Markets began the week in soft fashion with most of the major averages descending in the .5-.7% neighborhood. The Dow was hurt by some of its larger priced components, remember it is price weighted, with AAPL and CAT falling the most in the 30 stock index. Both of the aforementioned names were sending some warnings signs with bearish candles or in AAPL’s case CLOSING at or in its lower half of the daily range 6 sessions ending between 1/18-25. Perhaps the fruit is a little too rip and looking for some comfort near its 200 day SMA which it has not been in contact with since the election in late ’16. In CAT’s case along with the negative candles the stock is beginning to trade wide and loose, where prior it traded extremely taut a hallmark bullish trait. The Russell 2000 looks the most concerning to me, number one on a relative basis it has not kept pace with the big three and the presence of two bearish engulfing candles in the last 5 days and a doji sandwiched in between them on 1/25. Some value oriented investors may same it is becoming more attractive with an RSI near 60, compared to the Nasdaq, S&P 500 and the Dow all above 70. I prefer strength and always believe instruments are priced the way they are for a reason.
Looking into individual sectors if was hard to declare a winner by groups, as all of the major S&P sectors fell. Monday the “best” behaved were the cyclicals, healthcare, financials and staples, although they were all off between .3-.4%. Healthcare has been on quite a run and will be looking to record its first 5 week winning streak since last spring. The XLY, with the help of firm retail names will be attempting to gain ground 12 of the last 13 weeks. The XLF is spooning the round 30 number and will be interesting in 2018 going forward to see if it stalls or recorded a nearly 11 year breakout as it last traded near this current level back in May 2007. Energy is having the same issues with a prior high here and is pausing, one could not say it is acting bearishly as it flirts with prior highs made back in December 2016. That being said it was the worst performer as the XLE lost 1.5%. The weaklings today were the utilities and energy and it is hard to be bullish about the utilities as the group just can not seem to gather any momentum. The XLU looks as if it is already receding after making a somewhat valiant stand at the very round 50 number. The ETF was down 1.3%.
We have been stressing recently how well “old tech” names have been acting. Perhaps it would serve us right to look at the “old biotech” in the same light. Boy its seems like a long time ago when Trump was on the campaign trail bashing healthcare companies on their drug prices, and the space seemed uninvestable. I am old enough to remember just the big three that dominated the sector with BIIB, AMGN and GILD. We can add PFE of course, its a more defensive pharma play but it has joined the party trading at 16 year highs. This year alone BIIB and AMGN are higher by 13 and 14% YTD already and the latter name pays a 2.6% dividend yield and crossed above the very round 200 number briefly today. Below is the chart of GILD and how it was profiled in our Tuesday 1/16 Game Plan. It charged past the round 80 number on 1/16 and is now more than 10% higher than the recommended entry. Today it blew past an add on buy point through a cup base trigger of 86.37. The chart morphed into a bull flag and the break last Friday above 82 carries a measured move to 92, but this name can keep going as these measured moves are not an exact science.