The Nasdaq ended the week in fine form recording its first back to back 1% gains since the 4/3-4 sessions as it now stands just 2% off most recent all time highs. It is now back above a 7637 cup base trigger after a brief bear trap. Look for a retest of the bearish engulfing candle at the round 7800 number from 6/21 at all time highs.
The Russell 2000 continues to impress with the best weekly gain higher by 3.1%, followed by the Nasdaq rising 2.4, the S&P 500 by 1.5 and the Dow by .8%. It is clearly resuming its uptrend after last weeks halt to an 8 week winning streak, and this week registered a bullish engulfing candle. The small cap benchmark has gained 10.3% YTD, second only to the Nasdaq up 11.4%, and the leadership both demonstrated this week shows “risk on” appetite has returned.
The Dow rose by a pedestrian .8% this week and is the only major average lower YTD off by 1.1%. Friday it rose above its upward sloping 200 day SMA, although it took several sessions to do so unlike the prior two occurrences on 4/2 and 5/3 with both sessions under the secular line intraday, but managing to CLOSE above each time.
The VIX has declined 5 of the last 6 days and Friday slumped more than 10%, but more importantly undercut its 50 and 200 day SMAs and the break above a bullish falling wedge has failed quickly, just the opposite of what one wants to see. We know the best breakouts work out right away. To add to the bearish narrative it recorded a bearish MACD crossover.
Healthcare led the way Friday as the XLV rose 1.4% breaking above a cup with handle trigger of 85.82. On a weekly basis it scored the best gain as well jumping 3.1%, its best move in 4 months. It was aided by BIIB’s weekly jump 23% advance with the stock coming within 3 handles of a three year high. The IHI should be watched closely as it is now within 1% off all time highs and has risen 11 of the last 13 weeks.
Technology was a strong actor for a second straight session as the XLK added 1.2%. The ETF recouped its 70.52 cup with handle trigger originally taken out on 6/1. Three of the last 6 days have been higher by more than 1% as it continues to receive support at an upward sloping 50 day SMA (7/2 registered a bullish engulfing candle higher by “only” .9%). AAPL, MSFT and FB which make up more than 1/3 of the ETF are all acting well technically.
Energy was the only major S&P sector to lose ground last week, falling marginally by .4%. The XLE has carved out a double bottom base with a potential 77.75 trigger, but one looking for “value” has to come away somewhat impressed with the OIH. It is now 12% off most recent 52 week highs (XLE is 5% off its) after failing to break above a cup base trigger of 29.63 in late May. The 200 day SMA is holding up strong, and on the RSI it shows an inverse head and shoulders with the bullish zone threshold line of 50 being the neckline. A break through the figure will indicate a positive trend change.
There have been many energy skeptics, including myself, recently but one has to give credit where it is due. The XLE continues to defend its bull flag breakout above 74, but seems hesitant to want to break above a long triple top just below 79 dating back to December ’16, January ’18 and again this May. Until it breaks above I would continue to be cautious, but that feeling is becoming less so with time. Below is a former best of breed play PE, and how it was presented in our Monday 6/25 Game Plan. It broke ABOVE a bearish head and shoulders formation in late June, and moves in the opposite direction can be powerful. The stock recaptured its 50 day SMA on 6/27 and has defended the round 30 number too CLOSING above it 6 of the last 7 sessions. Look to add to above a 33.53 cup base trigger and oil bears could be in for a crude awakening, pun intended. Admire the pedigree at the top here as the CEO is the son of the CEO at powerhouse PXD.