The major benchmarks were happy to end the first week in September, often a rocky month. The Nasdaq lost ground everyday this week, and witnessed its first four session losing streak in 4 months, and did so in increased volume. AAPL’s potential date with its rising 50 day SMA is getting closer. Semiconductors weighed on tech this week as the SMH lost nearly 3%, its worst weekly decline since the two weeks ending between 6/22-29 fell more than 7%. INTC which earlier this year looked like a leader, is now on the cusp of bear market territory off by 19% from most recent 52 week highs. The stock is looking to complete a bearish rounding top pattern and if support does not hold in the 42 area, another leg down could come. Value bulls will point to the dividend yield of 2.6%, but PRICE action looks wobbly at best.
For the holiday shortened week it was not what growth investors wanted to see. The Nasdaq and Russell 2000 lagged falling 2.5 and 1.6%. For the former it was its fourth biggest weekly loss since the week ending 11/4/16. The S&P 500 and Dow fared better on the week down 1 and .2%. The VIX was able to finish above its 200 day SMA, although by the smallest of margins, and now it must do so consistently. It has not put up back to back CLOSES above the line in 2 months. It is touching to 60 RSI number at the moment where it has failed four other times in the last 6 months. Overall I keep hearing their are still pockets of strength in the market, but using the word still to me has a negative connotation, as those areas that are showing firmness are becoming fewer and farther between.
Healthcare was the lone major S&P sector to advance Friday, and it did so barely higher by .1%. Energy and cyclicals were off by one penny, and it was the utilities an outlier declining 1.2%. The XLV successfully tested its cup base trigger of 91.89 the first 3 days of this week and held firm. It continues to trade very taut overall and now sports a bull flag formation with a trigger of 93. A break above would carry a measured move to 97. The XLE did manage to record a bullish hammer today CLOSING above its 200 day SMA, important as intraday it was below the line. The XLY which registered a bearish engulfing candle on Wednesday is looking at a potential retest of a breakout ABOVE a bearish falling wedge trigger of 114. Keep in mind traditionally these break to the downside.
On a weekly basis it was the staples and utilities that dominated with the XLU and XLP higher by 1.2 and 1.1%. The XLI is quietly up 8 of the last 10 weeks and this one should be watched in the last quarter of ’18 as it approaches a cup base trigger of 81.06 in a pattern that began the week ending 2/2. Top component in the ETF BA will have a big say in its direction, as well as the Dow Industrials as it is the largest priced play in the index. Although it trades wide and loose it did record a bullish engulfing and hammer candles this week on Tuesday and Friday. The one to watch in my opinion is still the financials as the coiling action there remains. The XLF is on a 4 week winning streak, albeit the entire gain is just 1.2%, and all four have CLOSED extremely tight within just .16 of each other.
The saying goes the longer the base the greater the space, upon the breakout. Patterns that take their time are much preferred to those which are short in duration. Below is the chart of the IT play UIS and how it appeared in our Wednesday 8/8 Game Plan. The group contains leaders like GLOB and EPAM which both happened to put an end to 4 session winning streaks, the latter with a bullish engulfing candle Friday. The chart here shows the WEEKLY chart and the cup base formation that showed a 20 month long base. The stock is higher 5 of the last 6 weeks, and this week rose by a decent 2.4%, following the prior weeks GAIN of 16.6% in the best weekly volume in 2 1/2 years. If one were to look at its daily chart they would see very tight overall trade. Next stop a test of the very round 20 number.