The Dow was the best actor among the big four indexes Friday as the benchmark rose .4%, aided most by its largest priced component BA gaining 1.4%. Its third largest priced name in the 30, GS is still mired in a downtrend off 18% from most recent 52 week highs, and for now seems to be shrugging off the bear flag at 220. Give credit to the Dow the CLOSED above its 50 day SMA everyday this week, after the prior week spent nearly the entire week underneath its 200 day SMA.
We mentioned we wanted to see a few CLOSES above the round 7800 number on the Nasdaq, and it did so both Thursday and Friday as it grapples with the ugly bearish engulfing candle from 6/21. However Friday recorded a doji candle which can signal a fatiguing of the prevailing trend. It registered just three other ones in all of 2018 so far on 4/16, 5/17 and 5/24 which failed to hurt the tech heavy benchmark. Friday’s doji however could hold more significance as it occurred at all time highs.
On a weekly basis their was a bit of bifurcation as the defensive Dow added 2.3% and the Russell 2000 FELL .4%. The small cap benchmark is dealing resistance with the WEEKLY doji candle of its own from 4 weeks back presently. On a YTD basis the Nasdaq holds a commanding lead higher by 13.4%, putting some space between the Russell 2000 which has gained 9.9%. The S&P 500 is up 4.8 and the Dow by 1.2% thus far. The VIX followed through this week lower after the prior week recorded an ugly bearish engulfing candle. That was preceded by yet another bearish weekly shooting star that reversed at the very round 20 number just 3 weeks ago. Is the VIX headed for single digits once again where it started 2018?
The financials were the laggards Friday and perhaps it was a buy the rumor and sell the news event. There was some big options purchases last week, and the earnings that were delivered from the banks Friday were uninspiring as WFC, C and JPM all lost ground, albeit in a small way. However given how WFC, C and JPM are all 17, 17 and 11% off their most recent 52 week highs one still has to paint a bearish narrative on the overall group. The most disappointing move to me came as FRC, which had been showing solid relative strength now 7% off its most recent 52 week highs, reversed hard as it continued to flirt with a 9 month cup base trigger of 105.62.
On a weekly basis their was just one major S&P sector that declined, as the utilities via the XLU slipped 1.2%. Their were healthy gains seen with the industrials, consumer discretionary and technology showing the way with advances of 2.2, 2.1 and 2.1% respectively. Healthcare should not be left out of the conversation as it put up a nice return of 1.6% this week, on top of its 3.1% jump the prior week. The ETF is now honing in on the very round 90 number, where it has recorded just two CLOSES above in 2018. It has risen 10 of the last 11 sessions and is constructively building the right side of its cup base with a potential 91.89 trigger.
As we are all aware there has been a big push in defensive sectors and we normally highlight the staples and utilities, but one can not ignore the strength in the REIT space. I am a purist, and still count the nine major S&P groups, even though real estate and communications now make up 11. The XLRE is higher 6 of the last 8 weeks and its daily chart now shows a cup with handle base with a trigger of 33.45. Below is the chart of WELL and how it was presented in our Friday 5/4 Game Plan. One could see the turning point with the a nearly 10% combined gain the weeks ending 4/27-5/4 in aggressive volume, with a nice bounce off the very round 50 figure. Leading stocks will offer additional buy points on the way up, and its current chart now shows a bull flag formation with an add on buy point through 64 which would carry a measured move to 71.