The Russell 2000’s weakness is beginning to become a bit of a habit instead of an aberration. It has now lost ground 4 of the last 5 sessions, and looks like a legitimate double top with bearish engulfing candle registered on 6/21 and 7/10. In a healthy breakout the initial time touching a rising 50 day SMA following a breakout, here the symmetrical triangle near the round 1600 in early May, would be a great entry. However it is looking to touch it again quickly for a second time, perhaps bearishly to soon. Maybe it was spooked as it came within one handle of challenging the Nasdaq’s YTD move recently.
The Nasdaq ended Monday lower by .3%, but it did CLOSE above the round 7800 number for a third consecutive day, although the doji candle from last Friday still looms large. Volume has been uncooperative as it rose into the 7800 level it achieved late last month. Could it be blamed on the summer doldrums? There is evidence that markets tend to underperform in the second half of July and extend into the August and September months. Give it credit for hanging around 7800, as it could very well be a double top with late June, but the longer it can hang around here the more the bulls will fell invigorated. Semiconductors need to participate.
Are the financials a contrarian indicator? The group via the XLF easily recorded the best major S&P sector return Monday with the XLF higher by 1.8%. The second best actor was were the cyclicals and utilities which ended up higher by .3% and lower by .1% via the XLY and XLU. The XLF still trades below both its 50 and 200 day SMAs and within the range of the nasty 13 session losing streak between 6/11-27. Markets have been doing fine just without them, but should this be seen as a welcome addition or should investors take a cautious view at its nascent strength?
Energy was the worst performing space today as the XLE lost 1.1%. Its failed break above a double bottom trigger of 77.75 on 7/10 recorded a bearish shooting star, CLOSING below the pivot even though it was above intraday. It was the middle day of a bearish evening star pattern and today the ETF ended below its 50 day SMA, perhaps to quickly after doing so just last month. It is making a habit in CLOSING in the lower half of its daily range in July, suggesting buyers have little faith in the group going forward.
There have been some nice turnaround stories in the casual dining space. CMG comes to mind as it has rallied more than 200 handles from its February lows this year although it has filled in a gap last week from the 7/7 session and is holding on barely to its 50 day SMA. Below is the chart of SHAK and how it was presented in our Thursday 7/12 Game Plan. This name has come a long way since completing a triple bottom at the round 30 number the weeks ending 1/15/16, 3/17/17 and 9/8/17. The stock touched its rising 50 day SMA for the first time in 3 months last week, which is often a good entry especially following a recent breakout. It topped out not long after going public near the very round 100 number the week ending 5/22/15, and a look on its weekly chart can be interpreted as a cup with handle and can be added to with a buy stop above a 70.06 trigger.