Markets put in a dull session Monday with most of the major indexes finishing the day near the UNCH line. The Nasdaq however did add .3% and its nascent strength is certainly a welcome sign for investors. It is on a 5 day winning streak and 4 of the 5 CLOSED right at highs for the daily range, a bullish trait. The S&P 500 rose almost .2%, but more importantly it has started ’18 off with a 5 session winning streak, like the Nasdaq, and is up almost 3% YTD already. A stat I read today reported by Ryan Detrick stated that when this occurs, and is has done so 15 times, it has ended the year higher 15 of 15 times. And the gain is nearly 20%. Of course there is no guarantee but bulls have to be feeling confident. Hopefully cautiously so. The Russell 2000 closed at an all time high and one can make the case that it edged above a bull flag formation with a flagpole beginning at 1460, so a measured move could run another 100 handles.
Looking at individual groups to begin the week, we saw some curious action with the lagging utilities leading with the XLU higher by .8%. The ETF rose just 9 sessions in all of December and is still firmly entrenched below its 200 day SMA, where good things rarely happen. Energy was second best and this group has been acting the exact opposite of the utilities as of late, meaning its white hot. The XLE added .6% and is quickly approaching the 78.55 cup base trigger we have discussed recently in a 13 month base and we know the longer the base the better chances of a breakout holding. The ETF is on a current 3 week winning streak, and to demonstrate how weak the space has been recorded only one other streak like that since December of ’16, that being the 6 week winning streak between weeks ending 8/25-9/29. The only sectors to lose ground Monday were the financials and healthcare. They fell just fractionally and CLOSED in the upper half of their daily ranges and the XLF and XLV are both in nice overall uptrends, so a day to rest was nothing to be ashamed about.
We have always been big believers in the round number theory. Some may think it is elementary, but keeping things simple sometimes can pay big dividends. Also one wants to keep an eye on names that shrug off weakness in their particular sector. A good example of both of these is seen on the chart below of WAT and how it was profiled in our Thursday 12/7 Game Plan. Monday healthcare was the laggard but the stock rose 1.2% and now on an impressive 5 session winning streak up by nearly a combined 6% in the process. It has also blasted above the round 200 number which was its trigger in a goof looking bull flag formation. The stock was unable to muster any strength above the 200 number since touching it on 10/27. On 11/20 it CLOSED slightly above the 200 figure, but was quickly turned away and on 12/4 recorded a huge reversal, finishing 7 handles off intraday highs. This breakout carries a measured move now to 222, and the 200 area now should be very good risk reward going forward.