Douglas Busch

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ChartSmarter Monday Game Plan 9/17/18

Markets:

  • Most of the major averages CLOSED near the UNCH mark, with the exception of the Russell 2000 which ended Friday higher by .4%. The Nasdaq recorded back to back CLOSES above the very round 8000 number to end the week, and touched its rising 50 day SMA as well to mark the FOURTH consecutive month it has done so. Is the line becoming stronger, or is the more times it is felt make it more likely to break through on the downside? The tech heavy index was certainly helped by the action in the semis as they followed through decently from Wednesdays hammer. For the week it recorded a doji candle, which could signal a fatigue in the downtrend which still has the SMH 7% off most recent 52 week highs. We prefer to see plain old boring PRICE action with NO news move the group, so we will see how the space acts next week without the announcements of upgrades and prices hikes which were seen today with NVDA and AMD.
  • On a WEEKLY basis it was the reverse of what was seen last week as the Nasdaq lost 2.5%, the worst performer of the major four, and this week it was the best behaved as it carved out a 1.4% gain. The S&P 500 rose every day this week higher by 1.2% and this month has bounced off the highs made 1/26 making it a successful retest and so far looking like prior resistance will become support. On its daily chart it has the look of a bull flag breakout which began at the round 2800 number, and the trigger roughly at the 2900 number giving it a measured move to the very round 3000 figure. On a YTD basis there has not been a change on the leaderboard in months with the Nasdaq still commanding a big lead up 16% in 2018, followed by the Russell 2000 up 12.1%, the S&P 500 by 8.6% and the Dow by 5.8%. Let the bull market carry on.

Sectors:

  • There was a fair amount of bifurcation among the major S&P sectors, with the financials coming to life leading the way as the XLF rose by .7%. They were followed up by energy and the industrials with the XLE and XLI advancing both by .5%. On the downside the staples and healthcare lost .3%, the cyclicals fell .4%, and the utilities declined .5%. The staples once again failed to CLOSE above the 55 number, which remember is the neckline in a bullish inverse head and shoulders formation. The XLK was UNCH on the session and just missed CLOSING in the upper half of its daily range everyday this week Friday.
  • On a weekly basis the three standouts were energy, industrials and technology with the XLE up 2%, XLI by 1.9% and the XLK by 1.8%. Energy was helped along as crude is attempting to build the right side of a cup base, but is having some issues with the round 70 number. That level has pushed it back since late July and it has recorded just 3 CLOSES above 70 since then even though 12 sessions were above intraday or within pennies of the number intraday. The industrials continue to defy tariff gravity as the XLI is now on a 5 week winning streak and edged closer to the long cup base trigger of 81.06 in a pattern nearly 8 months in duration. The only major S&P sector to fall for the week were the financials as the XLF gave up .4%.  

Special Situations:

  • Healthcare has seen some really nice action recently. Since the early summer one would have reaped nice rewards had they invested within. The IHI, representing the device space, is now higher 18 of the last 23 weeks. The IBB looks a bit more suspect as it is stalling following a break above a 119.40 cup base trigger taken out on a WEEKLY basis the week ending 8/31. Below is the chart of a small cap play CARA and how it was presented in our Wednesday 7/25 Game Plan. This week the stock gained nearly 10%, and it did retest that flag breakout near 18, and held firm a good sign. Since then it has been comforted by its rising 50 day SMA, and like most leaders is ready to offer an add on buy point. Enter or initiate a new position above a cup base trigger of 22.39, which could also be interpreted as a longer cup with handle trigger in a WEEKLY pattern that began more than 14 months ago.

ChartSmarter Friday Game Plan 9/14/18

Markets:

