Consumer Sector Review: 9/9/24
Range Bound? Or something, more sinister for the XRT? In times of volatility, we tend to inflate our concerns and this is precisely when we should keep our emotions in check, although that is obviously easier said than done. This is where technical analysis comes in handy and if we take a look at the daily chart of the XRT, which is under heavy pressure declining 8 of the last 9 sessions, one can make the case for an entry down toward the 70 area. It becomes more clear on the WEEKLY chart as the 70 number has acted as both resistance in 2022, 2023, and 2024 and perhaps now support. It is also coming into its 50 and 200 WEEK SMAs although they have shown no significance in the past. In our last consumer note a couple days ago we put up our thinking that on the MONTHLY chart a pullback into the 50 WEEK SMA made sense and that to aligns with the round 70 number. It is now about 3% from that potential support line. Will it hold? No one knows but one can make a logical bet there with a CLOSING STOP below 68.
Technology Sector Review: 9/5/24
Alternative Viewpoint: There is no question technology is an unloved sector and perhaps the old adage comes into play, "to buy when there is blood in the streets." The technical damage within the sector will take time to work itself off but nothing goes up, or down in a straight line. It would be a lonely view to be bullish here but there will be some volatility in September for sure. That will make for some possible tactical plays for market participants to trade around core positions. The daily chart below of the XLK shows a potential decent long scenario as the ETF trades back into a bullish island reversal at the still upward-sloping 200-day SMA. Its WEEKLY chart shows a doji candle the week ending 7/12, which was also the middle week in an evening star pattern. The week ending 8/23 traded into the middle of that formation and now is trending lower again. The MONTHLY chart shows August with a long-legged spinning top candle, in a very wide range similar to what occurred in August 2015 and March 2020 (both at the 50 MONTH SMA). Those were turning points that sent the QQQ higher, but last month came from an extended position. Use the 200-day SMA on the daily as your navigator short term, and one must admit they are WRONG with a CLOSE below that line.
Consumer Sector Review: 9/4/24
Rethinking the Consumer Narrative: The discretionary space in 2024 has not been the place to be, as it continues to inhabit the worst performance among the 11 S&P sectors thus far on a YTD basis. The XLY is higher by 4% with 4 months left, and we know trends in motion tend to remain that way more likely than they are to reverse. Overall there were some ominous signs Tuesday with the weak action with new month money normally providing a bid, and holiday-shortened weeks which tend to be bullish (of course, this week has 3 days to go). But in general, we know snap-back rallies within bear markets can be violent and perhaps that is what occurred between early August and the present. We pondered whether the broadening out of names acting well excluding AMZN and TSLA would correspond with a breakout above a MONTHLY bull flag. PRICE did not confirm, and the next likely scenario would be a handle forming at 50 MONTH SMA support in a long cup base that began with a sound rejection at the very round par number in late 2021.
Industrial Sector Review: 9/3/24
Gaining "Steam": Steamboats were a significant invention during the "industrial revolution", and the sector as of late has been on the ascent. The group since mid-November has been a stellar performer and if one squints here they can see they are the second-best actor of the major 11 S&P sectors trailing only the financials. It is the black line on the chart and last week overtook both communication services and utilities. Within the space, railroads are continuing to move higher, a good sign of economic activity, with leaders UNP and NSC adding 4 and 6% last week. The former recorded a breakout above a WEEKLY double-bottom pivot of 246.27 last week and the MONTHLY chart took out a cup with handle trigger of 254.62. I am not endorsing them but the airlines could be making a move with an unsure crude direction as the JETS are on a 4-week win streak following a bullish counterattack candle the week ending 8/9. Defense stocks have been putting on a show and the ITA MONTHLY chart registered a bullish hammer candle in August. The group is firing on all cylinders and look for it to continue to do so if this "value versus growth" story keeps playing out.
Technology Sector Review: 8/30/24
Was Druck Right? In the latest round of 13F filings a couple of weeks back Stanley Druckenmiller had sold out of his NVDA. To be frank we do not know when he did as 13F information is backward-looking and stale. But he is looking smart as usual today with the 6% plus haircut in the stock following the earnings announcement last night. Notice on the daily chart the bearish engulfing candles on 6/20 and 7/11 were both near-term tops. The latter one's drawdown recorded a move lower of 33.4% from the top to the bottom of the range. The jury is still out over last Thursday's bearish engulfing candle, but today's move will likely have the stock needing time to repair the technical damage. We know from FALSE moves (break BELOW bull flag) come fast ones in the opposite direction. Will the market be able to navigate higher with NVDA, which makes up more than 6% of the S&P 500, floundering? With today's move, it went from the second most valuable company on the planet to third, and is no longer a member of the $3T trifecta market cap club with AAPL and MSFT.
Healthcare Sector Review: 8/29/24
Roadblock Weakening? Biotech has been a tough place to be since the 2021 top. The MONTHLY chart below shows the visual pain investors have had to endure following the bearish shooting star candle in February of that year. The ETF declined 13 of the next 17 months hitting a peak near 175 to a low of 62. From there the fund vacillated roughly between the round 70-90 numbers before breaking above 90 this February and that stubborn line of resistance now looks like support as it was firmly retested and held in May and July. We know that the vast majority of instruments that trade through 90 will reach par and beyond and that is where the ETF has been stuck. Notice the 50 MONTH SMA resides there and the XBI was above that line intramonth in February, March, and July this year but all three were unable to CLOSE above it. It has now formed a bull flag and it will be interesting to see where this finishes August on Friday. The daily chart this time around, for the time being, has held up better than the early and late July examples. That's a good start. Let's see where we finish to end the week and August.
