Markets endured another whipsawed session Wednesday with the Dow lower by .1%, the Russell 2000 higher by .1%, and the S&P 500 and Nasdaq lower by ,5 and .9% respectively. The Dow recorded a doji candle today and CLOSED below its 50 day SMA for the third consecutive session. The Nasdaq and S&P 500 registered inverted hammer candles, which were above their 50 days but finished underneath the line. Each is still near the top of their bullish piercing lines from Tuesday and could still see further cutting into them. There is still work to be done on all of the aforementioned benchmarks and it could take some time until this is resolved. The VIX ended up well off intraday lows but still fell more than 14% after reversing hard at the very round 50 number on 2/6. Lets see if it could successfully retest a good looking cup base trigger just above 17.50 in a base that began early last August. That would give the bears some ammunition that this could be just the beginning of something bigger to the downside.
Looking at individual groups energy, the laggard of the major S&P groups, the XLE fell 1.8% Wednesday and perhaps those voicing their concern about the group being a leader up until two weeks ago are correct. It is now lower by 5% YTD and is now off a quick 12% from most recent 52 week highs. This week headed into Thursday it has dropped 5%, this after the prior week slipped 6.5% in the second strongest weekly volume in the last 14 months. Bulls can hold onto the fact that the ETF is now at the oversold 30 RSI number and it pays a dividend yield of 3.2%. Also lagging today was technology with the XLK dropping .1.3% as semiconductors and software retreated. MCHP which recently took out a 96.02 cup base trigger on 1/17, rapidly fell apart, a red flag as we know the best breakouts work right away. Its ascent came to an end not surprisingly near the very round par number on 1/23 and is now 16% off most recent 52 week highs. A former best of breed play from year past, MTSI is now 71% off its most recent 52 week highs, not a typo. Today it suffered its FIFTH consecutive negative earnings reactions losing more than 36%. Prior to that it fell 18, 25.5, 6.5 and 3.2% on 11/15, 8/2, 4/26 and 2/1/17.
We did mention yesterday that their were many nice bottoming candlesticks on Wednesday, but they are likely to be tested sometimes more than half way down the pattern before they make the resumption to the upside. If it CLOSES below the low of the formation that negates the set up, but for now many are holding their bullish moves. Below is a prime example of RACE and how it appeared in our Friday 2/2 Game Plan. This chart does not show the bullish piercing line candle recorded this Tuesday, but the stock not only retested the cup with handle breakout trigger of 121.56 originally taken out on 2/1 but also filled in a gap from the 1/31 session too. Many have been calling for an increase in allocation to European names and whether that is true or not, this chart as any other is to be admired wherever it is domiciled. As a very sharp, salty horseplayer once told me a horse does not know his odds, (do not always play the favorite), a chart does not know where it hails from. Just focus on PRICE.