Markets continue, and always will, to confound the most. It was nice to see the Nasdaq lead Tuesday as it rose .8%, recapturing a good deal of Mondays 1.4% drop. At fault for the tech rich indexes loss yesterday AAPL was to blame, and today it did little to comfort those worried by the name. It advanced .2% after the previous session slipped 2.7%, and today also CLOSED in the lower half of its daily range, something it has done 8 of the last 10 days. You will hear ad nauseam that tariffs are the culprit but this name is extended in PRICE and it would not be at all concerning to see it retest its upward sloping 50 day SMA following the breakout above a cup base trigger of 194.30 originally taken out on 7/25. Lets keep in mind it gained ground 21 of 25 sessions between 7/31-9/4.
It was encouraging to see the S&P 500 and Russell 2000 participate in turnaround Tuesday’s advance. Each rose in the .5% neighborhood and both are doing what you would like to see them do as they have held their respective round numbers of 2900 and 1700. The EEM is looking to continue its lukewarm momentum following 9/11’s bullish counterattack candle. Lets not fool ourself this is in sell rallies mode until the long term downtrend can be broken. For me that would be a move through and more importantly CLOSE above 44.25. It did trade in bear market mode recently more than 20% off most recent 52 week highs which generates a lot of chatter, which can actually be bullish from a negative sentiment perspective. Listen to PRICE and ignore the noise, which can be deafening at times.
Cyclicals and industrials led the way today as the XLY rose 1.3%, and the XLI advanced .9%. The industrials are also making a push toward the round 80 number, which is influential as it has recorded just three CLOSES above in 2018, back in January. It is also nearing a cup base trigger of 81.06 in a 7 1/2 month cup base formation. The XLI acted well Tuesday despite FDX, its 11th largest component, falling more than 5% after an ill received earnings report. Its chart trades wide and loose compared to peer UPS, and today FDX blamed tariffs for the shortfall. I believe that will be the new excuse, similar to what retail would declare with bad weather justifications.
Yesterdays winners were todays losers as the staples and utilities fell, albeit at a fractional pace. The XLU and XLP lost .2 and .4%, to be fair nowhere near where technology and cyclicals dropped Monday, which both slipped more than 1%. And one can certainly paint a glass half full interpretation on the groups as each of the ETFs CLOSED in the upper half of their daily ranges. The XLP did shrug off some body blows recently, with KR falling 10% on 9/13, but it did manage to record a bullish engulfing candle on 9/17 off the 200 day SMA. Today GIS was tripped up after earnings and has now declined 4 of the last 5 times reporting, and three of the four were sizable. MeatLoaf declared two out of three ain’t bad, but I have to think he would have stated four out of five is anything but appetizing.
Energy has been in the news as of late with word that we are now the largest producer of oil on the globe. There are many things to thank, I will mention one in rapidly evolving technology. The development has many benefits, less dependent on nations overseas, but I just strictly follow PRICE action. The XLE is starting to see some relative strength once again as on a 3 month look back it was the worst performing major S&P sector and now on a one month period is the third best actor. Below is the chart of CDEV and how it was presented in our Tuesday 8/4 Game Plan. The 200 day SMA was a roadblock, but with each test, the resistance seemed to be waning, until the late August venture above. Last week drilled higher by nearly 10%, its second best weekly advance in 14 months, pun intended. It is now attempting to break above a cup base trigger of 21.09 as it moved firmly away from the 19 area.