Markets did their best Wednesday to overcome a sinister start to the week Tuesday. The Russell 2000 has to be considered the “ace”, even though it is still underperforming the Nasdaq on a YTD basis, although the lead is now less than a stick. Looking at a shorter time frame however shows just how dominant the small cap benchmark has been with a gain of more than 9%, while the Nasdaq’s advance is just beneath 3%. Today it broke above a bull flag trigger of 1640 and the measured move is 90 handles higher. The Nasdaq more than recouped Tuesdays loss of .5% gaining .9%, the S&P 500 was nearly even as it rose 1.3% today compared with the 1.2% loss yesterday, and the Dow was the only major average that was unable to recapture Tuesdays losses as it rose 1.3% after dropping 1.6% yesterday.
Looking at individual groups the rally today was very broad in nature with all nine of the major S&P sectors finishing in the green. The energy space led a vicious rally as the XLE rose by 3% (XOM its largest component had its best day in nearly 2 years) ending a 5 day losing streak and the ETF is attempting to put the ugly bearish engulfing WEEKLY candle last week behind it which slumped 4.5% in active volume. Keep in mind this occurred near highs not seen in 3 years. The financials were the second best actor as the XLF rose 1.8% and trade was a bit soft compared with Tuesdays volume as it recaptured more than half of the 3.3% loss. Lagging Wednesday was technology as the XLK rose .7%, just below the second worst performer in the utilities which added .8%. The question begs to ask is energy quality leadership, or are we seeing a long triple top?
The cyber security space within software has been rewarding patient longs. We recently looked at PANW and it is vying for a 6th advance within the last 7 weeks. That round 200 number it broke above should be a floor if one sees the pullback. Below is the chart of CYBR and how it was presented in our Thursday 5/10 Game Plan. There are some parallels with PANW that broke above a cup base nearly 3 years in duration. CYBR dealt with a long cup base pattern and the round number theory as well. It is now trading north of the round 60 figure for the first time in nearly 3 years and is looking for an 8th consecutive weekly gain and a rise 18 of the last 22 weeks. Again the adage goes the longer the base, the larger the space in which the stock can move after its breakout. The pattern below stretched more than a year and a half and should have some legs as it moves away from the 59.38 pivot.