Douglas Busch

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ChartSmarter Wednesday Game Plan 8/23/17

Markets put in a powerful session Tuesday and encouraging was the Nasdaq leading with the index higher by 1.4%. It did reclaim its 50 day SMA in the process and was the second consecutive day CLOSING near highs for the day. Early on I had the feeling that this was an important day for if the averages were unable to maintain the big morning gains and rolled over it would have been very difficult for the bulls to come back from that. Certainly there is still work to be done, but today was definitely a positive. It is often said the hard trade is often the correct one and it would have taken lots of courage to step in and go long any of the prior three days before Tuesday, so those that did I commend you. The S&P 500 also recaptured its 50 day SMA marginally today adding 1% and the Russell 2000 gained 1.1% and finished just underneath its 200 day SMA. The rally was broad based Tuesday with 6 of the 9 major S&P sectors rising more than 1% and it was technology that led via the XLK with a jump of 1.5%. Materials and healthcare were the second and third best sector moves and the XLV is on a current 4 week losing streak but the ETF is just 2% off most recent 52 week highs. Looking at some strong material plays benefitting from nice numbers coming out of China are SCCO. Below is how the chart appeared in our Wednesday 8/2 Game Plan and today recorded its second straight CLOSE above the round 40 figure. A peek on the weekly chart shows the stock now traveling toward a long 42.13 cup base trigger in a pattern that began way back during the week ending 1/25/13. The recent flag breakout also carries a measured move to 46.

ChartSmarter Tuesday Game Plan 8/22/17

Markets were flat to start the week and bulls are not under the assumption that the old adage never to sell a dull market applies today. There having been many days were the benchmarks were near the UNCH line, and it seems that it is either that or big moves lately mostly in the lower direction. The bulls can at least point to today that the markets did CLOSE near the days highs, something it has been unable to achieve recently. The Nasdaq is now down 12 of the last 18 sessions and on a 3 day losing streak, with all three CLOSING underneath its 50 day SMA. That important line to beginning to flatline and bulls are looking for that to be temporary. The tech rich index was the worst performer of the big three falling less than 1% and the Dow and S&P 500 were higher by .1 (the Russell 2000 lost .1%). Peering into individual sectors it was the staples and utilities acting well once again, with the XLP up .4 and the XLU adding .3% and the XLV advancing .5%. There seems to be a lot of talk of gold recently, perhaps with perma bears coming out of hibernation with the market "seemingly" on the ropes. Looking at the GLD itself the chart looks to have put in a triple top at the 123 number from the 4/17, 6/6 and 8/18 sessions. On a longer term view, which to me are better predictors, it has the potential of completing a bullish 3 week tight pattern and has formed a bullish ascending triangle and a break above 124 has a measured move to 141. Looking at some individual names in the space below is the chart of NEM and how it was reviewed in our Wednesday 8/2 Game Plan. It is still a few percentage points away but one should keep a close eye on that 38 level.

