Monthly Archives: May 2016

Markets began the holiday shortened week in a rather listless fashion. The Nasdaq was once again the leader as it gained .3% and one gets the feeling that the benchmark is now a beach ball held underwater and if released is ready for a strong pop. The same could be said for the S&P 500 in regards to the round 2100 figure which was a wall once again Monday. The small caps acted even better as the Russell 2000 rose by .4%. The Dow which we rarely follow recorded a bearish engulfing session to CLOSE above its 50 day SMA (it still sports a double bottom base with a trigger of 17935, but that is looking tenuous at the moment). The price weighted index was hurt by names at or above par with DIS, BA and HD fell. Regarding the best performing sectors today there was some very interesting bifurcation. The utilities group acted the best and it was the staples which lagged and was the worst performer. Merger Monday was alive and well as there was some activity in the software and healthcare groups as SQI and CPXX were acquired, both with very healthy premiums which has to be interpreted as bullish. Some retail names have weathered the storm within the group well and remember those are the ones which generally will act accordingly and flourish once the overall sector can catch some love. A good example is LULU and the chart we profiled in last Fridays Game Plan. Since February it has traded between the round numbers of 60 and 70 and rose above its 50 day SMA Friday and today followed through slightly on decent trade. Watch now for a subsequent move through a double bottom trigger of 67.18.

Markets closed out the week Friday with decent gains as we go into the holiday shortened week, which are traditionally bullish in nature. The Nasdaq recorded its second 3% plus weekly gain of the year, and the 10.6% combined drop the weeks ending 1/8-15 seem a distant memory. A move next week above the 4970 level would put an end to the bears chant of lower highs and lower lows since recent all time highs. The tech heavy benchmark is now on a 4 session winning streak and has outperformed the S&P 500 for a third straight week. It still has some work to do being 6% off recent 52 week highs, whereas the S&P 500 is just 2% off its, and that should give the markets some extra stamina to continue to advance. The S&P 500 continues to have issues CLOSING above the 2100 number and next week seems crucial. An inability yet another time being rejected there would concern technicians. Financials and technology led the way Friday and these 2 groups remain the beneficiaries of healthy sector rotation. Retail has been a clear laggard and rightly so with recent earnings debacles with names like ANF, CHS, SIG, FRAN, GPS, M, and JWN. But if we can start to see these names stabilize and enjoy some capital flow into them that would energize the bulls. Some of that is beginning as we had nice reactions from ULTA and BIG and even DECK today. Earlier this month good moves followed releases from WMT, URBN, COST and BURL to name a few. One of my favorite names in the space that has yet to break out, but has held up so well in a difficult retail arena is MIK. Below is the chart of the stock how we profiled it in our Friday Game Plan.

Markets for the most part were flat Thursday, and after the last 2 sessions hefty gains it has to be viewed as bullish. More to like was the Nasdaq's outperformance, albeit small, which rose .15% compared to the S&P's flat finish. For the week headed into Friday it has jumped a robust 2.8% and is inching closing to a breakout about the bullish inverse head and shoulders pattern we spoke of earlier in the week. The S&P 500 is higher by 1.8%. Thursday marked the return of the defensive utility and staples groups, which we the best performers with the XLU gaining 1.1%. The ETF has put up back to back big volume breaches of the 50 day SMA on 4/20-21 and 5/17-18 which fell a combined 4.6 and 3.6%. Today it recouped that line but volume was limp. I have been seeing an abundance of nice bases setting up in individual stocks (such as your traditional cup with handle, double bottom, etc.) and it has been a little while since that has happened and that type of behavior is a bullish sign. Breakouts are occurring and more importantly they are holding firm. A great example is the stock of CXW which we profiled in our Monday 5/9 Game Plan. It took out a double bottom pivot point of 32.21 on 5/5 and for good measure retested that trigger on both 5/18-19 and held firm. Stocks often will go back to the breakout trigger to test its authenticity. The stock the last 2 weeks and this one thus far, has traded within the big week ending 5/6's 9.7% advance. A move above the 34 handle could be used to add to ones stake or initiate a new position.

Markets put together back to back gains Wednesday with both the Nasdaq and S&P 500 advancing .7%, a very good showing considering Tuesdays outsized gains. Remember bull markets are ones that give you the feeling you will never be let in. Today it was the energy and materials group which acted the best, after they were the 2 worst performers Tuesday (the old adage is trends tend to persist rather than reverse, but we have been range bound for almost a year now). It was the financials that were the only other major S&P sector to rise close to 1%, and the laggards today hailed from the most defensive of groups being the utilities (utilities were the only group to fall Wednesday) and staples. The S&P 500 is readying itself to a test of the round 2100 figure, a number it has CLOSED above only twice all year on 4/19-20. Speaking of the round numbers there are a couple vehicles that are grappling with them at the moment. First is crude with the very round 50 figure and AAPL with the 100 handle. If oil is able to break through and hold there is chatter that more names will be able to access the capital markets (PE did so yesterday). AAPL looks likely to break through 100 and fill in a gap to the upside from 4/25 just before the latest earnings report. AAPL and some out of favor names, notably in tech, have become investable again. QCOM fits that bill. Of course it is among the semiconductor group, some say it is just a law firm, and its inclusion in the sector will help lift its share price alone. Technically it has improved as well. Talk is cheap, and PRICE action speaks and QCOM has backed it up. Below is the chart which shows its bullish scenario now trading above its 200 day SMA for the first time since late '14.

Tech shares are on the move and that is a positive development. The Nasdaq has made it a habit recently of outperforming and if it continues the market rally has some legs. We have biotech rising, software names have seen some love, the semiconductors are joining the nascent stampede. Below we see stocks from a diverse arena of technology that have flourished and most likely still have room to run. In this Mondays Game Plan we looked at ADBE. It has put up 3 consecutive positive earnings reactions and Tuesday it took out a bullish ascending triangle pattern in firm trade to hit all time highs. This morning premarket it is now above the very round par number and a CLOSE above today would give one a good stop to play against. Stocks that can be bought as they take out bullish ascending triangle formations are ADBE. ADBE is a software name higher by 3% YTD and 23% over the last one year period. Earnings momentum is solid with gains of 3.8, 2.8 and 1.2% on 3/18, 12/11 and 9/18 following a loss of 2.5% on 6/17. The stock has traded very taut with a 94 or 95 handle between the weeks ending 4/1-5/13 and it has formed a bullish ascending triangle formation which began with intraday highs of the most recent earnings reaction. ADBE is on a 3 week winning streak as the Nasdaq overall has been soft. Look to enter with a buy stop above 98.25. A breakout would put stock at all time highs and a move through the very round par figure should be added to.