The Nasdaq flexed its muscles Thursday moving higher by 1.2% and the liftoff from the rising 50 day SMA should give more confidence to the bulls. Chatter throughout the day seemed to be negative, and give credit for shrugging off sizable premarket blues. The bears have to be getting more frustrated, as many of these short bearish streaks tend to peter out quickly. They point to the markets often topping on big headlines or milestones, and what could be bigger than the APPL $1 trillion market cap. Price action continues to chug along higher, frankly with price action a bit more wide and loose than I would like, but like the adage goes trade the market you have not the one you want.
The S&P 500 recorded a bullish engulfing candle right off the very round, important 2800 number. It is higher just 4 of the last 6 sessions and bulls want to see some follow through here, but we have to keep in mind with all the dark talk out there the benchmark is still just 2% off most recent all time highs. The handle on its cup base dating back to late January has a much better look after today. Thursday move put it up for the week heading into Friday and if that holds would be a fifth consecutive weekly gain.
Technology and staples led Thursday, and lets focus on the latter as the former is talked about incessantly this week with AAPL and TSLA. The XLP YTD is the still the worst performer of all the major S&P sectors lower by 4.4% (only other group in the red for 2018 is the materials). However the tide seems to be changing as on a three month look it is the second best actor higher by 10.3%, narrowly being outdone by healthcare with the XLV up 10.5%. The ETF is higher by .6% this week so far and is now above its 200 day SMA as it builds the right side of a cup base with a potential trigger of 59.05.
Lagging Thursday was energy and materials as the XLE and XLB fell .5 and .7% respectively. The XLE recorded its first 3 day losing streak in 6 weeks, and on its weekly chart with one session left this week is sporting a bearish dark cloud cover. Add to that the bearish engulfing weekly candles, the weeks ending 5/25 and 6/15 which slumped 4.5 and 3.6% respectively and you have your bearish tilt. Another view of the weekly chart however could be a bull flag, and for that reason I still believe this ETF is in no mans land and should only be participated in on breaks to the upside above 79.
The housing sector has been under assault since late January, like everything else was but this space has missed out on the subsequent rally. The XHB is 17% off its most recent 52 week highs (pure play ITB by 19%). Both ETFs had patterns sporting bullish inverse head and shoulders formations, but they moved to the downside. Many names even somewhat associated with housing like FND or SUM are now lower by 32 and 38% from their own respective 52 week highs. Below is the chart of OC and how it was presented in our Monday Game Plan this week. It too shows a deep downtrend, now 37% off its most recent 52 week highs, and down nearly 3% headed into Friday. Food, clothing and NO shelter is how the stock market rolls these days.