ChartSmarter Monday Game Plan 5/23/16

Markets finished off the lows once again Friday to close out the week, and if one takes anything positive away from the action is was the technology sector overall that gained the most. The XLK rose 1.2% to best all of the major S&P groups. The technology ETF’s daily chart looks like it is sporting a bullish inverse head and shoulders pattern that began early last November. The right clavicle is now under construction and a move through the 44.50 area would be a breakout and target a move to the round 50 number which most likely put the Nasdaq at all time highs. Friday the utilities and staples sectors were the worst performers. The Nasdaq did outperform the S&P 500 for a second consecutive week, an encouraging sign, rising 1.1% compared to the S&P 500’s .3% advance. On the daily chart of the Nasdaq one has to be aware of the lower highs and lower lows put in since the intraday high of 5176.77 and one may see a double bottom with handle pattern developing but the handle that began the week ending 4/22 is a bit long in the tooth. It still has work to be done, but some greenshoots are being born. The oil/equity correlation seems to be fading away with each passing day, but one normal relationship that I am keeping my eye on is the dollar/oil group. The UUP is now on a 3 week winning streak and higher 4 of the last 5, but the XLE is ignoring that fact. The energy ETF rose 1.8% this week, more than doubling the UUP’s gain of .8%. The energy sector is also overlooking the possibility of interest rates gaining to, and that has put a bid under the financials. For the week it put in the second best advance with the XLF higher by 1.4%. Referring to the earlier greenshoots comment below we look at the chart of the SMH ETF which easily outdid the benchmarks with a healthy 5.1% weekly gain, even as its largest component INTC lagged with a .8% weekly gain. INTC is still 15% off recent 52 week highs but is holding the round 30 number well and the last 3 weeks have all CLOSED very taut within just .24 of each other suggesting a big move is coming up or down.