Douglas Busch

Software to the Rescue?   The software space has been holding up better than the semiconductor space so if technology is going to get going it may need the IGV to step up. Give the ETF credit for CLOSING near highs for the session Wednesday and gradually distancing itself from its 200-day SMA. This fund is now 12% off its most recent 52-week highs, showing relative "strength" with the SMH 19% off its annual peak. It has been affected by some high-profile earnings misses with CRWD falling 6% Wednesday but did end up recording a bullish hammer candle. TTD, which cratered 33% on 2/13, is now more than 50% off its peak made in early December and since then has declined 11 of the last 13 weeks. Lesser known plays, but that were generals prior, are PEGA which gapped down 20% on 2/13 after an ill-received release have been left for dead. Its WEEKLY chart here suggests bottoming after a doji candle last week at the 50 WEEK SMA (notice the doji called the top the week ending 2/7) and heading into Thursday this week a bullish hammer is forming. APP jumped 24% on 2/13 but has since fallen more than 200 handles and sports a bear flag at the very round 300 number. Wednesday's action could be interpreted as a bullish morning star, it just can not take out this week's lows.

Relationship Issues: Within the very diverse healthcare group comparisons to subsectors could give investors good places to over and underweight. The ratio chart below comparing the XBI to the IBB shows a risk-off flavor as the more dynamic "youthful" names underperform their larger cousins for the last 3 months. This speaks to a defensive posture as market participants look for maturity and dividends from individual names. While both of these are in downtrends the IBB is "just" 11% off its most recent 52-week highs while the XBI is 18% off its annual peak. Looking at the daily chart of the XBI notice it is back again to the lower part of a channel and candle patterns have been helpful in identifying smart purchases. A bullish morning star on 12/20, a bullish harami on 1/15, and an engulfing on 2/12 saw quick but temporary advances. Currently, the engulfing candle last Friday was negated and today's piercing line could see a sprint higher but it would likely be short-lived. The PPH also is touting a conservative approach as it has outshined biotech since the election, the opposite of what many believed would occur, and has acted brilliantly since taking out a bullish inverse head and shoulders formation. The IHI, representing medical equipment, was unable to break above a bull flag we spoke about last week, but a move into the 62 area would be the initial touch of a rising 50-day SMA following a cup base breakout, often a solid entry point.

No Tariffs on Stock PRICES: Certainly, the above statement is a weak stab at humor, but Chinese ETFs are standing tall in 2025 for the most part. Below is the daily chart of the KWEB, whose only blemish was the recent doji candle which should have had long shareholders at least shaving around a core position. It is now just 2% above a double-bottom and that could be a logical spot for those who missed the nascent strength to initiate a position. On its WEEKLY chart, last week completed a bearish evening star pattern that also traded into a former ugly engulfing candle the week ending 10/11/24 that dropped 9%. The MONTHLY chart will need to show a CLOSE above the 50 MONTH SMA in March which would be its second straight since July 2021 (notice the bearish gravestone doji candle at the very round 90 number from February 2021 that started a long slide). BABA has to be considered best in breed but with a possible bearish MACD crossover and being extended look for this to trade back toward its cup base breakout pivot of 117.92 from 2/12 before a resumption of the uptrend (notice the dojis from 10/2 and 10/7/24 that commenced the cup pattern).

Tech Wakes Up: The old saying goes "it's not how you start, but how you finish". That can apply very well to the stock market and boy did it do so Friday. The Nasdaq CLOSED nearly 500 handles off its lows and give the bulls credit in doing so to end the week as Mondays have been generally soft. And the benchmarks did something that classic bull markets do, open near the lows and CLOSE on the highs. Am I declaring this a bull market again? That is hard to say but one now has a very clear area to play against on the long side. At the intraday lows Friday the Nasdaq was 10% off its recent highs, jibberish for a correction, although it was violent and swift in nature. One day does not satisfy my concern but it is a good start and Monday will start the new month where inflows take place. The MONTHLY chart did record its third straight dubious candle and notice the bearish RSI divergence since the start of 2018. That was why PRICE action is omnipotent, as if someone was cautious over that they would have sat out a huge bull run. Pick your bias with the semis after a big NVDA report this week as the SOXX MONTHLY chart sports a bull flag. Bears will point to the doji candle last August, and the last 5 months all CLOSING well into the lower half of the range with long upper wicks. I am sure you have heard it ad nauseum this is a stock pickers market and not one to be a hero in. As Zanger has said there is 1 or 2 times a year where the market has a clear, powerful trend and you can really step on the accelerator. This is not one of them.

Election Gap Filler: As maddening stats abound regarding sentiment, especially how close we are to all-time highs could it be as simple as we as just rangebound? That argument could have been made before Thursday's plunge with the 19000-20000 range undercut, but trade has been a bit sloppy, (wide and loose PRICE action), and after a doubling of the Nasdaq from 10000-20000 it does feel like it is exhausted. This is a time to be very small or on the sidelines. I was slightly bullish a couple of weeks ago, but only if the tech-heavy benchmark could distance itself from the very round 20000 figure. That never happened, and the daily chart below shows how capital has been rotating overseas comparing it to the Dax (Germany) since the election. Of course, this is even more pronounced against China as seen here. The softness started in 2025 and looking at the RSI in the mid-20s, where it was just before the Nasdaq started acting well against China perhaps we will see the nascent relationship start to unwind and tech firm. With the MONTHLY chart coming tomorrow the Nasdaq is looking at a third straight negative candle beginning with last December's bearish shooting star (January spinning top). All 3 months were above 20000 intramonth, but none CLOSED above and it is doubtful Friday will advance 1500 points.