Bellwethers:
Last week we discussed that AAPL was a proxy for the Nasdaq as it comprises nearly 7% of the index. Its 200 day SMA is a line in the sand and should have overall market implications. It remains stuck there, and an obvious bellwether for the XLY is AMZN as it makes up nearly 25% of the ETF. Keep in mind that both of theses mega cap names are still well off their most recent 52 week highs with AMZN down 14 and AAPL 19%. If this couple can garner any kind of strength toward old highs this spring the market has a lot of room to run, a big if of course. Lets take a look at the chart of AMZN, as its direction will also move benchmarks.
Gap Fills In Gap. Wait What?
Laggards usually can be identified with certain features. They show wide and loose trade, just the opposite of very tight trade for bullish behavior. Below is the chart of GPS and notice the wayward trade. It put up a gigantic move of more than 16% on 3/1 after reporting it would spin off Old Navy. Those gains evaporated quickly as it filled in that gap last week. Regarding spin offs we posted a chart of ELAN on Monday in our Healthcare Report. Anyone with pets realizes the costs involved are huge for medicine. Anyone surprised that two companies now have been spun off to concentrate purely on capitalizing on it. ZTS from PFE and ELAN from LLY.
Examples:
The saying goes most gaps are filled. It is probably accurate, but if PRICE action is acting well near a gap fill it certainly gives an investor a good risk/reward scenario. Below is a good example of DDS and how it was presented in our 3/12 Consumer Report. The stock trades 26% off most recent 52 week highs, but notice how gap was filled almost precisely on 3/7 from the 2/25 session. It is up by 2.2% this week and the prior 3 all traded within the range of the week ending 3/1’s gain of almost 15%. The rejection at the 200 day SMA for a third consecutive day is a line in the sand now.