trigger on 10/20 and was comforted by its rising 50 day SMA not to much longer after that. The round 60 number was important as it was resistance the weeks 7/3-10/15 and it has digested that move bullishly as the last 3 weeks all CLOSED very tight with .62 of each other. That type of action could lead to explosive moves and thats just what we saw as this week sprinted higher by 6.5% on above average weekly volume, even during a holiday shortened one.