  • The Nasdaq led the way again Thursday with a gain of .7%, although it did finish off session highs and CLOSED above the round 8000 number. For the week headed into Friday it has recouped about one half of last weeks 2.5% slump, but one has to give it credit. It seems like sentiment is still pretty weak despite the solid YTD performance, and one usually sees euphoria at market tops. Today the latest to pour cold water on it was Tepper, who said we were in the late innings of the bull market, and then of course proclaimed he was "very, very long" MU. We are nearly half done with the month of September, which seasonally is weak, yet in years when the market is up headed into the month it behaves much better than when it was down coming in. Sure it could still puke, but respect the PRICE action thus far. 
  • Risk still feels like it is still on, and to demonstrate that I give you two ETFs that have traded in different paths recently, but support the narrative. First peering into the JNK it is now on a 6 session winning streak and keeps grinding out new highs. On the other hand the EEM which currently rests 19% off its most recent 52 week highs, may have recorded a bottom this week. On Tuesday it recorded a bullish counterattack candle, and on its weekly chart with one day left has the look of a bullish hammer and harami candle. One could also say it bounced off a bullish falling wedge pattern too. The old saying that trends tend to persist more than they reverse comes to mind, so tread carefully. We all know bottom fishing is one of the most expensive ways to conduct business.

Sectors:

  • Healthcare and technology were your best actors Thursday with both the XLV and XLK gaining more than 1%. The XLV has risen 1.3% for the week thus far and is further distancing itself from the 91.89 cup base trigger that it took out in a 7 month pattern. The XBI has made three separate ventures above the very round par number since June, but it has been unable to stick. It now sits 6% off most recent 52 week highs and the slight weakness could have been foreshadowed with the failure to break above a 3 week tight trigger, as the weeks ending 7/6-20 all CLOSED within just .43 of each other. Remember that type to coiling action normally leads to big movers, normally with the prevailing trend, but in this case the ETF dumped 5.2% the following week, the exact opposite of what bulls wanted to see.
  • Energy, financials and staples were your worst performers on Thursday. Neither of them were that far from the UNCH mark (staples were the worst off .25%), but watching the financials which look like they will register yet another tight weekly CLOSE tomorrow, the last 4 weeks have finished in the lower half of the weekly range. We have highlighted the vulnerability of GS this week, but one can point to many others for a bearish take. Look no further than BLK, which swims in bear market territory down 21% from most recent 52 week highs, as it looks to break below a descending triangle formation. The very round 500 number was comforting in February, May-July but that is well in the rear view mirror now. A move below 465 could see a 45 handle decline. 

Special Situations:

  • The specialty chemicals group is one that has been acting well this year, and is a good indication of the genuine health of the economy. Their has been some M&A activity with KMG being swallowed. Below is the chart of RYAM and how it was profiled in our Wednesday 8/15 Game Plan. It looks very likely to be recording its sixth weekly CLOSE above the very round 20 number and it did break above a cup with handle trigger of 20.89 on 8/17 and has acted well POST breakout about 5% higher from the pivot. The best breakouts tend to work out right away and give additional entries on the way UP, and one can do so thru a cup base trigger of 23.06 in a 5 month pattern.

ChartSmarter Thursday Game Plan 9/13/18

Markets:

  • The Nasdaq was the under performer Wednesday, albeit with a fractional loss of .2%, and did for a second straight day CLOSED in the upper half of the daily range, a bullish trait. The tech heavy benchmark sits just 2% off most recent all time highs, and one has to come away impressed with its resiliency. Where are all the bears who proclaimed that the index was being held up by FANG names in past months? Three of the four names are in correction mode with FB down 26% from most recent all time highs. AMZN has done the best and notice it was stopped precisely at the very round 2000 figure today. They are onto new theories, and perhaps a valid one would be the health of the semiconductor arena. "Old tech" plays like TXN and INTC have not been invited to the party as they sit 13 and 22% off their respective highs. The group looks so bad it could be due for at least a dead cat bounce.
  • Where some spaces fail, others make up the difference. It could be the transports that recorded a stellar day on Monday. FDX just said they are going to start a six day working week with all the demand from ecommerce and we know the sector is rolling along, pun intended (FDX is being outdone by rival UPS on a 3 month time period with UPS up 5% and FDX down 4% and UPS has a dividend yield of 3% compared with FDX at 1%). The IYT did break above a bull flag trigger, and bulls want to see continuation on that move. Gold put in an excellent session rising more than 3% and completing a bullish morning star pattern. The commodity has acted poorly recently so careful if you think it may glitter up your portfolio.

