The major averages displayed bifurcated action Wednesday as the Dow rose by .6% and the Russell 2000 fell by .5%. The Dow was aided at least early on by its largest priced component BA, but it CLOSED off session highs recording a bearish shooting star candle. It was inching toward a cup base trigger of 374.58, but it was unable to do break above it. GS, the third largest component, was able to hold on to its intraday gains adding 3% and followed through upon its bullish hammer/harami candle Tuesday. Keep in mind it did register a recent 11 day losing streak and a break above a bullish inverse head and shoulders trigger in the 240 area was short lived. Give the chart some time to repair itself. The Russell 2000 is threatening to undercut its 50 day SMA which it has touched now 5 consecutive months, and retesting the line in the sand, round 1700 figure.
The Nasdaq ended Wednesday fractionally in the red and some of its largest influencers are in some tug of wars between bulls and bears. GOOGL for one broke below a bear flag formation on Monday, but on Tuesday it produced a bullish inverted hammer and Wednesday saw a hammer as well. FB too sported a bear flag formation that aligned with the round 160 number, but it CLOSED above the figure on Tuesday after being below intraday. One can be mildly bullish on the stock as it did complete a bullish morning star pattern, but any finishes below 160 would be bearish. International markets were firm Wednesday as China through the FXI, which recently sported a nice double bottom at the round 40 number. It is back above its 50 day, but did so last month for 3 sessions before falling back below it. Look for a sustained few days CLOSING above the line. The EEM is looking for just its second back to back weekly gains since February, as the ETF did record that during a 4 week streak in July too.
There was an undisputed general among the major S&P sectors and it was a sleeping giant until today. The financials, via the XLF, rallied 1.7%, its third best gain since 7/9 when it rose 2.3%. The ETF has been gradually building the right side of its cup base as it approaches the round 30 number, and has been doing so in a bullish, gradual fashion. That is witnessed with the last 8 weeks CLOSING very taut, all within just .36 of each other. Of course it is benefitting as interest rates rise, and the most visible indication of this is through the 10 yr treasury yield now well above 3%. It is nearing highs made back on 5/17 which recorded a spinning top candle, and the following session recorded an ugly move completing a bearish evening star pattern. There will be obstacles from here on out, but if that negative formation is taken out to the upside, if could provide some very healthy rotation.
On the flip side it was almost textbook, how often do we see that, as the utilities slumped with the rise in yields. The XLU suffered its worst day losing 2.1%, as with the XLF recording its best day, falling 3.1% on 7/9. On its 14 day RSI it broke below 50 into the bearish zone for the first time since June, after receiving several bounces off it since. Is a trend change in place? The XLK was the second worst performer lower by .2%, as software names were well, soft. The PSJ lost 1.9% Wednesday, after Monday fell by 2.8%. Both of those sessions were accompanied by greater than average daily volume. It is down 3.8% for the week thus far, which would be its worst week since the week ending 3/23 if it stands. I mentioned this a few weeks back, and will do so one more time. If the semiconductors and software are both weak at the same time, buckle your seat belts.
Retail has seen its share of former leaders turn into laggards, and that is frankly a bit worrisome. Some examples include BIG, which was a discount leader which is now off by 36% from most recent 52 week highs. MIK is now more than 40% off its, and others nearly 30% off recent highs include CRI and HBI. Below is another one in GOOS, and how the name was profiled in our Friday 9/7 Game Plan. It is a good reason why CLOSING stops are so important as this one had a 61 stop, which came close but never finished above it. It is now down 5 of the last 8 weeks and another 3% this week so far. Today recorded a bearish engulfing candle at the round 60 number, undercutting its 50 day SMA for the third time in the last couple weeks. A potential cover could be the gap fill from the 6/14 session which would most likely align with the rising 200 day SMA as time lets the moving average catch up to PRICE.