Turnaround Tuesday was in force today and it was the risk on indexes that fared best. The Nasdaq and Russell 2000 rose by .6 and 1% respectively, and the latter is honing in on its nemesis, the round 1700 figure. I come away impressed with its tenacity and its continued touches upon the line in my opinion will only weakens the bears resolve there. Of course the final arbiter is PRICE alone and keep in mind a break above 1700 would be a move through a bull flag, which has a measured move to 160 handles.
The bond market usually give clues ahead of the overall stock market direction. Thats the belief as the smart money is there and its much larger. Looking at the 10 year yield it is within the confines of a symmetrical triangle. Notice the trouble with the “round” 3 number as it was resistance on 6/13 and 8/1. The pattern began with the completion of a classic evening star pattern on 5/18, which resulted in a 50 basis point plunge in just 6 sessions. The JNK is showing a “risk on” appetite and sports a bull flag formation. Last weeks loss interrupted a 5 week winning streak, its first such feat in 10 months.
The rally was broad Tuesday and it was the cyclicals that impressed the most with the XLY higher by 1%. The diverse group has been pushed upward by traditional retail names and others such as casual diners. The brick and mortar plays have been helped by a vibrant consumer and the combination of unprofitable stores being closed down. Restaurants are of course benefitting from the stronger economy and stocks like CMG and WING and wing are sitting deliciously right smack at 52 week highs, pun intended.
Lagging Tuesday, but still advancing were the energy and utility sectors. The XLE needs to hold 73.98 to continue the lower highs and higher highs within its current symmetrical triangle that began in May. The XLU is trading very sloppy, but on its weekly chart things look a bit better as there is the possibility of a bullish 3 week tight pattern to emerge. The ETF is higher 6 of the last 9 weeks and consolidating the 4 week winning streak ending between 6/15-7/6 which added a combined 8.8%. The right side of its cup base is looking healthy as it grinds higher gradually, and has a potential trigger of 57.33.
Retail names have been doing plenty of the heavy lifting for the overall markets this year, as the XRT is now decisively above the very round 50 number. The ETF rose 2.3% today and the group is very diverse and it is not hard to find leaders within. Below is the chart of BOOT and how it appeared in our Friday 8/10 Game Plan. This name broke above 26.35 cup base trigger on 8/8, and immediately reversed the next session recording an ugly shooting star candle showing that although they are useful, PRICE action reigns supreme. To add to the bullish narrative the trigger for the short cup base could have been interpreted as a handle in a much larger base that began the week ending 7/17/15. This name should be pulled magnetically toward those all time highs in the mid 34’s toward the end of the year.