Markets went back to the old days putting up an impressive “Turnaround Tuesday”, with the Dow and Nasdaq each gaining more than 2%. The S&P 500 rose by 1.7% and the Russell 2000 added 1.1%. It did show the classic definition of capitulation today with the major averages suffering heavy losses at the open and CLOSING well upon their highs. The Dow’s intraday range was more than 1100 handles, but it did finish beneath its 50 day SMA. Lets see if it can garner any follow through Wednesday. The Nasdaq did manage to end the day above its 50 day SMA, a positive as you want to see a rapid reclaim of that line if it is pierced. Its intraday range was nearly 300 points top to bottom. The S&P 500 bounced near the round 2600 number and concluded today just below the 2700 figure. The Russell 2000 registered a bullish hammer candle exactly off its upward sloping 200 day SMA. It is still tough to gauge where the market will head from here, but if the major benchmarks can hold above todays lows that would be a solid start. Art Cashin weighed in saying he thought this was a bottom, Dennis Gartman called for the beginning of a ear market yesterday and Ray Dalio chirped in at Davos that anyone sitting on the sidelines in cash would look silly. Filter out the noise and as always respect the PRICE action.
Looking at individual groups, bulls saw just what they wanted to see with 8 of the 9 major S&P sectors advancing robustly, and the only laggard was the defensive utility space with the XLU dropping 1.5%, and dropping further below the very round 50 number. The ETF now 16% off most recent 52 week highs and lower 7 of the last 9 weeks and has lost 3.1% this week thus far. Leading Tuesday were the materials and technology sectors with the XLB higher by 3.2% and the XLK rising by 2.8%. The XLY bounced right off the very round par figure Tuesday and recorded a bullish piercing line pattern, and narrowly missing an even more bullish engulfing candle. It rose 2.6% today, recapturing almost all of Mondays 3.4% decline. The semis were the hottest subsector of technology as the SMH rose by 3.7%, although it still has some work to do as it fell underneath a cup with handle breakout trigger of 104.06 on 1/17 so quickly. That is often a red flag, but lets give it the benefit of the doubt and see if if can resume its uptrend in the coming weeks.
Select retail names have been acting healthy lately, and best of breed players have to be watched closely because in these type of market conditions they throw the baby out with the bath water creating excellent buying opportunities. Last night we profiled ANF in our first paragraph and Tuesday it recorded a bullish engulfing candle finding support at its upward sloping 50 day SMA. Its downturn recently with the rest of the overall market has been somewhat orderly and taut trade is a hallmark bullish characteristic. Below is the chart of COST and exactly how it was profiled in our 2/6 Tuesday Game Plan. Today it ended a 6 session losing streak and filled in a gap from the 11/29/17 session. It looks like it may have reset after not surprisingly encountered trouble at the very round 200 figure on 1/29. With todays CLOSE it is also back above a 183.28 cup base trigger taken out last December. Lots to like if todays low can hold.