Douglas Busch

Material Witness: The materials sector overall has been a decent performer up 3.5% YTD making it the fourth-best major S&P sector performer. The daily chart below shows it has been making some technical amends following the break ABOVE a bear flag. It recently recorded a bullish island reversal which gives good risk reward on the long side against the recent lows just above 84. Its WEEKLY chart shows the doji candle last week which is adept at signaling PRICE changes from the prevailing direction and it found a bounce near the lows of the big week ending 1/17 gain of 6%, its best move since the week ending 11/11/22 (some distribution has been popping up in February and March). Looking at some of the top holdings LIN at 18% is approaching a cup with handle pivot of 470.76 and recorded a bullish golden cross although there has been some negative RSI divergence. The second largest component in SHW may have registered a double bottom at 327 with a doji on 1/10. FCX, another top 10 holding, put up a bearish engulfing candle Wednesday at the 200-day SMA, and Thursday completed a bearish island reversal with the gap down. This could be a temporary ceiling for the name.

Round Number Salaries: Long-time readers of ours know our affinity with round number theory. Well, I can remember the announcement that unions won for UPS employees to receive $200K a year. Looking at the MONTHLY chart below of UPS we can see how the round numbers have played a role with PRICE. It looks ready to head back toward the very round par number sometime in Q2 after hitting a brick wall at 200 and notice now the secular 50-MONTH SMA is beginning to curl lower for the first time in a decade, an ominous sign. Is this a sign of a fragile economy, or is it company-specific? Probably a mixture of the two, but more the latter as this is almost 30% off its most recent 52-week highs. Its WEEKLY chart shows this has not recorded a CLOSE above the 50 WEEK SMA since August 2023, has been a big weight on the XLI for more than 2 years, and never crossed above the 60 RSI level. The MONTHLY ratio chart against FDX shows how this has given back almost all of the strong 2018-22 run and now is sporting a bear flag. I think this name will break forcefully below 100 later in 2025.

Bollinger Bands Telling the Story? Biotech has been a subsector within healthcare where losers tend to congregate. The space is not called the "widowmaker" for nothing. False pushes higher have occurred which inspire hope, but salty veterans know this is far from a viable strategy. Sure it will have its moments where bulls get excited but the sanguine feeling is often transitory. The daily chart of the XBI displays the troublesome theme as the fund was above the middle line in the Bollinger Band for just one session before undercutting Tuesday (by mere pennies). Is this bearish stance becoming too predictable? The bearish engulfing candle today suggests there could be some more pain into the lower Bollinger Band line near 85.30 before the next temporary jump occurs. Investors playing this space should be quick to take profits on any quick rallies, and any longs will be subject to the weight of the overall group's heaviness. Doji candles were recorded on 3/10 and 3/20 which suggest the ETF may be bottoming but market participants in this arena have been trained to not trust any fledging bottoms. I have always stated one must be open-minded to all possibilities within and select individual names have flourished inside. But take a balanced approach and remain underweight the group until PRICE demands your bullish slant. Bollinger Bands tightening are telling you to be ready for a big move either way. Recency bias tells us the move is likely lower.

Energy Revolution: Energy is making its presence felt in 2025, as the XLE is the best-performing major S&P sector on a one-week, month, and YTD basis. On a one-month lookback period, it is the only group in the black among the 11 major S&P groups. The daily chart of the XLE below shows it approaching a double-bottom pivot of 93.12, and a break above there would also negate the prior 3 lower highs that started last November with consecutive bearish shooting stars on 11/21-22 followed by an engulfing candle that slipped 2%. From there it declined 15 of the next 18 sessions, but it feels like this vehicle is gaining some confidence. This is a waterlogged ETF at the top and CVX looks very strong on the MONTHLY timeframe and if this can break above a cup base pivot of 171.82 in the near term that carries a measured move to 210. We continue to pound the table that this should be overweighted against its major rival in XOM and evidence of that would be the recent break above the ratio chart after a 4-year downtrend. It has a better dividend yield above 4%, and its 13% advance in 2025 thus far is double that of Exxon. Stick with winners. 

Delivery Status:  As the discussion rages on whether a recession is near, remember they are always backward-looking as you will not know until 2 consecutive quarters of negative GDP, some stocks are better at giving clues than others. The daily chart below of FDX which is now 22% off its most recent 52-week highs from last summer is one of them. Some rare doji candles may be telling the story, and the one last week could be saying the selling pressure is abating. Its WEEKLY chart shows a triple top at the very round 300 number with bearish candles (and just one WEEKLY CLOSE above 300, marginally so the week ending 7/19) at the level and a potential bearish rounded top. Notice the stock has not put up back-to-back WEEKLY gains since the end of last November. UPS has been acting a bit better, up 3% over the last one month period compared to FDX down 8%, (not to mention that juicy dividend yield of 5.5%) but both of them are well below their 200-day SMAs (UPS gave 2 chances to short into the nasty large bearish filled in black candle from 10/24). Both were higher on a soft tape Tuesday, perhaps a tell but their action over the next few weeks could be very important.