Douglas Busch

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ChartSmarter Tuesday Game Plan 12/5/18

Markets began Monday in a brilliant fashion but ended anything but. Remember just as in life, and so goes the markets, it is now how you start but how you finish. The Dow ended up more than 200 handles from intraday highs recording a bearish shooting star candle in the process. The Nasdaq slumped 1% reversing more at the round 6900 hard very similar to the 11/29 session. The week started off soft for the tech heavy benchmark and rotation is firmly underway and the week is obviously still very early, but keep in mind if this week were end down, it would be the first back to back negative weeks since mid August. The S&P 500 and Russell 2000 also finished well off session highs after decent intraday gains evaporated. There were some bright spots if one looked deeper with the transports up 1.8% via the IYT, off highs too, and fell backwards after hitting a roadblock at the round 190 number, pun intended. It still well above the cup base breakout trigger of 181.67 taken out on 11/29. Retail showed signs of life, but bears will point to its laggard status. The XRT broke above a 44.20 cup base trigger today and could be primed to move toward a weekly double bottom trigger of 48.36.

Looking at individual sectors there was some clear bifurcation with the financials once again putting on a show with the XLF up 1.4%, and the materials, cyclicals, staples and industrials advancing between .8-1.2%. For the XLF it was its third move of at least 1.4% in the last 5 sessions, making the gain a bit frothy and most likely in need of a pause with sideways trade wanted from the bulls. On the opposite end of the spectrum it was technology that lagged badly with the XLK slumping 1.6%. It is now about 1% from a rising 50 day SMA potential test, which will be interesting to see how its defended. One normally wants to see an orderly decline into the important line where institutions will generally add to a winning position. But the frantic nature in which it is approaching it is not ideal and volume is bulging. It is now back below the 2.2% dump recorded on 11/29. Perhaps we are in for a move seen last in early June where volume exploded as it receded into its 50 day line, and although it did not hold up falling below in late June and early July, the uptrend did resume after a brief lapse. Also showing weakness today were the utility and healthcare sectors.

They say a healthy market should include robust performances but both the financials and transports. It is a bit old school, but in a very simplistic way it makes a lot of sense. If banks are doing well they are it means interest rates are rising and therefore the economy must be humming along. The transports signal that goods are being purchased from consumers that are energized and being delivered. They often have a very nice gauge on economic activity. Below is a name that has a little bit of both of the aforementioned groups as it is a payment play for transporters. Here it is how it was profiled in our Monday 11/20 Game Plan. It broke above the suggested bull flag trigger on 11/30 and is now on a route to the round 200 number, pun intended. It has charged higher 12 of the last 14 weeks and the last 5 weeks have all CLOSED very taut within just 2.15 of each other which suggests a big move is imminent.

ChartSmarter Monday Game Plan 12/4/17

Markets went on a rollercoaster ride Friday with the Dow finishing nearly 300 handles off late morning intraday lows and all the major averages recorded big reversals, perhaps none bigger the the Russell 2000 that witnessed a hammer candle precisely off its rising 50 day SMA. The S&P 500 fell .2% and the Nasdaq and Russell 2000 fell .4 and .5% respectively. For the week the Nasdaq lost .6% but did manage to CLOSE in the upper half of the daily range. The S&P 500 ended the week higher by 1.5% in the fourth best weekly volume of the year and the Dow scored its best weekly gain in all of 2017. On a YTD basis the Dow made up some big ground on the Nasdaq this week and although it is unlikely to catch it with just one month left this year its gain of 22.6 to the Nasdaq's 27.2 is narrowing quickly. Keep in mind the volatility we have been watching is indicative of topping action, the exact opposite of slow rounding action seen at bottoms. Of course as technicians the real truth lies in price and respect the trend as long as it lasts, but their are some warning signs emerging. Remember there are no shots across the bow, but tops in hindsight will obvious. Perhaps this week will be looked at with the frantic trade in both MU and SQ. Each of them met recent trouble at the very round 50 figure, and notice MU bounced precisely at the 40 number Friday, but MU slumped 15.5 and SQ 21.8% this week in humungous volume. MU saw the largest weekly trade since the week ending 10/11/13 and SQ doubled its second largest weekly volume tally ever this week. Former general EA is on a five week losing streak and down 9 of the last 11. ULTA is 32% off its most recent 52 week highs, PCLN has now reported three consecutive negative earnings reactions. When you see former captains struggle and be taken out one by one it should be a cause for concern. I have a feeling December is going to be a very dramatic month.