Sectors:

  • Staples, energy and healthcare acted the best Wednesday as the XLP, XLE and XLV rose by 1.1 and .5%. The staples were aided in a big way by tobacco names as stock like MO and BTI rose more than 6%. The former broke back above its 200 day SMA for the first time since February and even with todays gain is still 15% off most recent 52 week highs. To be fair WBA and CVS did some of the heavy lifting as well. The XLE was helped along by crude CLOSING above $70 and bears which were looking for the right clavicle in a bearish head and shoulders formation may have to come up with another narrative. The industrials were the fourth best performers on the session.
  • Lagging today were technology and financials. The latter lost .9% making it easily the worst major S&P group. The XLF is still trading in a very taut manner and it will be interesting to see if the tight WEEKLY CLOSES continue this Friday. It is on the verge of recording a bullish golden cross, and amazingly some names in the space just can not seem to get it together as GS is now on an 11 day losing streak with the majority of those finishing in the lower half of the daily range. Even though the XLK did fall today it did manage to record a bullish hammer candle. Its weekly chart shows that it has not touched its rising 50 day SMA in over two years dating back to June of 2016.

Special Situations:

  • It is always a good exercise to keep an eye on names that buck weak sectors. One does not necessarily have to buy the stocks that exhibit that behavior, but in the very least a watch list should be in place. Below is the chart of NOV and how it was presented in our Monday 8/9 Game Plan. Notice it rode its 50 day SMA nicely higher since April, it did undercut it last Friday, and is currently trying to reclaim the line. Remember it is not a penalty to drop below it, but the stock must stay close and recapture it in prompt fashion. It did record a bearish evening star pattern on 8/1, with a doji on the middle day of the 3 day formation, and that did lead to a 10% haircut. This chart in my opinion still looks productive with a stop below 42.75.

ChartSmarter Wednesday Game Plan 9/12/18

Markets:

  • The major averages sported lukewarm gains Tuesday, and it was encouraging to see the Nasdaq outperform. It rose .6% no doubt with help from AAPL as it ended a 4 session losing streak and narrowly missed recording a bullish engulfing candle. One would have to go back to the late April period to see a 4 day down move for the name. Indexes, like stocks, will often have trouble initially touching a round number, but the Nasdaq powered through 8000 on 8/27. It is approaching that level once again and one does not want to witness any fatigue here. Heavyweights in the tech space like AMZN, which is now looking like it wants to retest the very round 2000 figure, and AMD is flirting with the 30 number as well. All three of those aforementioned plays could have a big say to where the Nasdaq is heading in the near term.
  • The Russell 2000 did not participate much Tuesday as it was basically UNCH for the session. It could be reveling in its hard fought victory above the round 1700 number, which quite frankly it deserves so credit for. It is not uncommon at all for a breakout to be retested for its validity, and that goes for all instruments in the trading world, and last Friday it came within 6 handles of that round figure. The rising 200 day on the VIX has proved to tough to CLOSE above with any consistency, and its 50 day SMA is now sloping lower. Today it lost more than 6%, following through on Mondays bearish engulfing candle. The instrument has failed to record consecutive CLOSES above the secular line now for 9 weeks. Taking a cue from the recent US Open, advantage bulls.

Sectors:

  • Charging ahead Wednesday was energy, technology and cyclicals. It is nice to see the latter two making stand and refusing to go away as the overall markets need them to flourish. Give the XLE a bit of credit as it is building upon its bullish hammer candle from last Friday off its 200 day SMA. Tuesday it recorded a bullish engulfing candle rising 1% in good volume. In my opinion it is still in no mans land, but the bulls are digging in where they need to be doing so. The XLY now has the look of a bull flag formation and a move and CLOSE above 117.25 would carry a measured move to 124.
  • Lagging Tuesday was just what bulls like, as the utilities and staples fell and .3 and .4% via the XLU and XLP. It seems to be do or die for the XLP here as it has shied away from the 55 number, in a bullish inverse head and shoulders pattern dating back to February. If the ETF can manage a CLOSE above 55 it would carry a measured move to 61. Give it some credit for recording a bullish golden cross and it is still holding a small gap fill from the 8/15 session. The XLU is faring a bit better as it trades 5% off most recent 52 week highs, while the staples are currently sitting 8% off its own. The XLV did not participate in the decent market move today, but it has the potential to complete a very bullish 3 week tight pattern this Friday as the last 2 CLOSED within just .23 of each other.

