There is a saying that cash is king. In an uncertain market, when is it not, it can be considered a valuable position. I am not disputing the statement, but one has to realize that some funds MUST have capital deployed. And I only make this point as the US markets may be the best place to put money to work. Keep in mind money is put to work where it is treated best and that by far is here at home, as returns firmly suggest. We raised this argument last week and it is a valid one if domestic benchmarks can carry the entire weight. Only time will tell, but the ankle weights on the US benchmarks are starting to show some fatigue.
The Nasdaq managed to show a bit of strength Monday, but it was muted as the tech heavy index still lost .25%, but outperformed the major averages. Concerning is the Russell 2000’s recent action. The round 1700 number has been a stern roadblock and Monday slumped by .7%. Its 50 day SMA is getting plenty of PRICE attention, but the bulls are still in control as its 50 and 200 day SMAs are sloping higher. The VIX recorded its third straight winning session, its first in 2 months, and it did CLOSE above its 200 day SMA.
Strength was very select among the major S&P sectors as the defensive utilities group was the leader with the XLU rising a frail .2%. Healthcare, technology and staples were not far behind being the only other groups that came within the UNCH mark Monday. The XLV has the possibility of forming a 3 week tight pattern, as the last 2 weeks CLOSED very taut within just .18 of each other. In my humble opinion, that is bullish as it fights with the very round 90 number and trying to avoid a double top. The last time 90 was touched was in late January, before a rapid descent. The fact that it is not shying away this time around speaks volumes.
Lagging Monday were the financials, materials and energy. The XLF did complete a bullish 3 week tight pattern last Friday as the previous 3 all CLOSED within just .16 of each other. This week is obviously off to a poor start as the ETF was lower by 1% today, but the week is still young and the set up is still in play. Looking at the XLE since breaking below its 50 day SMA on 6/15 it has been unable to show any consistency staying above it. Additionally now the line is sloping lower for the first time since mid April, even as GDP put a recent impressive print.
One should always keep a close eye of recent new issues, ones that go public in the last 2 years, as these can prove to be big winners going forward. Below is the chart of YEXT and how it appeared in our Tuesday 7/10 Game Plan. It came public in April ’17 and had been trading between 11-15 its first year of trading. It took off after breaking above 15 the week ending 6/1 on a CLOSING basis, with a huge move of more than 14%, and overall has moved 50% since June. Not surprisingly it had some problems with the very round 20 number, touching it for the first time between this June-July, before busting above the week ending 7/27 screaming higher by almost 17%. The stock broke above a bull flag and now looks to be forming another one and add to wit a buy stop, and as always CLOSE, above 23.