Bulls have to be watching the Nasdaq’s relative weakness recently, as Monday it again lagged the big three. Keep in mind it was the only one of them, the Dow and S&P 500, to CLOSE lower last week. It was positive in a very fractional manner as the Dow and S&P 500 added .4%. The S&P 500 is nearing 52 week highs, and is nearing yet another cup with handle trigger just above 2864. It filled in a gap to the upside from the 8/9 session and is now a half of a percent from all time highs. The Dow recorded a bearish hanging man candle today but the range was small, and the last 4 days have risen 800 handles top to bottom.
The Russell 2000 touched the important round 1700 number for the first time in four weeks, but was unable to CLOSE above it. This index is a good barometer of what is happening domestically, as they vast majority or revenues from stocks in the benchmark come from the USA. We are all well aware of the dispersion between here and abroad and investors looking to exploit that difference will park there capital accordingly. But PRICE action is paramount, and one wants to witness consecutive CLOSES above 1700 before becoming too excited. Remember 6/20, 7/9 and 7/19 all did so, only to lose the 1700 figure the very next day.
Leading the way to start the week was a near quadruple photo finish with the cyclicals, industrials, energy and materials all gaining in the .7% neighborhood. The retailers propelled the cyclicals as evidenced by the XRT rising more than 1% today in strong volume. The ETF is looking for a third consecutive weekly gain (would have been 4 but the week ending 8/3 CLOSED at 49.99) and the very round 50 number could be seen as a durable floor, where it was prior resistance. The XLE has burned many recently, and the last 3 days have traded in a very taut range and within the 8/14’s 3.5% loss. It did find support at its 200 day SMA and could be readying itself for another run into the 79 area in the fall which is a huge level. A potential double bottom trigger of 78.10 is setting up. More aggressive traders could enter here with a tight stop below 71.50.
Looking at what lagged Monday was an interesting trio that does not normally trade in tandem. It was the staples, technology and the utilities that were the only three major S&P sectors to lose ground. The staples I though would have benefitted from some M&A announced this morning with PEP taking a liking to SODA. Sure on 8/1 it screamed higher by more than 26% after a well received earnings report, but one has to wonder if someone knew something prior to todays big news as it rose 14 of the previous 14 sessions.
The transports have always had plenty of attention put on them as the often have a genuine pulse of the health of the economy. It is a broad group with rails sandwiched in, both of which deliver goods across the globe. UPS is on a current 6 week winning streak, its first since early ’16, and its chart for the first time in a long time looks better than chief rival FDX. The IYT is chugging along toward a 206.83 cup base trigger, pun intended, as it looks confident above the very round 200 figure. Below is the chart of UAL and how it appeared in our Tuesday 8/7 Game Plan. It has flown above a bull flag trigger of 82.25 on 8/7 and then fell back toward the round 80 number before taking off again, multitude of puns tonight. The last 3 weeks all CLOSED very tight within .67 of each other which often leads to explosive moves.