Special Situations:

  • The jury is still out on the financials, at least via the XLF. The set up is promising, but without PRICE confirmation there is nothing to do. The XLF has CLOSED the last 8 weeks all within just .36 of each and that type of coiling action often leads to very explosive moves. Below is a great example of being patient with PRICE action on a CLOSING basis. Here is the chart of GS and how it was written in our Thursday 8/30 Game Plan. A bullish inverse head and shoulders formation was developing with its neckline aligning with its 200 day SMA. The buy stop above 245 was never taken out on a CLOSING basis, and anyone who tried to play cute has suffered, as the name is now 15 handles off that trigger. It currently trades 16% off most recent 52 week highs and is now on a TEN session losing streak, although today did record a spinning top candle which can signal the recent weakness could be abating. 

ChartSmarter Monday Game Plan 9/10/18

Markets:

  • The major benchmarks were happy to end the first week in September, often a rocky month. The Nasdaq lost ground everyday this week, and witnessed its first four session losing streak in 4 months, and did so in increased volume. AAPL's potential date with its rising 50 day SMA is getting closer. Semiconductors weighed on tech this week as the SMH lost nearly 3%, its worst weekly decline since the two weeks ending between 6/22-29 fell more than 7%. INTC which earlier this year looked like a leader, is now on the cusp of bear market territory off by 19% from most recent 52 week highs. The stock is looking to complete a bearish rounding top pattern and if support does not hold in the 42 area, another leg down could come. Value bulls will point to the dividend yield of 2.6%, but PRICE action looks wobbly at best.
  • For the holiday shortened week it was not what growth investors wanted to see. The Nasdaq and Russell 2000 lagged falling 2.5 and 1.6%. For the former it was its fourth biggest weekly loss since the week ending 11/4/16. The S&P 500 and Dow fared better on the week down 1 and .2%. The VIX was able to finish above its 200 day SMA, although by the smallest of margins, and now it must do so consistently. It has not put up back to back CLOSES above the line in 2 months. It is touching to 60 RSI number at the moment where it has failed four other times in the last 6 months. Overall I keep hearing their are still pockets of strength in the market, but using the word still to me has a negative connotation, as those areas that are showing firmness are becoming fewer and farther between. 

Sectors:

  • Healthcare was the lone major S&P sector to advance Friday, and it did so barely higher by .1%. Energy and cyclicals were off by one penny, and it was the utilities an outlier declining 1.2%. The XLV successfully tested its cup base trigger of 91.89 the first 3 days of this week and held firm. It continues to trade very taut overall and now sports a bull flag formation with a trigger of 93. A break above would carry a measured move to 97. The XLE did manage to record a bullish hammer today CLOSING above its 200 day SMA, important as intraday it was below the line. The XLY which registered a bearish engulfing candle on Wednesday is looking at a potential retest of a breakout ABOVE a bearish falling wedge trigger of 114. Keep in mind traditionally these break to the downside.
  • On a weekly basis it was the staples and utilities that dominated with the XLU and XLP higher by 1.2 and 1.1%. The XLI is quietly up 8 of the last 10 weeks and this one should be watched in the last quarter of '18 as it approaches a cup base trigger of 81.06 in a pattern that began the week ending 2/2. Top component in the ETF BA will have a big say in its direction, as well as the Dow Industrials as it is the largest priced play in the index. Although it trades wide and loose it did record a bullish engulfing and hammer candles this week on Tuesday and Friday. The one to watch in my opinion is still the financials as the coiling action there remains. The XLF is on a 4 week winning streak, albeit the entire gain is just 1.2%, and all four have CLOSED extremely tight within just .16 of each other. 

Special Situations:

  • The saying goes the longer the base the greater the space, upon the breakout. Patterns that take their time are much preferred to those which are short in duration. Below is the chart of the IT play UIS and how it appeared in our Wednesday 8/8 Game Plan. The group contains leaders like GLOB and EPAM which both happened to put an end to 4 session winning streaks, the latter with a bullish engulfing candle Friday. The chart here shows the WEEKLY chart and the cup base formation that showed a 20 month long base. The stock is higher 5 of the last 6 weeks, and this week rose by a decent 2.4%, following the prior weeks GAIN of 16.6% in the best weekly volume in 2 1/2 years. If one were to look at its daily chart they would see very tight overall trade. Next stop a test of the very round 20 number.