Douglas Busch

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ChartSmarter Tuesday Game Plan 12/12/17

Markets put in another lackluster, but productive session as the Nasdaq led gaining .5%. Although the last 2 weeks have declined, albeit less than 1%, the last 11 have all CLOSED in the upper half of the weekly range, a bullish trait. It is now about 2% away from the very round 7000 number which would probably surprise no one if it touched it before year end, which could be why it may not! The very round 5000 and 6000 numbers were tested and held firm after breaking through them the weeks ending 11/4/16 and 5/19/17, so if it does conquer the 7000 figure to the upside it could be a positive in a line of defense. The Russell 2000 put in a second consecutive long upper tail, a bearish quirk, and I still marvel at its strength from a technical perspective. The benchmark has recorded two V shaped cup base breakouts since September, which are often failure prone.

Looking at individual sectors it was the technology and energy groups that excelled with the XLK and XLE both gaining .8% followed up by utilities with the XLU adding .6%. The XLK is rebounding nicely off a retest of its 50 day SMA, and is on a 5 session winning streak with each successive session showing smaller volume. One would like to see a bit more conviction but it is hard to ignore the PRICE action. Energy on the other hand is once again doing battle with the round 70 number, a level is has backed away from since early November. One has to give the edge to the bulls if the bears can not push this ETF lower, and the longer it fights up here the more it looks like a continuation situation following the six week winning streak ending between 8/25-9/29 which rose a nice gradual 9.5%. Reading Barron's this weekend I was surprised to see 5 of the 10 investment strategists making their 2018 predictions recommended energy as one of their favorite sectors. Just one advised steering away from the group. Staples, industrials and financials lagged.

As crazy as the markets having been, excluding Bitcoin, sometimes it pays to just be simplistic. Of course people try to make things look overly complicated, perhaps to demonstrate intellect, but being plain and straightforward is often the best route. There has been rotation ongoing, which is healthy, and some of this money has poured into transports and some has spilled over into select retail names. Attempting a little humor here one could have been very successful this year using a plain approach and weighting toward things we all need to survive such as food, clothing and shelter. PPC has had a nice run in the food group, and one would have to been living under a rock to not was has been going on in the homebuilder space. Below is a chart of GPS and how it was profiled in our Wednesday 11/27 Game Plan. It is another prime example of the round number theory in force as the 30 figure was a road block beginning in March '16. The stock is now higher by 10% since the breakout and on a current 6 week winning streak. A big reason is consumers affinity for discounted goods with their Old Navy stores firing on all cylinders. It is now in the process of bull flagging on the daily and a CLOSE above 34.25 would generate a measured move higher of nine handles.

ChartSmarter Monday Game Plan 12/11/17

Markets put in a lukewarm week with the Dow rising .4% recording a somewhat bearish spinning top candle, but is higher 13 of the last 16 weeks. The S&P 500 rose .35% and is also higher 13 of the last 16 weeks. The Nasdaq did fall .1%, falling for a second straight week, but both weeks managed to CLOSE in the upper half of the weekly range, as bulls try to absorb any selling pressure. The Russell 2000 which is often a good indicator recorded a doji candle, some may argue a gravestone doji, but it was not registered at all time highs. The bulls get the benefit of the doubt with the burden of proof argument and perhaps the second half of December strength will arise. Will that expected development turn into the January effect which became irrelevant as investors began to anticipate the strategy. The VIX fell below the round 10 number and the UVXY fell beneath the round 10 number after finding nearly precise resistance at the 20 figure the week ending 10/27. The levered ETF was close to the round 10000 number in September '15 and just CLOSED at 12. If one does not adhere to stops one will be devastated. Protect your capital. There is no similarity to BitCoin here but whatever instrument you engage in respect your well earned money.

Looking at individual groups it was a decent session Friday as all of the nine major S&P sectors gained ground (the materials via the XLB finished UNCH). The best actors were the healthcare and energy arenas with the XLV and XLE rising 1.1 and .9% respectively. More importantly for the week there was some expected bifurcation with five of the S&P sectors rising and four falling. The two best performing groups doubled the gains of the second best actors. The financial and industrials both rose 1.5% and bullishly scored these gains of powerful advances the week before. The XLF rose 5.2% and the XLI 3.1% the week ending 12/1. Seeing that type of follow through in critical areas has the bulls resting a little more comfortably this weekend. Honorable mention goes to the staples as the XLP is now on a current, yet gradual 6 week winning streak up 6.4% in the process and is its first such streak since the weeks ending 2/12-3/18/16. The laggard for the week was the utilities with the XLU ending a 9 week winning streak falling 1%. The ETF for those concerned is still buzzing just 2% off most recent 52 week highs.

