The Nasdaq led the way again Thursday with a gain of .7%, although it did finish off session highs and CLOSED above the round 8000 number. For the week headed into Friday it has recouped about one half of last weeks 2.5% slump, but one has to give it credit. It seems like sentiment is still pretty weak despite the solid YTD performance, and one usually sees euphoria at market tops. Today the latest to pour cold water on it was Tepper, who said we were in the late innings of the bull market, and then of course proclaimed he was “very, very long” MU. We are nearly half done with the month of September, which seasonally is weak, yet in years when the market is up headed into the month it behaves much better than when it was down coming in. Sure it could still puke, but respect the PRICE action thus far.
Risk still feels like it is still on, and to demonstrate that I give you two ETFs that have traded in different paths recently, but support the narrative. First peering into the JNK it is now on a 6 session winning streak and keeps grinding out new highs. On the other hand the EEM which currently rests 19% off its most recent 52 week highs, may have recorded a bottom this week. On Tuesday it recorded a bullish counterattack candle, and on its weekly chart with one day left has the look of a bullish hammer and harami candle. One could also say it bounced off a bullish falling wedge pattern too. The old saying that trends tend to persist more than they reverse comes to mind, so tread carefully. We all know bottom fishing is one of the most expensive ways to conduct business.
Healthcare and technology were your best actors Thursday with both the XLV and XLK gaining more than 1%. The XLV has risen 1.3% for the week thus far and is further distancing itself from the 91.89 cup base trigger that it took out in a 7 month pattern. The XBI has made three separate ventures above the very round par number since June, but it has been unable to stick. It now sits 6% off most recent 52 week highs and the slight weakness could have been foreshadowed with the failure to break above a 3 week tight trigger, as the weeks ending 7/6-20 all CLOSED within just .43 of each other. Remember that type to coiling action normally leads to big movers, normally with the prevailing trend, but in this case the ETF dumped 5.2% the following week, the exact opposite of what bulls wanted to see.
Energy, financials and staples were your worst performers on Thursday. Neither of them were that far from the UNCH mark (staples were the worst off .25%), but watching the financials which look like they will register yet another tight weekly CLOSE tomorrow, the last 4 weeks have finished in the lower half of the weekly range. We have highlighted the vulnerability of GS this week, but one can point to many others for a bearish take. Look no further than BLK, which swims in bear market territory down 21% from most recent 52 week highs, as it looks to break below a descending triangle formation. The very round 500 number was comforting in February, May-July but that is well in the rear view mirror now. A move below 465 could see a 45 handle decline.
The specialty chemicals group is one that has been acting well this year, and is a good indication of the genuine health of the economy. Their has been some M&A activity with KMG being swallowed. Below is the chart of RYAM and how it was profiled in our Wednesday 8/15 Game Plan. It looks very likely to be recording its sixth weekly CLOSE above the very round 20 number and it did break above a cup with handle trigger of 20.89 on 8/17 and has acted well POST breakout about 5% higher from the pivot. The best breakouts tend to work out right away and give additional entries on the way UP, and one can do so thru a cup base trigger of 23.06 in a 5 month pattern.