Markets demonstrated classic bullish behavior Wednesday as they started very hard upon their lows and went out at session highs. PRICE certainly showed capitulation, but volume was a bit flat and that is ok as that could be the case in turnaround situations as their is not much belief among investors at the start. The Russell 2000 again showed strength as it was the first benchmark to turn green. It rose by 1.3% and the Nasdaq was the best behaved up by 1.4%. Notice Tuesday harami candle looks very similar to the 2/9 harami and both of those were preceded the day before with big down days. The tech rich index went on to almost rally a quick 1000 handles from there. The Dow rose by 1% even being held back somewhat by its largest priced component BA falling by the same amount (only two other names in the Dow fell today being the energy giants XOM and CVX). The VIX backed off yet again near the 25 number. Is this the beginning of something real or just another dead cat bounce? No one knows for sure and we have to keep in mind that corrections take many months and the major averages have run very powerfully over the last several years. Bulls may be happy with sideways action the rest of 2018.
Looking at individual groups on the huge turnaround today, one would have like to seen better leadership than the cyclicals and staples. The XLY added 1.8% and XLP rose by 1.5%, followed by the healthcare and technology as the XLV and XLK added 1.4%. The utilities and energy were the laggards today as the XLU was higher by .2% and energy was down .1%. The XLU has been steadfast and the bottoming process is ongoing and now has the look of an unorthodox bullish inverse head and shoulders formation that started in the beginning of January. A break above 51 would see a measured move of 4 handles which would begin to set up an add on buy point near a cup base trigger of 57.33.
We have spoken a lot with retail recently, as the group has been overall strong. Whatever the reason it is, the tax cuts, consumer confidence numbers, we do not care. It is all about PRICE action. Below is the chart of UAA, and how it appeared in our Tuesday 4/2 Game Plan, which to be fair has been a laggard. Even after todays break above a bullish falling wedge rising more than 6% it still sits 24% off most recent 52 week highs. But even weaklings find strength and this chart is improving ever since its bullish counterattack candle recorded on 2/6. Give the stock credit as it has bobbed above and below its 200 day SMA, which would have sunk many a laggard. Its 50 day SMA is sloping higher and has been making higher highs and lows since last November. It this name going to become a NKE or ADDYY again, highly doubtful, but on its weekly it is forming a bull flag and a move above 18.30 could propel the stock another 6 handles.