The materials group has been showing backbone, pun intended, as the metals groups heat up, mostly the steel and aluminum plays. The XLB is still trading around a 59.72 cup base trigger that it was above intraday four consecutive days between 11/30-12/4 but was never able to CLOSE above it. As well it is dealing with the round 60 number and this should resolve this sometime before year end most likely. The chart of EXP below is an intriguing one as it has its tentacles in some interesting spaces. First it supplies to the homebuilders which has been firing on all cylinders and it does participate in the oil and gas arena and we know how energy has been in a real tug of war between bulls and bears recently. Here is the chart of EXP and how it appeared in our Friday 12/1 Game Plan. It recorded a stellar week advancing 4.3%, on top of the prior weeks 4.8% gain, both coming in active volume. Look more continued upside.

ChartSmarter Friday Game Plan 12/8/17

Markets registered lukewarm gains Thursday as the Nasdaq followed through in a mild fashion, up .5%, after Wednesday's bullish engulfing candle. Volume was constrained, and for the week the tech rich index is lower by .5% headed into Friday, and if that holds would be a second consecutive weekly loss. It was helped along by the semiconductors with the SMH rising 1%, but looks like a brick wall may be tough to get through on the upside at the very round par figure, which would also be a test of a broken 50 day SMA. Biotech's also helped as the IBB rose by 1.4%, but still resides 9% from its most recent 52 week highs. The Russell 2000 was a bright spot, gaining .7% as it recorded its own bullish engulfing candle at its 50 day SMA, ending a 4 day losing streak. Both of the aforementioned benchmarks are doing the right thing so far, quietly finding support at important levels. Nothing flashy, just responsible action.

Looking into individual sectors it was the industrials that led the way with the XLI higher by .9% and it is now nicely above a 73.30 cup base trigger taken out on 11/30 and retested yesterday and held firmly. It now has the look of a bull flag formation and a CLOSE above 75 would give it a measured move to the round 80 number. The airlines were a big part of their outperformance Thursday as the JETS ETF has gained 8% during its current 3 week winning streak and has added 2% this week headed into Friday. The laggards hailed from the conservative utility, healthcare and staples groups. The XLP was a real weakling falling .9%, but volume was subdued and it is still above a double bottom trigger of 56.04 taken out on 11/30. Technology via the XLK is on a 3 session winning streak, but still DOWN for the week thus far by .3%, courtesy of Mondays 1.6% slide. Trade has fallen with each successive session during this streak, and the bulls would be happy going into the weekend if that could change tomorrow.

The longer retail continues to firm up the greater the belief that the move is simply a dead cat bounce. Is it foreshadowing consumers feeling more upbeat, or an economy that will keep growing? Who knows and who cares. The PRICE action in some of these names is telling you what one really needs to know. We have witnessed some excellent earnings reactions to support the bull mode theory with LULU, DG, GIII and VRA all up handsomely this week thus far. Of course you will have laggards, that will keep that moniker, and that includes ASNA and DLTH which are both LOWER by more than double digits this week after reporting and are way off their 52 week highs with ASNA down 76% and DLTH 57%. Below is the chart of ETSY and how it appeared in our Wednesday 12/6 Game Plan. The name is approaching the very round 20 number and has advanced 12.6% this week so far, already on double average weekly trade with one day still to go. It would not surprise me to see this name gravitate toward a 29 cup base trigger that began the week ending 4/24/15 sometime in 2018.

ChartSmarter Thursday Game Plan 12/7/17

Markets put in a quiet session as the Dow is now on a 3 session losing streak, with all 3 CLOSING right near lows for the day. It did nearly achieve a 1250 handle gain following the bull flag breakout above a 23500 trigger (came up about 200 points short) and still looks a bit heavy after Mondays shooting star candle. The Nasdaq put in a decent day recording a bullish engulfing candle just above its rising 50 day SMA after bouncing near the 50 RSI number to remain for the time being in the bullish zone. The Russell 2000 was the laggard Wednesday as it registered its first four day losing streak since late July and is currently retesting a double bottom breakout trigger near 1510. The violent nature in which it has retreated to test the pivot is worrying. I am hearing a chorus of prognosticators explaining this is historical weak beginning of December which should be followed up by strength into the year end beginning next week. Is it too obvious?

