The indexes finished off session highs Tuesday, with the most notable being the Nasdaq up early on by 1.1% and ending the day negative, albeit ever so fractionally. Until today the large ranges on the tech heavy benchmark has been CLOSING on the upside. Is this the beginning of a change? No one knows for sure and bears can point to the negative rising wedge that began on 3/13 with a bearish engulfing candle. Another engulfing candle was recorded on 6/21 hitting resistance within the pattern, and today an ugly reversal as well. Traditionally this week is volatile with the bevy of earnings and perhaps one could take a cautious tone in the short term.
The round numbers have been influential recently with the most noteworthy being 2800 on the S&P 500 and 1700 on the Russell 2000. The latter was a material under performer as it fell 1.1%, and for a third consecutive day was above 1700 intraday with zero finishes above. Keep in mind it has not recorded back to back CLOSES above 1700 as the 6/20, 7/9 and 7/20 sessions ended above 1700 with the very next days failing to do so. It is a line in the sand now, and the bull flag that looked decent last week is now wavering, pun intended.
Retail and transports weighed on the S&P 500 as it was held to a gain of .5%. The IYT slumped 1.5%, recording a bearish engulfing candle to CLOSE under its 50 day SMA, and the ETF is now 7% of most recent 52 week highs. The right side of a cup base looked promising until it was pushed back at the very round 200 number as the 6/11-18 sessions all traded above 200 intraday with just one of the 6 CLOSING above (6/15 finished precisely at 200). WERN and JBLU reacted to earnings today and both cratered to the tune of 10%. Buckle your seatbelts in that space. The XRT can not seem to shake off its own round number of 50 as it fell in firm volume Tuesday.
Groups that led Tuesday were energy and materials with the XLE and XLB adding 1.2% and 1.3% respectively, and healthcare rounded out the top three as the XLV rose .9%. The XLE was stopped at its 50 day SMA, CLOSING below its 50 day SMA which is starting to slope lower for the first time in 3 months. Keep in mind it trading below its 50 day in not necessarily a penalty, but it wants to stay within close range and recapture it in rapid fashion as it has recorded SEVEN straight CLOSES below the important line.
On the losing end today were the cyclicals with the XLY falling .3%. The XLY is now on a 5 session losing streak and has registered three doji candles in the last 7 days, with the gravestone on 7/19 the most bearish. With all the talk of how well the retailers have done, the group is among the subsectors in the ETF, the XLY has recorded just TWO accumulation weeks in all of 2018 thus far. That being said it trades just 1% off most recent all time highs. Bulls and bears can paint their own narratives accordingly, with the bulls still in control and could point to the ETF remaining at such lofty heights despite the lack of volume.
Not all technology names rolled over Tuesday, as the Nasdaq retreated from gains of better than 1% in the early going today. Names that buck that kind of weakness should be viewed as bullish. One potential stock is the chart below of GLW and how it was presented in our Friday 7/13 Game Plan. Now this name REPORTS earnings tomorrow morning (I have no position), and as a long term investor, one needs to have the gumption to hold through multiple, and sometimes very many reactions 4 times a year. This name recently broke above a bullish inverse head and shoulders formation and its 200 day SMA Tuesday. It is up better than 2.4% this week so far and that should change tomorrow, but it is looking for its first 4 week winning streak in 8 months. CLOSING above the round 30 number Wednesday, which has given it trouble since beginning of February, would be a bullish occurrence. Today was the seventh day since 2/5 being above 30 intraday, but unable to conclude the day above 30.