Markets ended in the red Wednesday with the previously leading Nasdaq lagging as the tech benchmark slumped .85%, although it did bounce off the round 6900 figure. It recorded a spinning top candle after dropping more than 700 handles following the bearish engulfing candle on 3/13, and it is now less than 1% higher YTD. That particular candle often signals a softening of the prior trend and the index is now 9% off most recent all time highs. For the week it has declined .6% as the S&P 500 and Dow have risen .6 and 1.3% respectively. The Russell 2000’s 50 day SMA is now pointing lower and we have been looking at that and the VIX for clues to the direction of the overall markets. The Russell 2000 ran into trouble near a double top just above the round 1600 figure with bearish engulfing candles on 1/24 and 3/3. The VIX seems to be having some shyness at the 25 figure as it has reversed there, as it was above 25 three days so far in March but was failed to CLOSE above. The markets certainly have the feel of carrying an anchor on its back, but shorts are in a difficult spot here after a feast.
Looking at individual sectors there was some bifurcated action with another suspect group leading Wednesday as the staples via the XLP rose by 1.4%. The ETF is lower by 11% from recent 52 week highs and has sported gains of 1% or better 2 of the last 3 sessions after a 10 day losing streak between 3/12-23. The only other major S&P groups to advance today were healthcare and the financials as the XLV added .5 and the XLF .2%. Lagging were the discretionary, materials and energy plays with the XLY down 1.2, materials by 1.3 and energy slumped 2%. On a weekly basis there are some interesting scenarios as technology is lower marginally by .2% heading into the last day of the holiday shortened week. If that holds tomorrow it would be the ETF’s first 3 week losing streak since the first 3 weeks of 2016. On the flip side the best acting group for the week again is suspect as the staples via the XLP are higher by 2.8%, more than double the second best groups with healthcare and financials higher by 1.4% heading into Thursday.
The tech sector continues to unravel, but search for names that have been holding up very well for when the group turns higher, no one knows when for sure, they will be the first to sprint out of the gate. Below is the chart of AKAM and how it was profiled in our Thursday 3/15 Game Plan. We do confess it is harder to discover stocks that are holding up well, especially in technology which was a big outperformer. That does not mean you discard the group, but just the opposite one should build a watchlist and look for plays that hold up the best compared to peers. AKAM fits the bill as it looks to consolidate here as it trades 10% off most recent 52 week highs and near the round 70 figure. It is looking to find support at its rising 50 day SMA following a break above a double bottom trigger of 68.75 on 3/2. The spinning top candle on 3/9 has sent it lower quickly, but is giving investors a good risk/reward entry here.