Looking at individual sectors Friday it was energy that was a clear leader with the XLE rising .8% and the only two of the other major nine S&P groups to add ground were the staples and financials. It was the industrials which were hit the hardest to the tune of 1.2%. More importantly on a weekly basis there were so huge moves with the financials gaining 5.2% via the XLF (was accompanied by the second best weekly volume of 2017), and the industrials added more than 3%. The only sector to fall for the week was technology with the XLK FALLING 1.5% and falling below the 3 week tight trigger of 64.12, with the three weeks ending between 11/3-17 all CLOSING within just .15. The XLE looks most intriguing to me as although it is still 11% off most recent 52 week highs it has gained 11 of the last 15 weeks. It recorded a spinning top candle today as it wrestles with the round 70 number registering just 3 CLOSES above the figure since falling below it on 4/13. The ETF feels like it wants to continue to build the right side of a long weekly cup base trigger of 78.55 that began the week ending 12/16/16.

We always like to discuss the importance of keeping leaders in a weak group on close watch as when the space gets love, the strong hands will often be the first out of the gate and provide superior returns. Surely most avid investors have been aware of CMG's troubles which is still 38% off most recent 52 week highs even with this weeks 10% plus gain. Others former leaders such as EAT, CAKE, DPZ and SONC still lag 34, 28, 17 and 16% off most recent 52 week highs. Of course there have been stalwarts like MCD and WING and the recent takeovers regarding PNRA and BWLD. Below is the chart of slow and steady gainer YUM and how it was written about in our Wednesday 11/8 Game Plan. The stock has gained a very respectable 32% in 2017 and now sits at all time highs and this week registered its first weekly CLOSE above the round 80 number. Three of the last four weeks prior to this one traded above 80 intraweek but were unable finish above it. The chart is not only easy on the eyes, but the palate as well, pun intended.

ChartSmarter Friday Game Plan 12/1/17

Markets once again took investors on a ride with a big move higher as the Dow and S&P 500 rose by 1.4 and .8%, and the Nasdaq tacked on .7% and the Russell 2000 sat the party out finishing near the UNCH line. The Dow is now on a 5 session winning streak and on Tuesday flew above a bull flag trigger of 23600 which carries a measured move of 1400 handles which would touch the very round 25000 figure. Heading into Friday it has gained 3% which if it holds would be the best weekly gain all year and best since the weeks ending 11/11 and 12/9/16 which rose by 5.4 and 3.1% respectively. For all the hype about how crazy the market has been to think the best weekly gain for the Dow before this week in 2017 was a 2.2% gain the week ending 9/15 puts things into perspective. The Nasdaq is underwater for the week so far to the tune of .2% and the S&P 500 has added 1.7%.

Looking at individual sectors the rally was broad based with each of the nine major S&P sectors gaining ground. The best actors hailed from the energy and industrials with both the XLI and XLE higher by 1.6 and 1.5%. Both of their charts have very different trajectories with the XLE still 12% off its most recent 52 week highs and the XLI right at all time highs. The industrials look excellent as the 4 week losing streak which lost a very modest combined 3.5% the weeks ending between 10/27-11/17 is now a thing of the past. The ETF is easily enjoying its best weekly gain of 2017 higher by 4.2% heading into Friday and is the firmest advance since the stunning 8.1% election inspired jump the week ending 11/11/16. It has firmed up since bouncing off the round 70 number almost precisely on 11/15 and successfully retesting its 69.68 cup base trigger originally taken out on 9/18.

Energy has behaved well this week following a 1% drop this Monday. Since then it has gained each session with volume growing with each successive day and the XLE is now higher by 1.8% heading into Friday and today recaptured its 50 day SMA which has been sloping higher for 3 months now. In fact volume this week so far with one day left is nearly double that from all of last week, of course that was holiday shortened but still very impressive. Below is the chart of a leader in the space PSX and how it appeared in our Tuesday 11/28 Game Plan. This Warren Buffett favorite, or maybe it is not anymore, I just see the truth in price alone, is now trading at all time highs and quickly approaching the very round par figure. It is higher 12 of the last 14 weeks and this week has jumped another 4.2%.

ChartSmarter Thursday Game Plan 11/30/17

Markets were bifurcated Wednesday as the Nasdaq was hit to the tune of 1.3%, while the Russell 200o rose .4%. The Nasdaq dropped hard following yesterdays hanging man candle and on its RSI could be slipping below a nice uptrend line that began in early August. One banking on any window dressing into year end with the tech giants is clearly confounded today, but there is still plenty of time left in '17. A wise friend of mine pointed out that he figured the Nasdaq would struggle once Bitcoin did so. He is looking genius today, with the huge reversal. The Russell 2000 did record a bearish shooting star and we are now headed into the end of the month and the major averages have been up 10 months in a row, however the gains have been gradual. This could be the first year we go 12 consecutive up months in a calendar year. The bulls can point to today as being rotational as tech imploded, capital was deployed into transports screaming higher by 3.4% via the IYT. Financials and retail also demonstrated strength with the XRT rising by 2.4%. For the week it has added 5.8% and weekly volume is the strongest since the week ending 3/3 already with still two sessions remaining. The bears may point to these types of huge swings as being indicative of potential market tops. December should be an epic tug of war.

