Benchmarks were rattled somewhat Thursday after tariff announcements, but the Nasdaq and Russell 2000 “outperformed”. The Nasdaq which did record a bearish harami, ending a 4 day winning streak fell .3% (Russell 2000 lost .1%). But on a WEEKLY basis is higher by 1.8%, which doubles that of the S&P 500 and Dow up .9 and .8% respectively. AAPL shrugged off any frailness that market exhibited adding almost 1% today, and is looking at a potential THIRD 4% or more weekly gain in the last 5. NFLX also gained ground as its momentum continues following its bullish engulfing candle on 8/20. The stock came close to touching its 200 day SMA in late August, but it has not directly contacted the secular line in almost 2 years now.
Yesterday we mentioned the VIX and how a big move was to be anticipated, the direction unknown, and today it delivered with a jump of more than 10%. It is still swimming underneath its 200 day SMA, a line that is rising, and its 50 day is looking like it wants to curl higher as well. The instrument is now back to the death cross in early July, and the bulls need not temper their enthusiasm until a couple of CLOSES above the 200 day occur. In the last 8 weeks there have been just TWO finishes above. The thirst for treasuries, as investors around the globe search in vain for yield, has not been quenched as the yield was once again abruptly turned back at its declining 50 day SMA via the 10 year yield.
Groups that acted best Thursday were defensive in nature as the utilities and healthcare “led”. The XLU rose fractionally by .1% and the XLV fell by .1%. The XLU still has the look of a cup with handle pattern in a base nearly 10 months long (longer the base the greater the space upon the breakout). The potential trigger there would be above a 54.86 trigger. The XLV recorded a bearish harami candle today, but is still comfortably above its 91.89 cup base breakout pivot. The ETF has gained 1% this week heading into Friday, but volume has remained cool which bears would highlight, and the bulls would counter with the summer doldrums as the reason. It is likely to retest that 91.89 entry soon, and does have some cushion underneath as well with the 90.48 cup with handle trigger taken out on 8/16.
Lagging today were the materials, industrials, financials and cyclicals. That made it two sessions in a row that the finnies and industrials were weak. Peering into the weekly XLI chart one sees the rounding bottoming pattern still in construction, but volume trends remain a bit of a concern. There was plenty of distribution, most notably 8 weeks ending between 2/2-6/22 which fell at least 2% in greater than average weekly trade (two slumped more than 5%). Bulls want to see volume return with conviction as traders return from holiday. The XLY has some more retail names that were under pressure today, a trend that is becoming somewhat problematic, with DLTR, ANF, and MIK all declining by double digits Thursday.
Consumer staples have backed off slightly after a nice run since May, as the XLP is lower 8 of the last 10 sessions. It is important to monitor which names rode that wave and which were left behind. Stocks that are not helped by a rising sector tide are apt to fall harder once a downtrend materializes. Below is a good example of TAP and how it was presented in our Wednesday 7/18 Game Plan. This name has long been rumored as a takeover candidate, and how many times have we seen names that were near being acquired and it never happened. This name has now filled in a gap to the upside THREE times from the 5/1 session, which happened to align with the round 70 number. Its 200 day SMA is still sloping lower and that Rocky mountain high has lost its fizz, pun intended.