Markets put in a stubbornly bullish session Wednesday, and did so despite the ten year yield heading higher (remember Tuesdays melancholy mood was because of it so tune out the media noise and respect PRICE). They were led by the Russell 2000 which powered higher by 1%, and much more importantly CLOSED above 1610. This could put it on a path to reach a measured move of 175 handles. The Nasdaq is finally taking some shape into a semblance of a pattern as it is now 3 days into a handle on its current cup base. I did read a quote this weekend in Barron’s that said the indexes were thrown a lot of bad news at it and it bent, but did not break. That was very well said and indicative of recent action. Will this continue on as the most hated bull market in history? No one knows of course, but time is healing the pain of the February correction and we have to remember with all the hype over the old adage to sell in May, the month is higher 5 of the last 5 years (h/t Ryan Detrick).
Looking at individual groups Wednesday the leadership was decent with materials and cyclicals showing the way. The XLB and XLY added 1.2 and .8%. Would I rather have seen technology, financials or even energy show some force? Of course, but overall price action had to be respected. The XLP was the third best actor, and this ETF is looking for a third very taut weekly CLOSE and is forming a bear flag pattern in conjunction with the very round 50 figure. Keep in mind breaks away from these very tight congestions tend to be explosive. Lagging were the utilities which is becoming common these days as the XLU slipped .8%, and was the only major S&P group to finish in the red today. It has declined 2% this week already, a big move for the defensive group, on top of the 2.2% descent last week.
Its been hard to overlook the momentum in energy as the XLE is now enjoying a 9 session winning streak, and former best of breed names like PXD and EOG have reclaimed that status. Below is the chart of PXD and it did have some round number theory come into play with a cup base breakout above a 190.05 trigger on 4/15 which was successfully retested on 5/3-4 and 5/8, a good sign. Looking further back left it was stopped at the 200 figure the week ending 2/171/7, coming within just .17 of the number. On a WEEKLY basis last week, it was the first to CLOSE above 200 and this week looks as if it is seeing some follow through gaining 1.9% heading into Thursday. Look for 200 to be your new floor. Encouraging is the action on its weekly chart as its 50 day SMA climbed back above its 200 day SMA recording a bullish golden cross.