Group Relative Weakness:
Nothing was immune from the last October malaise. Below one can see all losses were not created equal as the XLI lost 10%, the second worst showing for the major S&P sectors. Its chart shows a potential double top right at the round 80 number and this week headed into Friday has the look of a bullish hammer candle which would also be a harami. It is up 3.1% this week so far, yet still has made little headway into the prior 3 week losing streak which lost 12%. BA the largest component in the ETF, and biggest influence in the Dow being the highest priced, is having a strong comeback this week, up just 1.2%, but nearly 40 handles off the intraweek lows. Its weakness following a breakout above a cup with handle trigger of 372.67 on 10/1 fell apart quickly, a red flag. By contrast the second is having a very difficult year down 26% from most recent 52 week highs, and this laggard most likely has room to run to fill a gap at the very round 200 number from the 10/22 session. Bottom line the group was one of the hardest hit, and therefore will most likely see one of the softest rebounds in my opinion. Of course many will have the opposite outlook, but that what makes a market.
GE We Bring Good Things To Bears:
Technical analysis is certainly not foolproof and just like everyone else we will end up making plenty of mistakes. It is always good to admit and learn from your losses, and the good thing is most technicians will admit when they are wrong and preserve capital. In fact many traders I know still succeed very handsomely with a win/loss ratio lower than 50% by letting winners run. A good illustration of a recent flop was GE, and the chart below is from our Industrial Report from 10/19. We are big fans of gap fills, but they do not work all the time obviously, and this one kept on dropping following its gap fill and is now down 14 of the last 18 sessions. It is flirting with the very round 10 number, and curiously it recorded its best session of 2018 when it was dumped from the Dow Jones on 6/26 jumping almost 8%. The bears are still hungry here.
Below is the chart of GLOG and how it was profiled in our Industrial Report from 10/19. The saying goes the longer the base the greater the space to accelerate above the breakout. Today it recorded its THIRD consecutive good looking earnings reaction and is now flirting with a breakout above a 22.65 cup base trigger in a pattern that began the first week of this year. It is an LNG play that sports a decent dividend yield of 2.9% and trades just 4% off most recent 52 week highs, and comparing it against peers OKE, LNG and KMI which are down 10, 12 and 13% respectively makes its prospects even brighter. The stock is higher 6 of the last 8 weeks beginning with an 8% plus weekly gain ending 9/7 and this week is bettering that up more than 9% heading into Friday. Give it credit for CLOSING above the round 20 number earlier this week.