Looking at individual sectors it is impossible not to come away very impressed with the action in the financials. The XLF recorded excellent follow through after Tuesdays jump of 2.6%, easily the best performing group today adding another 1.6%. The ETF broke above a 27.03 cup base trigger today and we like to say here the best breakouts work out right away. If this is not a good example I am not sure what is. Perhaps the phrase if it looks obvious, it is obviously wrong comes to mind, but many like to pontificate that a true market rally must see financial participation. This should be a good sign going forward. Of course there was clear bifurcation Wednesday with technology via the XLK slumping 2.3%. We discussed the possible GOOGL implications yesterday with the bearish dark cloud cover and it spilled over to some of its mega cap peers today. AAPL slipped up 2.1% and it did recently fill in a gap on 11/15 from the 11/2 session, but that looks in jeopardy now. AAPL recorded another gap fill aligning with the very round 150 number on 9/25 from the 8/1 session and rallied nearly 30 handles to 11/8 highs, but this recent gap is not behaving in the same fashion.

Healthcare has been acting somewhat better as of late and of course like any other sector it is very diverse. To take a look at two subsectors in the space to illustrate our point lets take a peek at the performance of the IHI, the medical devices ETF compared to the IBB which is a biotech fund. IHI has essentially doubled the return of the IBB so far in '17 as it has risen 33% to the IBB's 17%. As well the IHI is just 1% off most recent 52 week highs while the IBB is 9% off its own highs. Below is the chart of ILMN and how it was viewed in our Tuesday 11/9 Game Plan. The stock is higher 15 of the last 20 weeks and by 5.9% this week heading into Thursday. It screamed above a 214.50 bullish ascending triangle trigger on 11/27 advancing 4.2% on double average daily volume, and still has room to run to its measured move of 232. The measured moves are not science, and this name could potentially exceed that and I feel it will be magnetically pulled toward a cup base trigger of 242.47 in a base that began 28 months ago the week ending 7/24/15. A break above there is a blue sky breakout.

ChartSmarter Wednesday Game Plan 11/29/17

Markets scored big gains Tuesday as the S&P 500 and Russell 2000 led with gains of 1 and 1.5%. The Dow finished near highs, up 1.1%, after a brief slip following a missile test in North Korea, and the Nasdaq lagged as the tech heavy benchmark finished the session with gains of .5%. The S&P 500 continues to defend the round 2600 number which served as a bull flag breakout and the Russell 2000 broke above a bull flag of its own Tuesday, although the pattern was short in duration. There were some long upper tails the last few days which was erased with todays breakout, which is the opposite of what was seen as it bottomed between 11/8-15 with a flurry of long lower tails on the small cap average. Leadership has gone under some changes as I chart through hundreds of names I see the likes of former generals like DPZ, ULTA and REGN now in bear market mode off 22, 31 and 33% respectively (REGN has fallen 28 of the last 36 sessions). The XRT looks like a bull flag here and new names are taking over with stocks like WMT, FIVE, KORS, VFC and PVH remaining firm.

Looking at individual sectors it was a pretty broad based rally with all nine major S&P sectors gaining ground. It was the financial that scored the best move Tuesday adding 2.6%. "Lagging" was technology which still rose by 3%. The XLK was affected by the weak action in its fourth largest component GOOGL. The tech heavyweight recorded a nice looking break above a bull flag trigger of 1065 on Friday, which would have had a measured move of 85 handles, and today reversed to CLOSE underneath the pivot. It is most concerning, as we know the best breakouts will work often right away, and certainly a slump the day after a promising move must be met with caution. The bulls are now presented with the burden of proof argument, meaning steer clear of long exposure until the trigger is reclaimed. I am not recommending a short here, but now there are certainly better fish to fry in the stock universe.

Financials have been trying to swim upstream and although the run has been higher, the path has not been smooth. The XLF has repeatedly bounced off its own 50 day SMA since 11/9 and has now climbed back above the bull flag breakout from the 10/20 session. Once instruments, either individual stocks or ETFs successfully retest breakouts it is often a good sign. The group is very diverse and below is the chart of VNTV, a payment play with very strong peers in V and PYPL to name a few, and how it was posted in our Wednesday 11/15 Game Plan. It had taken a prudent pause after a strong move higher after a big move the two weeks ending 8/11-18 which rose by more than 12% (week ending 8/11 jumped more than 9% in the best weekly volume in more than five years). Presently it now trades at all time highs and this best of breed play is now back above its rising 50 day SMA and today CLOSED above an add on trigger of 73.24, although a bearish shooting star was recorded.