Markets kicked off a new week with vigor Monday as the Nasdaq put its best foot forward, which is becoming a welcoming habit. It rose .7%, in line with the Dow’s advance, but it competing for the top spot among the big four indexes on a regular basis now is just what bulls want to see. Perhaps its long hibernation was a restful and rejuvenating one. A little concern was the Russell 2000 which still added .2% today, but was in the red for a small portion of the session. Of course this benchmark has been on a powerful run so a prudent pullback could actually be beneficial. Transports were not in a jolly mood or in sync with the overall markets as the IYT and its action since the bearish engulfing candle on 5/22 is anything but positive. Volume trends have been bearish and the 197ish area continues to be a roadblock, pun intended. Strong moves were seen in some of the retail names as ULTA, WMT and ROST. The last 2 names in the discount arena has seen some real bifurcation as ROST trades 3% off most recent 52 week highs while WMT is 22% off its own. Leaders like FIVE and WSM continue to impress.
Looking at individual sectors to start the week there was some encouraging news as cyclicals and technology were a strong one-two combo of the major S&P groups, with the XLY and XLK up 1.1 and .8% respectively. Retail helped propel the discretionary space as the media touts they are doing a much better job to offset AMZN’s influence. Of course AMZN is the largest component in the XLY, three time bigger than the second presence HD, and its performance has failed to back up that claim as it has not suffered whatsoever. In fact it is now on an 8 session winning streak and acted very well above the round 1600 figure which previously gave it some trouble this March-June. Lagging today were the utilities and energy as the XLU fell .8% and the XLE slipped .9% as XOM registered a bearish engulfing candle and it looks more and more that the promising long term weekly ascending triangle trigger just below 79, may well be a triple top. Stay tuned.
After Fridays jobs report the economy seems to be humming along. Of course there can be a disconnect between the stock market and the economy, but it is always a good idea to monitor what groups that have a pulse on the true health of the economic engine. The transports have been sending a positive signal overall, although todays action in the IYT left something to be desired. That paper and packaging plays can also give us a tell as to what the strength is among consumers and therefore corporations. Below is the chart of IP and how it was presented in our Monday 5/21 Game Plan. Until today it had been swimming below its 200 day SMA for 3 months but a thrust above Monday of almost 4% in well above average daily volume excited bulls. It is still 14% off most recent 52 week highs, but has recorded a nice double bottom at the very round 50 number the weeks ending 3/23 and 5/4 and the right side of a potential cup base is beginning to take shape. Stay long above the 200 day and the potential cup base pivot is 67.04.