Markets were hit very hard Thursday, this time the excuse was China tariffs. But one who has been following the action knows the technicals have been anything but stellar recently. A retest of the February lows now looks likely and it is to be seen if they will hold. The bull trap on the Nasdaq above the double top round number of 7500 on 3/9 is now a distant memory. It recorded a bearish engulfing candle on 3/13 at all time highs and since then it has fallen 6 of the last 7 days and today pierced its 50 day SMA for the third time since 2/5. The 3/14-16 sessions tried to hold close to the 7500 number, but notice each day CLOSED near session lows. This week the tech rich index is off 4.2% and looks likely to complete a bearish evening star weekly pattern Friday unless something drastic happens Friday. The VIX that we have been pounding the table as it is worrisome if it held above 15 did just what is was supposed to and today bolted to the upside by well more than 30% and looks like it is sniffing out a double bottom trigger of 26.32. I do not recommend playing this instrument, but it is good to keep an eye on it for clues.
Looking at individual sectors the utilities must have felt very lonely as the XLU was the only major S&P sector to gain ground Thursday. It rose .5% and the second best performer by a long shot was the staples, although they fell by .8%. Everything else was soft with each sector off between 2-3.8%, strong selling indeed. It was energy that fell 2%, technology by 2.6% and financials were struck to the tune of 3.8%. On the XLF weekly chart one can see just how chaotic it is as it has fell 4 of the last 7 weeks. More importantly notice the wide and loose trade, a hallmark bearish characteristic. One can see the very taut trade dating back to the summer of ’16 until hitting the very round 30 figure the week ending 1/26/18. Since then however the ETF is down 4 of the last 7 weeks, with big moves each week, mostly lower and this one is off 4.2% heading into Friday. Included in their is the week ending 2/9 which slumped 5.7% in the largest weekly volume since the week ending 11/11/16.
The financial space is a very diverse one, like technology, with different subsectors doing better than others. The payment transaction plays have been holding up well overall, as well as select credit card plays. Some spaces have been underperforming and below is the chart of WETF and how it appeared in our Tuesday 3/20 Game Plan. This particular name is lower by 32% off most recent 52 week highs, much more than some of its peers. One must consider that it has lagged other finnie names and that has to be taken into account when a stock can not keep pace. Additionally it has had problems with the very round 10 number recently with just one CLOSE above in the last month on 3/9 by 2 pennies. It is lower 7 of the last 9 weeks and this week by another 5.5% heading into Friday (6 of the last 7 weeks have declined more than 3%).