Looking at individual groups it was technology that led for a second consecutive session, although yesterday it was barely above the UNCH mark by the close via the XLK. Wednesday it behaved more bullishly with the ETF higher by .6% and for a second straight day finding a bounce of its upwards loping 50 day SMA. Volume could have cooperated a bit more but PRICE action was respectable. Its two next closest winners were odd company with the staples and utilities adding .5 and .4% through the XLP and XLU. The big laggard today was energy with erratic action with the XLE falling 1.3% and falling for 3 days in a row after having trouble CLOSING above the round 70 number recently. It is down 1.8% for the week so far confounding some as last week it stormed higher by 3.2% in the best weekly volume in more than 4 months. It reaffirms the notion that weak groups will tend to stay so longer than many believe.

Technology has been held underwater recently and not many are predicting it to end with the beachball effect and an explosive move higher. That on a contrarian basis alone could propel a move north, but a popular saying charts do not lie, people do could come in handy with this next chart. TWLO was a name that came public with much fanfare last spring advancing 11 of its first 15 weeks, moving from the low 20s to just above 70. Fast forwarding to the present it has dropped 4 of the last 6 weeks, and by 7.7% thus far this week. Its action mirrors that of another highly touted tech IPO ACIA that came public just one month before TWLO and it now trades 46% off its most recent 52 week highs (it as well rose 11 of its first 15 weeks traveling from roughly 27 to 125). Below is the chart of TWLO and how it appeared in our Tuesday 11/28 Game Plan. This could be talked about in the opposite of a leader in a weak group that excels once the group sees some capital allocated to it. TWLO was weak well before the Nasdaq softened up somewhat. Its losses could accelerate even further it technology does not regain its footing. It has broke below a bear flag and has a measured move into the high teens.

ChartSmarter Wednesday Game Plan 12/6/17

Markets registered negative reversals once again Tuesday and this recent pattern of starting on highs and going out on lows is becoming more concerning by the day. It could be a classic "sell the news" as tax reform now looks imminent. The overall trend is still higher but some signs are perking up. The S&P 500 is still comfortably above its bull flag trigger breakout above 2600 but today for the second consecutive session CLOSED well off intraday highs. It is the benchmarks first three day losing streak since early August between the days of 8/8-10. The Russell 2000 is behaving frantically as the last 3 days alone have traded within a 3% range and is now trading into the bullish hammer from last Friday which bounced off round 1500 number and 50 day SMA. Being a trend follower includes taking the pain, of course as long as positions are profitable, and accepting the drawdowns that are inevitable. Are we in the very early stages of possible sizable losses? We do not make predictions but simply let price be out navigators. Although trends are more likely to persist than to reverse, they will do so at some point. Let price be that informant and not outside noise.

Looking at individual groups it was technology that was the only major S&P sector to eke out a gain on Tuesday, and of course Monday it was the worst performer. Bulls can hardly take solace in that fact as the XLK fell 1.6% Monday and rose a scant 3 pennies today. It did however manage to find support at an upward rising 50 day SMA. The dull and supposedly boring utilities were the worst actors as the XLU slipped up by 1.3%. The ETF is on a current 9 week winning streak but looking at a potential bearish engulfing weekly candle depending on this Fridays close. On a shorter timeframe it has encountered trouble following the bearish dark cloud cover recorded on 11/15 and has now lost more than 2% the last 3 sessions, all on above average daily volume.

As the markets worries begin to accelerate, the bulls seemingly are able to grasp on to fewer and fewer bright spots. It may be temporary, but one group that is showing strength recently shrugging off the weakness is the paper packagers. Name likes ATR, IP and BMS have been holding their own and that could be a good indicator of the economy humming along. Of course the economy and stock markets do not always act in harmony with each other, but watching this group could pay handsome profits down the road, pun intended. Below is the chart of GPK and precisely how it appeared in our Wednesday 11/15 Game Plan. One can see on the monthly chart the visually appealing digestion for almost 3 years now of the prior uptrend that occurred between 2011-15. Keep this name on your radar for names that breakout from long bases as they are keen not just be more success prone, but often achieve more upside.