Markets recorded a lukewarm, second consecutive “turnaround Tuesday”, and the Nasdaq led up .5% after rallying more than 300 handles off intraday lows on 2/6. Today it battled with the round 7000 number, and won, and registered its first three session winning streak in three weeks. It is now approximately 1% away from its still upward sloping 50 day SMA, and the fear is that line that was consistently support for more than a year will now become resistance. One would be surprised if there was not at least an initial struggle there if retested. That 7000 figure was influential as well as it was the breakout about a bull flag trigger that overshot its 300 handle measured move this year. This tech heavy benchmark is a leader, and the closest to its 50 day currently, so the other major indexes will most likely take their cue from how it responds there. A boatload of market participants are most likely holding that same belief and could be the reason why it may just burst right through.
Looking at individual groups it was the staples, financials and cyclicals that rose in the .5% neighborhood. The XLP had registered one of the better looking breakouts recently, with a move above a very tight digestion period through 57, during a 7 week stretch weeks ending between 12/1-1/12 that all CLOSED with a 56 handle. The week ending 1/19 broke above that pattern, which also recorded a break above a cup base trigger of 57.46 in a base that began the week ending 6/9/17. Of course along with the overall market the ETF faltered, but has acted well since last Fridays bullish hammer candle. Now comes the hard part as it attempts to recapture its 200 day SMA. Lagging Tuesday were materials and energy. The XLE is now sitting on its 200 day SMA, but that two week shellacking of 14% the last couple weeks, with last weeks 8% plunge coming on the largest weekly volume in almost 2 years shows the chart has a lot of repair work to do.
The semiconductor group is trying to rebound after a recent regrouping as the SMH recorded a bullish harami candle last Friday. Keep in mind its cup with handle breakout above a 104.06 on 1/17 trigger failed, but is a good example of why it pays not to give up on a former leading sector. Below is the chart of CREE, a former laggard which is making positive amends. Notice it did run into trouble at the round 40 number with a spinning top candle last December, but retested a bull flag breakout on 2/6 that aligned with the round 30 figure. A good tell was the UNCH finish on 2/8 as the Nasdaq imploded nearly 4%. That gave investors the signal if the market could find some footing this could potentially be a good place to put some capital to work. Its 50 day SMA is not flatlining and one can add to their stake with a buy stop above the line at 36 now and add to finally through a double bottom trigger of 39.10 which was created with the reversal after earnings from the 1/24 session.