ChartSmarter Monday Game Plan 8/19/17

Markets finished an ugly week with the major averages giving up all there early afternoon gains Friday after some weakness in the morning. The Nasdaq and Russell 2000 lost .1%, the S&P 500 .2% and the Dow by .3%. The Nasdaq is now 4% off most recent all time highs and although the index is still making higher highs and lows, it is feeling heavy as it sliced its 50 day SMA Thursday for the second time in just 6 sessions. The tech heavy benchmark fell .64% this week and has fallen four straight with all CLOSING at the lows for the weekly range. The back to back weekly doji candles on the S&P 500 ending 7/28 and 8/4 seem to be taking a toll and it fell by nearly an identical amount for the week as the Nasdaq. It seems like it wants to test the comfort of the round 2400 figure which was resistance this March, April and May. The Russell 2000 which seems to be garnering a lot of attention lately is now lower 12 of the last 18 days and although it undercut its 200 day SMA, Friday did register a spinning top candle which often forecasts changes in the direction of the recent trend. Bulls obviously want to see that index recapture its 200 day SMA which is still firmly sloping higher, something which its 50 day SMA is not doing. It is hard to blame recent weakness on the political happenings as two of the sectors that did much of the heavy lifting since the election last year, the semiconductors and transports, were acting soft for some time. The IYT is now lower by 7% from its most recent 52 week highs and has lost ground 4 of the last 5 weeks and more concerning is how quickly the good looking cup base breakout from a 173.98 trigger the week ending 7/7 fell apart (the move in the airlines has contributed greatly with JETS down 12% from recent highs). Breakouts that fall apart that fast are often a poor sign, and todays move below the 200 day SMA is yet another warning. As always it pays to be simple and wait for the trades that offer the best risk/reward. Below is the chart of NFLX, and how it appeared in out Thursday 8/17 Game Plan, which Friday recorded a bullish inverted hammer candle. One will know relatively quickly if they are wrong.

ChartSmarter Friday Game Plan 8/18/17

Markets never saw green Thursday and through the course off the session the bleeding continued. The Nasdaq which has been concerning to me at least from the 6/9 session fell by triple digits and almost 2% today and undercut its 50 day SMA just three days after reclaiming it, a very bearish sign. As of yesterday the tech heavy benchmark was higher for the week but now is in jeopardy of registering a fourth consecutive down week, and all four finishing at lows for the weekly range. As with daily charts it is not where you start but where you end up. Keep in mind as well it was been 15 months since the last 4 week losing streak on the Nazz. The S&P 500 also undercut its 50 day SMA and the problem may turn out to be investors are becoming complacent to the fact that another quick recapture is just days away. The indexes rarely just fall out of bed without warning signs and this time is no different whether you want to point to the bearish shooting star candle at all time highs for the S&P 500 on 8/8 which now looks like a bull trap after an intraday flag reversed. The Nasdaq recorded a nasty bearish engulfing candle on 7/27 also at all time highs and the defensive in nature Dow is now the only major average above its 50 day SMA. Once again it was the utilities and staples that "outperformed" as the XLU and XLP fell by .7 and .9% and selling was indiscriminate. Many are blaming this recent weakness to the Trump agenda now almost dead, but it was never really even in motion. What those people that talk about that fail to realize is that it was most likely built in as the indexes look forward by 6 months. One would be wise to scale down their size in the current environment and even monitor names that ignored the shaky tape Thursday. Below it the chart of COH and how it was written in our Wednesday Game Plan this week. Perhaps one very delicate earnings report this week could be forgiven as the previous four all gained ground.

ChartSmarter Thursday Game Plan 8/17/17

Markets once again finished close to the UNCH mark Wednesday, but off session highs. The Nasdaq was higher by .6% at intraday highs in the early afternoon but gradually lost momentum. The Dow, Nasdaq and S&P 500 recorded spinning top candles which can predict a change in direction. The Russell 2000 which is lagging did register that recent bullish morning star pattern and it needs to start acting better. One does have to admire that the markets did hold up after the political of boards disbanding, and that could potentially be a positive tell. Looking at individual groups it was the materials group that led the way with the XLB higher by 1%, and not far behind were the staples and utilities that were both comfortably higher today with the XLU and XLP advancing .4 and .3% respectively. The XLU is sniffing out a 54.73 cup base trigger which would achieve an all time high and its dividend yield of 3.9% is giving it some income boost to go along with its capital appreciation. Below is the chart of NRG and how it was profiled in our Monday 8/7 Game Plan and it is currently nicely above the bull flag trigger of 25 and has gained more than 100% this year already. Investors affinity for the higher yielding plays recently is an interesting development which bulls and bears could explain in a positive light. Bulls could express their inclusion as the rally broadening out and the bears may say market participants are parking cash cautiously and not being able to stomach the heights the benchmarks are residing at this moment.