Markets have to be given credit for the nice reversal Thursday as the Dow for one registered a 400 handle reversal and CLOSED back above its 200 day SMA after being underneath intraday, reminiscent of the 4/2 session. Its chart has the look of a bearish descending triangle we have spoke about, but if it should break to the UPSIDE the move could be very powerful. At the very least investors now have a line in the sand with a quadruple bottom near the 23500 level, on a CLOSING basis. The Nasdaq bounced right off the round 7000 number today and it has defended that figure like it did on 4/24-25 CLOSING above it. On its RSI the symmetrical triangle is really coiling as the signal line spoons the critical 50 number. The Russell 2000 recorded its third consecutive hammer candle today, Wednesday was an inverted one, as it clings to 50 day SMA support. The VIX hit its intraday high at 11am and made a steady decline for the rest of the day and was once again smacked down at its now declining 50 day SMA, like it did on 4/24-25. The descending triangle with a 15 trigger looms large. It has been hard to find many bulls, myself included, and that could be a reason for a continued rally attempt. Will it be a dead cat bounce or have legs? The old adage goes “sell in May and go away”, but keep in mind we have been higher the last 5 Mays.
Looking at individual groups Thursday it was led by suspect sectors once again. Today it was the materials and industrials with the XLB and XLI advancing .4 and .2%, and put the staples in there rounding out the top 4 (although the XLP did lose ground fractionally today) and it would be hard to paint a pretty picture for the day. Both the XLB and XLI recently undercut their 200 day SMAs which they had both been above since March 2016. Lagging was the cyclicals, financials and healthcare, the latter two by .9%. The XBI among the healthcare arena is now 12% off most recent 52 week highs after an almost precise double top the weeks ending 2/2 and 3/16, both of which recorded bearish dark cloud cover candles at all time highs. The ETF has declined 6 of the last 7 weeks, and is down another 2.6% this week heading into Friday.
The energy space has confounded many investors this year and the move may or not be over. As always respect price. In the meantime when names lag in a strong sector, I do not care what the fundamentals tell you, be very wary. Below is a prime example of COG and how it was presented in our Monday FREE GAME PLAN this week. It still sits in bear market mode down 22% from most recent 52 week highs, as the overall group has flourished. The rising tide was unable to lift this submerged vessel, and volume trends remain weak as one would have to go back to the week ending 11/21/17 to see a week of accumulation. Conversely it is easy to see distribution as the weeks ending 2/9 and 3/23 fell 6.1 and 5.9% respectively in nearly double average weekly trade. If the 23 level which has been holding firm since February breaks this stock could become a wreck at the bottom of the ocean.