Technology Sector Review: 8/28/24
All Eyes on Us: The semiconductors will be in full focus as investors have been anxious about the direction the group will navigate following NVDA's earnings announcement Wednesday after the CLOSE. The name still trades 9% off its most recent 52-week highs but has sported a robust run off the very round 90 number on 8/5. It has carved out a handle on a double bottom pattern which can also be interpreted as a bull flag. Will a well-received number already been PRICED into perfection? Below is the chart of the SOXX and NVDA is now the second largest holding at just under 10% of the fund and behind AVGO. Its WEEKLY chart has something for both bulls and bears, and bulls would state the completion of the bullish morning star pattern the week ending 8/16 which jumped more than 9%, and the taut trade that has followed the last couple of weeks. Bears would claim that trade has been very volatile and choppy as of late, classic topping behavior following the 70-point decline from the bearish WEEKLY shooting star candle the week ending 7/12 (notice negative divergence too with lower RSI highs in February and July as PRICE made a higher high).
Industrial Sector Review: 8/27/24
Industrial Pause? Monday was a risk-off session as energy, staples, and utilities led. Tech took a back seat but the industrials are a group we have been monitoring for their strength for some time. The daily chart below of the XLI trades a bit wide and loose, hallmark bearish traits, but if one looks under the cover there are some individual names that are thriving. CARR, for example, is now above a double bottom trigger of 69.59 taken out on 8/21 and for the time being is ignoring last Thursday's doji candle. MMM which trades in an opposite manner of CARR, very taut, is now above a bull flag pivot of its own which began at the very round par number and the move above 125 suggests a 150 target is plausible into year-end. To keep a balanced approach the airlines just can not seem to get off the ground, pun intended, and the JETS have been week since the MONTHLY bearish evening star completed in August 2023 (notice doji candle in July). Unless it can CLOSE above 19.06 by Friday it will have recorded its fifth straight MONTHLY decline.
Consumer Discretionary Sector Review: 8/26/24
Consumer Group Strength Broadening: The XRT, the more diverse consumer discretionary ETF, is signaling good things for the group. Below is the MONTHLY chart which shows this could be ready for a beach ball held underwater breakout. It would have to climb above the round 80 figure first but if that occurs look for this fund to target the very round par number by the end of 2024. It shied away from that level in late 2021, which was the start of an ugly 8-month losing stream that found a floor in the 55 area which it held during 2022 and 2023. When compared to the top-heavy XLY on a ratio chart the XRT recorded a nice last 3 weeks of July and is now bull flagging for a possible continuation move higher. This to me speaks volumes as money may have been rotated out of the AMZN's and TSLA's and into the smaller names as the group's ascent spreads its tentacles wide (not saying TSLA and AMZN will not power higher from here). Its daily chart could hit a roadblock as it travels toward the 79-80 area for the sixth time in 6 months, or is that too obvious to occur again? The fund did complete the bullish island reversal on 8/15 (after the gap down on 8/2) and this coiling action could be ready for a charge higher.
Far East
Gold Wants a 3 Handle: Is the shiny precious metal sniffing out something ominous on the horizon? Of course, no one knows but its recent PRICE action which is what we focus on is telling us the path to least resistance is higher. The MONTHLY chart below shows it higher 7 of the last 10 and is looking for another advance in August. For the time being it is shrugging off weak seasonality factors, as like overall markets it is within the soft August-September time period and the break above the bull flag suggests a measured move to the very round 3000 number, which may or may not happen, and if it does occur could take years or sooner. The WEEKLY timeframe shows another break above a bull flag but at the 2450 pivot and Gold can still come back in 75 handles to retest the move before resuming its uptrend and would remain firmly intact. Notice RSI clinging to the overbought 70 RSI number for most of 2024 and we know there is nothing more bullish than an overbought situation that remains that way. Finally, the daily chart has some nice attributes as it twice broke above the range between 2300-2450, and fell back into it which both now look like bear traps.
Consumer Discretionary Sector Review: 8/19/24
Getting "Charged Up"? The EV space has been one that has been disappointing in sales figures overall and yet the daily chart below of TSLA seems to be ignoring this. That is a good sign and last week made some technical progress which is all we care about, and it is making its move as its flamboyant CEO seems to make headlines on a daily basis, which in the past has affected the stock. Perhaps bulls are looking past this noise and we flagged the potential weakness after the WEEKLY spinning top candle the week ending 7/12 after a furious sprint higher in PRICE. Some may interpret this as a WEEKLY double bottom with handle base but the handle has formed to low in the pattern. Against domestic rival RIVN, which was acting well nearly doubling in PRICE off the very round 10 number completing a bullish morning star on 6/24, it looks again like it wants to take on a leadership role (see ratio chart here breaking above 3-month downtrend). Its MONTHLY chart shows huge potential as it carves out a symmetrical triangle/bull flag. Notice how the doji in November 201 called the top and the bullish piercing line in January 2023 at the very round par number the bottom.
Infrastructure Report: 8/16/24
"Chip" on Its Shoulder: The old dilemma of whether to buy a leader or a former general? An analogy I often like to paint is investors should supply their portfolio with "all-stars" rather than triple AAA players in pursuit of a World Series. Some names need to take a rest, or a prudent pause before they start a fledging uptrend. A former good-looking semi-play in ON and its WEEKLY chart below could be ready for the promotion to the big leagues. A couple of weeks ago produced its third consecutive positive earnings reaction up 11.5% on 7/29 and on the daily chart there are some green shoots with Thursday seeing a third break back above its 200-day SMA, since early July, and it is ignoring a prior bearish island reversal with the gap down on 8/2 (after the gap up on 7/26). You can almost feel the bear's exhaustion of trying to push this name lower and are most likely looking elsewhere for shorting opportunities. Notice too on the ratio chart how it has been outperforming an already firming semiconductor group. Use a CLOSING stop below 72 if one takes the play.