Markets held their own to open the week Monday as the Nasdaq and S&P 500 finished near the UNCH mark, the Dow was up .3% and the Russell 2000 fell by .4%. Interestingly the VIX registered a bullish harami cross, with today registering a doji candle which could indicate a weakening of the recent downtrend. Retail and semiconductors acted firm and that is a good sign, that discretionary and technology will continue to power this move higher. The SMH did break above its double bottom trigger of 106.24 intraday, but did reverse to end up a stick lower from intraday highs, but ended up one penny above the trigger. Of course there will be bumps along the way, but PRICE action is beginning to firm. On the Russell 2000 I would really like to see a move and CLOSE above 1610 for a confirmation of this uptrend, as it is a leading indicator. Today it was above 1610 intraday once again but the chart recorded a bullish engulfing candle hitting an almost precise double top near 1615 at all time highs from the 1/24 session. The greenback has now completed a handle on its cup base and the potential trigger is 24.62 in a 7 month pattern. That of course could put headwinds on names that have big international exposure.
Looking at individual groups Monday it was energy and healthcare that led. The XLE rose by .7% and its dominance comes as no surprise and the XLV added to last weeks 2.5% gain, higher by .65% today. The XLE is at a critical juncture here as it is nearing the 78 number, last touched in December ’16 and January ’18, which is either going to end up being a triple top or a bullish ascending triangle breakout. The bulls are in control and the burden of proof remains with the bears who have been on the wrong side of the trade now after being emboldened with a 14% plus drop the two weeks ending between 2/2-9. The right sectors were lagging for bulls as the staples and utilities made up 2 of the worst 3 acting groups. The XLU is still battling at the very round 50 number which it has CLOSED below just 4 times since recapturing the number on 3/27. The XLP looks hapless lower 10 of the last 15 weeks and 16% off most recent 52 week highs.
The consumer is one of the best tests for how the economy is performing. GDP is 2/3rds consumer spending so to see how the charts in the space reflect how they are feeling is often a good tell. The XRT has a nice complexion as it gradually constructs the right side of a potential good looking cup base, just how you want to see it. If the right side of any cup base it built to rapidly it failure prone. Below is the chart of GPS and how it appeared in our Wednesday 5/9 Game Plan. Keep in mind this stock REPORTS earnings in ten days, but so far it is doing pretty much everything right. It did not venture to far below its rising 200 day SMA and it did recoup that long term line Monday in impressive fashion rising more than 4% on a pedestrian tape. It also broke above a bullish falling wedge today that aligned with the round 30 figure. Looking left on the chart it has not been comforting as it was resistance in March-April ’16, November ’16 and again in September-October ’17. I am not embarrassed to admit I shop in their Old Navy shops sometimes.