Benchmarks were on the defensive Wednesday, and were unable to dismiss overseas weakness. The DAX, CAC and FTSE all lost more than 1%, and although it did not affect the Dow which was essentially flat, the Nasdaq fell 1.2%. The S&P 500 and Russell 2000 lost .3%. Software the firmest tech space was responsible for the softness as stocks like WDAY plummeted 9.2% after earnings, although coming into today had risen 22 of the last 25 days. NOW slipped almost 5% after it showed hesitation at the very round 200 number recently. This group needs to solidify itself as we know semis have been shaky at times in 2018. If both start to slump that could have a profound effect on the averages.
The VIX recorded a spinning top candle, which often signals fatigue, and it has enjoyed a nearly 40% run since the bullish hammer off the round 10 figure in mid August. It has yet to show any follow through after 8/30 rose more than 10%. The bears will highlight it has not broken down either. Commodities are showing some interesting divergences. Crude which has acted well throughout times this year, bounced nicely off its rising 200 day SMA in mid August, and is now flirting with a double bottom trigger that aligns with the round 70 figure. Todays move below the 50 day SMA was not productive. Yet copper, which China is the largest consumer of, is now in bear market mode 22% off most recent 52 week highs. Perhaps the ETF could see some strength after touching the round 40 number on 8/15 and 9/4.
Utilities and staples were your leaders Wednesday with the XLU and XLP advancing 1.4 and 1.1%. Utilities were near the top of the sector leaderboard for a second straight session, and it is certainly a small sample but one does not want to see them emerge as winners once again. For the last week the staples and utilities are the best performers, in fact the only ones of the major 9 S&P sectors to gain ground. Technology happens to be the worst with the XLK lower by 1.8% over the same one week period.
Lagging clearly today were just the spaces you want to see if you are bullish with the cyclicals and technology weak. The XLY and XLK were off by 1.1 and 1.2% respectively. AAPL contributed to techs decline as it recorded its fourth consecutive bearish candlestick today, beginning with a bearish shooting star last Thursday and an engulfing candle today. The stock sits nearly 30 handles above its 50 day SMA, which gave it comfort just one month ago. A pullback seems responsible and purchasable. NFLX did not help either as it is nearing bear market territory now 19% off most recent 52 week highs and has found resistance at its downward sloping 50 day SMA.
It always pays to see which names shrugged off weakness. Below is the chart of ATR and how it appeared in our Tuesday 8/7 Game Plan. Now todays weakness was largely due to technology, and this chart is of a packager (ULTA strength has not hurt), but this chart has a lot to like. The name has advanced 9 of the last 10 weeks, and since the week ending 2/16’s 11.8% romp it has not recorded a week of distribution. To be fair it trades a bit on the illiquid side, but one would think that would make it prone to volatile behavior. It has proved to be just the opposite with very taut trade, a hallmark bullish characteristic. On 8/15 it bounced precisely off the very round 100 number, and this week heading into Thursday is higher by more than 3%. Respect strength.