Markets endured a tough day Thursday, no two ways about it. The headlines will shout at the 8 day losing streak for the DOW, which is now honing in on yet another touch of its rising 200 day SMA. The more contact it makes the more likely it is to break in my opinion. The Nasdaq and Russell 2000 which had been demonstrating good resilience, did none of that today. The Nasdaq recorded a spinning top yesterday, which like a doji candle could signal some weakening of the recent trend, and Thursday it registered a bearish engulfing candle at all time highs. Both of the last 2 sessions were pushed back at the round 7800 as well. PRICE will always supersede all other indicators, including candlesticks but it does not mean we should ignore them. They could give us clues and Wednesday I did witness bearish gravsetone doji candles on leaders like NOW and V. All three of the major benchmarks are now lower on the week heading into Friday, most notably the Dow off by 2.5%.
Looking at individual groups Thursday and at the expense of sounding like a broken record once again it was the utilities and staples that outperformed. It was not a stellar session for the sectors as the ended up .3 and .2%, but nonetheless they have now finished in the top spot of the group leaderboards 6 of the last 8 days. The XLU is higher by 1.7% heading into Friday and is looking for just its fourth back to back weekly gains in the last 7 months. It continues to trade below its 200 day SMA which is downward sloping, and until it can penetrate it to the upside it remains more of a market warning, that an actual long play to me. Keep in mind even if the market rolls over this group may outshine others on a relative basis, but on an absolute basis the returns should be limited. Lagging today was materials, industrials and energy, spaces that should be thriving in a growing economic climate. The XLE slipped 1.8% and decisively undercut its 50 day SMA.
We are big fans of watching IPOs as they tend to be less followed and therefore potentially offer opportunities. Often when names begin to trade public they act in a volatile manner as they attempt to carve out legitimate bases. This could be due to illiquidity among other things. When one can identify a name that shows somewhat taut trading, a hallmark bullish trait for any stock, one can be onto something. This is exactly what the chart below did, of ZS and how it appeared in our Thursday 6/14 Game Plan. It formed a nice long cup base that was taken out in active volume, but a bearish shooting star was recorded on 6/11 followed by an engulfing candle. It later went onto to cut into that star and has since faltered. It is lower everyday this week and by more than 14%. A gap fill from the 6/6 session would be a good risk/reward to cover and go long.