Douglas Busch

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So far Douglas Busch has created 3613 blog entries.
18 Feb 2024

THE WEEK AHEAD: Starting 2/20/24

By |2024-02-18T09:00:56-05:00Sunday|

"It usually takes more than 3 weeks to prepare a good impromptu speech." Mark Twain Nasdaq Brick Wall? In our last WEEK AHEAD Note we opened with the quote "Whenever you find yourself on the side of the majority, it is time to pause and reflect." To be frank many market participants were very hyper-bullish given the big tech move in November-December last year, however, January failed to deliver on the "Santa Claus rally" and the January barometer as well with the Nasdaq up 1% (much different to January 2023 that jumped almost 10%). It feels like the benchmark is at a stalemate here as sentiment has become negative. With seasonality bearish and the Nasdaq coming into contact with the round 16000 figure (on 2/9-12 both CLOSED below though), last touched with the MONTHLY bearish gravestone candle in late 2021 is a double top on hand? The vast majority of smart investors I communicate with are bearish now, myself included, and the daily chart seems to confirm this belief. We are seeing negative RSI divergence, with PRICE beginning to confirm, with dubious candlesticks too with a shooting star and engulfing candle on Monday and Friday. I think one should be positioned with plenty of cash, but be open to the idea of another leg higher. One can always get back in with a firm break above 16000. Patience here, with no need to be a hero.

16 Feb 2024

Materials Sector Review: 2/20/24

By |2024-02-16T16:28:38-05:00Friday|

Material Strength:   Are the materials ready for a comeback? Looking at the components to get a feel for what is contributing to the strength I was surprised to see that the top holding was LIN at nearly 22%, a bit top-heavy. The stock's back-to-back 3% WEEKLY gains are certainly helping. SHW is the 2nd largest name in the fund and it is acting well too as its WEEKLY chart is sporting a bull flag that formed at the bottom of a cup with handle pattern (a break above 315 carries a measured move to the very round 400 number). Rounding out the top three is ECL which is digesting the big earnings gap up on Tuesday (its fifth straight positive earnings reaction). Below is the daily chart of the XLB and last week completed a 4-week winning streak, its first since October-November 2022, rising 2.4%. On its WEEKLY chart, one can see it has underperformed the S&P 500 since the start of 2023, but that could all change with a break above the long cup with handle pivot of 86.40. And this is all with very little help from gold, which if that could turn around could be a tailwind. Truth be told there is little gold influence with NEM the ninth largest name in the XLB at less than 4%, and FCX has some exposure to the precious metal.

15 Feb 2024

Industrial Sector Review: 2/16/24

By |2024-02-15T17:29:42-05:00Thursday|

Recessionary Thoughts:   As news crossed the wire of Japan entering recession with two consecutive quarters of negative GDP growth, I thought it would be good to take a look at a couple of names that may warn us about that domestically. Below is the daily chart of FDX and it is at a critical juncture here as it tests a pattern from the late October lows. Just the fact that it has ventured this far back while many other overall names have not receded to these depths suggests caution. It is now 17% off most recent 52-week highs and since the crater week ending 12/22/23 that fell 12%, it has not advanced in back-to-back weeks. The fact that it occurred not long after a WEEKLY double bottom breakout pivot of 269.29 is even more worrisome as we know the best breakouts tend to work right away and act well POST the move. The chart of UPS, which is weaker, is now 26% off its annual peak, and its 200-day SMA is still sloping lower, the opposite of FDX. It has produced FOUR straight negative earnings reactions and has recorded a couple of big weeks of distribution following those reports down 11.3 and 11% in the weeks ending 10/27 and 2/2, and notice the bearish death cross as the 50 WEEK SMA crosses below the 200 WEEK SMA. Both these charts are speaking loudly about a possible recession here. 

14 Feb 2024

Technology Sector Review: 2/15/24

By |2024-02-14T19:40:45-05:00Wednesday|

Technology Lull?   Technology seems to be on a never-ending uptrend, but nothing goes up in a straight line. Well maybe SMCI does. The stock is now higher 18 of the last 19 sessions and has an RSI above 95. Now contrast that with a name like AAPL, the second largest holding, which we will go into much greater detail about later in this note, comprising 20% of the chart below of the XLK and one can see how it is lagging Microsoft (MSFT is now 22% of the fund and the largest component that we also opine on that name later in this report as well). We are short-term bearish on the group, not because of seasonality or sentiment measured, but because of the PRICE action. Give it credit for acting well following a 2% daily drawdown as seen here, but the negative candlesticks are starting to pile up near all-time highs for the ETF. Monday registered a bearish engulfing candle and Wednesday a hanging man. If this week's highs of 208.47 are taken out on a CLOSING basis above the bearish thesis needs to be put aside. 

14 Feb 2024

Technology Sector Review: 2/12/24

By |2024-02-14T10:29:28-05:00Wednesday|

Better Days Ahead? The Nasdaq continues to shine. It is now higher by 4% YTD, lagging slightly behind the S&P 500, but both are dealing with big round numbers currently. The Nasdaq could be on the verge of a meaningful breakout higher from this long cup base, something the S&P 500 has already done. Is it ready to play catch up? I would say yes with the familiarity from the level a couple of years ago. The tech-rich benchmark has never CLOSED above 16000 on a MONTHLY basis, although it was above it intra-month in November 2021. However, it CLOSED 700 handles from its peak at that all-time high that month, recording a bearish gravestone doji candle, whose drawdown did not end until the very round 10000 level in late 2022 (we spoke of this 13 months ago). Now a breakout could be upon us, with plenty of bears still shouting, which could fuel the fire. Software and semiconductors are firm, and "old tech" stocks like IBM and CIEN are prospering (JNPR was recently purchased). With all the rug pull chatter I have been hearing recently, those covering short positions and new organic buyers could create a recipe for success.