Markets were off Tuesday, and one can look at the glass half empty of half full. The Nasdaq and Russell 2000 outperformed, the latter CLOSING up fractionally, and this is a bullish sign. The Dow is now flirting with negative YTD status, and is on its first 6 session losing streak of 2018. It also recorded its third consecutive bullish hammer and today did so off its inclining 50 day SMA. The S&P 500 fell .4% and on its RSI and trading in the bullish zone above 50 and still making higher highs and lows since the February weakness. The Russell 2000 put in its own third straight long lower wick and this should not be surprising as it has benefited from tariff talk, as its members obviously garner the near entirety of their revenues domestically. The VIX once up comfortably in the mid teen percent was rejected at its downward sloping 50 day SMA for the fifth time since April. It has the possibility of a bearish death cross, but notice in the beginning of February the 50 day precisely touched the 200 day SMA and launched higher. Deja vu?
Looking at individual sectors Tuesday the top three certainly had a defensive flavor and it is something we have been harping on now since last week. The utilities and staples rose via the XLU and XLP by 1.1 and .5%, and this is the definition of suspect leadership and keep in mind last week one of the two aforementioned groups were the best actors 4 of 5 days. Rounding out the top three was healthcare as the XLY gained .2%. Lagging today were the industrials and materials, those most apt to be under pressure if a trade war intensifies. However if that does not become the case, I am in that camp, then there could be some real bargains in the area. The XLB and XLI fell by 1.8 and 2.1% respectively. The XLF is now on a 7 session losing streak although the last 3 have closed at the top of its daily range and is holding onto its upward sloping 200 day SMA. Question is is it touching that line to many times recently making it more apt to fail?
Technology was in the bottom half of the best performing groups Tuesday, but overall it is still acting well. Keep in mind the XLK is potentially looking to form a 3 week tight pattern as the last 2 weeks have CLOSED very taut within just 4 pennies of each other. Of course in the large diverse universe of technology one sees strong winners, and soft laggards. When a stock is left behind by a strong sector one can make all the excuse he or she wants, but the weakness is there for a reason and it speaks for itself. Below is the chart of SNAP and how it was presented in our Friday 6/15 Game Plan. On its weekly chart it shows a current 4 week winning streak that rose 30%, but it still remains 37% off most recent 52 week highs. This week has surrendered nearly 7% and could form a bearish engulfing candle depending on Fridays CLOSE. It has been beneath its 200 day SMA for most of the last 2 months and keep it in the penalty box at least until it can cross above that long term secular line.