The major averages sported lukewarm gains Tuesday, and it was encouraging to see the Nasdaq outperform. It rose .6% no doubt with help from AAPL as it ended a 4 session losing streak and narrowly missed recording a bullish engulfing candle. One would have to go back to the late April period to see a 4 day down move for the name. Indexes, like stocks, will often have trouble initially touching a round number, but the Nasdaq powered through 8000 on 8/27. It is approaching that level once again and one does not want to witness any fatigue here. Heavyweights in the tech space like AMZN, which is now looking like it wants to retest the very round 2000 figure, and AMD is flirting with the 30 number as well. All three of those aforementioned plays could have a big say to where the Nasdaq is heading in the near term.
The Russell 2000 did not participate much Tuesday as it was basically UNCH for the session. It could be reveling in its hard fought victory above the round 1700 number, which quite frankly it deserves so credit for. It is not uncommon at all for a breakout to be retested for its validity, and that goes for all instruments in the trading world, and last Friday it came within 6 handles of that round figure. The rising 200 day on the VIX has proved to tough to CLOSE above with any consistency, and its 50 day SMA is now sloping lower. Today it lost more than 6%, following through on Mondays bearish engulfing candle. The instrument has failed to record consecutive CLOSES above the secular line now for 9 weeks. Taking a cue from the recent US Open, advantage bulls.
Charging ahead Wednesday was energy, technology and cyclicals. It is nice to see the latter two making stand and refusing to go away as the overall markets need them to flourish. Give the XLE a bit of credit as it is building upon its bullish hammer candle from last Friday off its 200 day SMA. Tuesday it recorded a bullish engulfing candle rising 1% in good volume. In my opinion it is still in no mans land, but the bulls are digging in where they need to be doing so. The XLY now has the look of a bull flag formation and a move and CLOSE above 117.25 would carry a measured move to 124.
Lagging Tuesday was just what bulls like, as the utilities and staples fell and .3 and .4% via the XLU and XLP. It seems to be do or die for the XLP here as it has shied away from the 55 number, in a bullish inverse head and shoulders pattern dating back to February. If the ETF can manage a CLOSE above 55 it would carry a measured move to 61. Give it some credit for recording a bullish golden cross and it is still holding a small gap fill from the 8/15 session. The XLU is faring a bit better as it trades 5% off most recent 52 week highs, while the staples are currently sitting 8% off its own. The XLV did not participate in the decent market move today, but it has the potential to complete a very bullish 3 week tight pattern this Friday as the last 2 CLOSED within just .23 of each other.
The jury is still out on the financials, at least via the XLF. The set up is promising, but without PRICE confirmation there is nothing to do. The XLF has CLOSED the last 8 weeks all within just .36 of each and that type of coiling action often leads to very explosive moves. Below is a great example of being patient with PRICE action on a CLOSING basis. Here is the chart of GS and how it was written in our Thursday 8/30 Game Plan. A bullish inverse head and shoulders formation was developing with its neckline aligning with its 200 day SMA. The buy stop above 245 was never taken out on a CLOSING basis, and anyone who tried to play cute has suffered, as the name is now 15 handles off that trigger. It currently trades 16% off most recent 52 week highs and is now on a TEN session losing streak, although today did record a spinning top candle which can signal the recent weakness could be abating.