Markets started the week off on the right foot Monday, although some of the indexes did finish slightly off intraday highs. The Nasdaq cam close to breaking above its cup with handle trigger near 7460, but shied away. The Russell 2000 added to its break above its 1610 ascending triangle pivot and traded HIGHER following last Fridays doji candle, which many looked at as a sign of exhaustion. It is still premature but today was a step in the right direction. Out of the 30 stock in the Dow, just two lost ground today as MRK and JNJ fell, but the bigger story Monday was the ongoing bullish move in the transports. The IYT broke above a 195 ascending triangle trigger on a CLOSING basis, which carries a measured move to 213. That would obviously surpass a cup base trigger of 206.83, but the story has to be seen in a glass half full, maybe three quarters full scenario. Rail plays UNP and NSC are near 52 week highs and a piece in the Market View section this week in Barron’s caught my eye as the truckers are seeing growth like they have not seen in 30 years. Tick tock, inflation next stop?
Looking at individual groups Monday it was easy to spot the rally was broad based as all nine of the major S&P sectors gained ground. Industrials and energy led with the XLI and XLE higher by 1.5 and .1%. Rounding out the top three was technology, which the bulls welcomed as the XLK rose by .9%. Financials did not want to be left out of the mix as the XLF rose by .7% too. Staples and healthcare lagged as the XLP and XLV added .4 and .1% respectively. The XLI has advanced 11 of the last 13 sessions since bouncing precisely off the round 70 figure on 5/3. Volume trends for the ETF certainly have to improve, and bears will point the seven weeks since the week ending 2/2 have dropped 2% or more, with 5 of the 7 surrendering more than 3%. Of course BA has been a big contributor and it is nearing a 371.70 cup base trigger, and a breakout would achieve an all time high. WAB was the subject of M&A discussion as GE transportation unit is merging with it and it is nearing the very round par figure which has been resistance dating back to April-August 2015.
At some point sentiment becomes so negative on a stock that one has to put a name on its long radar. One does not simply buy on impulse however, as a catalyst is needed for entry. I personally admire stocks near 52 week or all time highs, but certain formations in technical analysis could alert bottoming situations which offer decent risk/reward. Below is the chart of GE and how it was presented in our Monday 5/14 Game Plan. It has spent the last 4 months trading sideways after a horrific downtrend, perhaps indicating sellers have exhausted themselves. The name is still 48% off most recent 52 week highs but the 15 level has been a line in the sand. There have been just 4 CLOSES above the number since falling below it on 2/5 until mid last week. It has achieved 3 of the last 4 sessions CLOSING above 15 and today broke above a bullish inverse head and shoulders formation. The measured move is not gigantic, but it could certainly surpass that. The dividend yield is still above 3%, compensating investors somewhat until the appreciation side of the equation comes to fruition.