Markets were torpedoed Thursday as the Dow gave back more than 400 points or 1.7%, the Nasdaq slipped 1.3 and the S&P 500 gave back 1.3% too. The Russell 2000 which did demonstrate some early strength was unable to avoid the softness, but showed some relative strength lower by .3%. Volume was strong showing the fingerprints of big institutions lightening up on positions. Keep in mind the weakness came in conjunction with a pullback on the 10 year yield as well, often a good sign for equities. On a weekly basis the Dow has fallen 2.8% headed into Friday (3 of the last 4 weeks have advanced or declined more than 4%), the S&P 500 is lower by 2.6 and the Nasdaq by 2.1%. The headlines will blame Powell, the tariffs, etc. but the benchmarks have felt heavy now for a month and when we see the sharp declines that we witnessed early on in February, it is usually not the only stumble and those that missed the initial bounce can usually count on better prices going forward, that being lower. The aforementioned big three major indexes are all looking like they will record bearish engulfing WEEKLY candles, unless their is some real strength Friday. The VIX continues its impressive week as today broke above a bullish falling wedge, although CLOSING well off highs.
Looking into it was a rush into the laggard defensive groups with the utilities finishing ever so slightly in the green, and the XLP lost .4%. Energy which has had plenty of its own struggles was the second worst actor with the XLE off by .2%. Being hit the hardest near the tune of 2% were the financials and industrials. The financials gave up its 50 day SMA support for the second time this month, which is very often a poor scenario. If one wanted to do some Monday morning quarterbacking you could say the rebound in the middle of February was accompanied by very soft trade. As we have stressed many times before the very taut action in the XLF for more than a year has now become wide and loose, hallmark bearish characteristics. There is nothing wrong with taking some money off the table here and waiting for the dust to clear.
Discretionary names have been on a roll overall, but some retail names have been battered around lately. LB took a plunge below its 200 day SMA today and is now 33% below most recent 52 week highs. Of course you have perennial laggards like BBBY, GIL or a GME. One must focus on names that are shrugging off the weakness in February and the sector too. Below is the chart of TPR and how it appeared in our Wednesday 2/7 Game Plan, the old COH or Coach and to be honest I abhor name changes but this one has worked out well so far. If you compare its performance to the XRT it is just 3% off most recent 52 week highs while the ETF is 9% off its. It is holding above the 48.90 cup with handle trigger it broke above on 2/6 and is also looking for a third consecutive weekly CLOSE above the very round 50 number.