Markets were hit hard to end the week Friday as the Dow, S&P 500 and Nasdaq all lost more than 2% (the Russell 2000 declined 1.9%). All of the aforementioned benchmarks are still above their upward sloping 200 day SMAs, but underneath their downward sloping 50 day SMAs. On a weekly basis the Dow acted best down .7% as investors gravitate toward old, mature dividend paying names and obviously that is a concern. Its daily chart shows a break below a symmetrical triangle near 24600, which does carry a measured move down by 3000 handles, and it did fill in a gap to the upside on Thursday from the 3/21 session. At the expense of sounding like a broken record the Nasdaq was the laggard losing 2.1%. If one looks at the tech rich indexes RSI, the February correction quickly recaptured the bullish zone threshold 50 figure and it has done anything but that this time around. Next week should be critical for all the major averages as the old adage goes, “nothing good happens under the 200 day”. Give indexes the benefit of the doubt here as the lines are still sloping higher, but patience is running thin.
Looking at individual groups Friday, no major S&P sector avoided the carnage, although it was easy to spot where the “best behaved” spaces emanated from, the defensive utilities and staples. The XLU still fell .8% and the XLP by 1% but this is becoming a common theme seeing them at the top of the leaderboard. Energy was the third best actor as the XLE dropped 1.8%, and the final 6 major groups fell between 2.1 and 2.8%. On a weekly basis it was energy that “led” with a loss of .1%, as it continues to try and break above its 50 day SMA and was stopped there for the second straight session. Interestingly it recorded its third consecutive weekly spinning top candle, a candle which often signals that the prior trend is losing steam. However one is going to want to see that break to the upside soon as the longer it fails to do so the downtrend it is in will most likely resume. Concerning once again was technology as the XLK fell the most this week by 2.1%. The bearish evening star weekly candle completed the week ending 3/23 is weighing heavily.
In this type of market environment we are in one is not to try and be a hero number one as capital preservation is paramount. Also one should be diligent about what names are outperforming on this fragile tape. Below is the chart of AAXN and how it was presented in our Tuesday 4/3 Game Plan. This week it rose better than 6% and it has acted well POST breakout from a huge cup base pattern that began the week ending 6/12/15 above 36.05, and they say the larger the base the higher the space. This name was influenced by round number theory as well with the 30 number acting as a stubborn wall the week ending 8/5/16 and this week registered its first weekly CLOSE above the 40 number and is well clear of the 40.25 bull flag formation trigger that was smashed through on 4/3 jumping more than 7%in nearly double average daily volume.