ChartSmarter Tuesday Game Plan 7/26/16

Markets began the week underwater and were never able to get out of negative ground with the Nasdaq UNCH and the S&P 500 by .3%. One could make the case for a bull flag developing on the S&P 500 near all time highs or the pessimist could say there has been a bearish engulfing candle last Thursday and a spinning top and doji candle last Monday and Tuesday. With everything PRICE action trumps all, as indicators react to price movements and not the other way around. Even though losses were minimal 8 of the 9 of the major S&P 500 sectors fell and energy took the worst hit with the XLE lower by 1.9% (the utilities fell today and finished in the middle of the pack and they may have been affected by the negative Barron’s article this weekend which I personally did not agree with). The crude and benchmark correlation has certainly unwound recently, but one traditional intermarket relationship which seems to be holding firm is the oil markets and retail names. As the price at the pump has come down, the feeling is many will spend any excess savings on retail. Today a number of retail names acted well on a poor tape and that could be a good tell going forward. Below is the chart of BIG which we profiled in our Friday 7/22 Game Plan, which today perked above a cup base trigger of 53.45. Other best of breed names that acted well today were LULU and some laggards joined the fray too with SHLD, M and JCP up on the session. Keep an eye on the XRT which is well into building the right side of a good looking cup base with a potential trigger of 46.60. Of course it could go onto to form a handle, and todays action could be interpreted as a bull flag breakout which would have a measured move of 5 handles from here which could catapult a good number of names in the group.