Sturdy Setback Or Turning Trend?
What makes a market is that many have diverging views. If we apply that thought to the industrials versus the S&P 500 on a ratio chart, there is something for both the bulls and bears to argue their point. There is no question that the XLI and many of its components have lagged, as the industrials on a 6 month look back period are just the NINTH best performing major S&P sector out of 11. On its WEEKLY chart the XLI is being pulled toward the round 80 number, which would be the pivot in a long double bottom pattern that began in January ’18, and the fund sits just 4% off most recent 52 week highs. BA will have a big say in its direction, as it is the largest component at more than 8%. It is still feeling the effects of the 7 session losing streak between 3/4-12 after the terrible airplane disaster. Last week CLOSED fractionally lower, but at the top of its weekly range, and the prior two jumped a combined 10%. Maybe the chart hangover is wearing off.
Since the month of May UPS and Federal Express have traveled in different directions. I have often mentioned UPS in the past has been treated like the red headed stepchild compared to FDX, but that is no longer the case. The ratio chart below contrasting the two shows this clearly. UPS did try and break above a cup base pivot of 121.40 this week on both Thursday and Friday, but was unable to CLOSE above it. FDX used to be considered a bellwether on the global economy, but should it lose that assumption? The technicals certainly say so. UPS is digesting an 8.7% earnings related jump on 7/24 well, and FDX reports earnings 9/17 after the close. The very round 150 number has been holding firm since late last December. If that figure does not hold that would be a break below a bearish descending triangle that began in September ’18.
The shipping space has been delivering the goods, pun intended. Below is a good example with the chart of STNG, and how it appeared in our 8/15 Industrial Note (full disclosure that entry was missed by mere pennies on 8/16). It is now resetting after a failed breakout, and did find support last month at an upward sloping 200 day SMA. It is quickly sailing toward the round 30 number, and has carved out another cup base pattern with a pivot of 30.87 (the very round 20 number gave it issues back in February-March). On its WEEKLY chart it has the look of a bullish inverse head and shoulders formation with a break above that same cup base carrying a measured move to the 45 number.