"He will win who knows when to fight and when not to fight" - Sun Tzu

Dodgy Dow?

  • As the hype with technology reigns, more specifically the semiconductors meteoric rise, the Dow that was gaining some of the spotlight in the latter part of 2023 has subsided. And its chart is displaying that melancholy. Perhaps one would say the Dow is meaningless but on this chart, one can see it has had the propensity to lead in years past as seen here. Truth be told since the start of the year the Dow has been lagging and could this be a canary in the coal mine if it breaks below this recent digestion and its 50-day SMA? On a YTD basis, the Dow has advanced by 3%, while the Nasdaq and S&P 500 have risen by 6 and 7% respectively. This is a PRICE-weighted index (and the higher-priced names are more influential) so particular attention should be paid to UNH, which is below its 200-day SMA and 12% off its most recent 52-week highs. MSFT, the second largest component which we spoke about in our Friday Tech Note is the one to watch as it may have recorded a failed breakout Friday. It registered a spinning top candle the day after a CLOSE above a cup base pivot of 420.14, but give it the benefit of the doubt and remain bullish as triple witching may have skewed the technical picture Friday. One can see that UNH has done the damage and the Dow has held up but if Microsoft buckles that could be a shot across the bow.

Rates Feel Perky:

  • With all the hoopla surrounding interest rates, many believe the market takes care of the Fed's work. If that is the case could it be saying that rate hikes could be in the future? The daily chart of the 10-year yield suggests that is possible, if we can see a break above the bullish ascending triangle. The WEEKLY timeframe has some appeal as well as it recorded a bullish engulfing candle as it continues to ride the comfort of its rising 50 WEEK SMA (which it has done since last December). That was the first touch since the breakout above a prior double bottom which is often an optimal entry, but to be fair one would like to see a "springboard" off the moving average and not a lazy stay of 3 months and counting. Last week it also rose more than 5%, its best return in many months, and notice too that the Bollinger Bands are starting to constrict which often signals a big move could be imminent (also back above the middle line, the 20-day SMA between the bands for the first time since last November). Peering at the 20-year bond the TLT which was rejected at the very round par number on the WEEKLY chart with a doji and shooting star candle in the last 2 weeks of 2023 looks ready to resume its downtrend. Of course, the big question is whether this nascent strength in rate will finally be a headwind for equities?

Golden Coil:

  • The incessant chatter about the Gold rally dampened somewhat this week. After a 8 session win streak that ended this Tuesday, it is doing exactly what it needs to do, taking a well-deserved rest. The metal has obeyed round number theory that we spoke about in a WEEK AHEAD Note in late January with the 2000 figure acting as both support and resistance. On the MONTHLY timeframe, that level was also notable as it was nearly impossible to CLOSE above 2000 even though the marked months of August 2020, March 2022, and April-May 2023 were all above intramonth but none of them were able to CLOSE above it. Since the finish above last November it has traded below 2000 intramonth or extremely close and all have CLOSED above it, giving the impression that former resistance is now support. Notice on that MONTHLY chart the 2100 level is important, as a CLOSE above would carry a measured move to 2600. First things first the precious metal would need a CLOSE above 2175 on the daily chart below for the next leg upward.

Commodity Lift:

  • Oil strength could be a double-edged sword as it could be a sign of economic strength, but also inflation (of course supply and demand issues come into play). We are seeing the firmness as well in soft commodities with the robust move in the DBA. Last week it surged 5.2%, its largest WEEKLY gain in 2 years, ignoring a doji candle too from the prior week. PRICE is putting distance between itself and the cup with handle pivot of 21.61 made during the current 9 of 10-week win streak. Below is the updated daily chart of crude oil and the gradual, rounded bottom it started putting in last November, now looks like it has some stamina to push for further upside. Sellers earlier in March tried with vigor (volume) to push this below the 200-day SMA, but the secular line remained resolute. Interestingly the 200-MONTH SMA also is playing a role here as oil may be breaking ABOVE a bearish head and shoulders formation and we know from FALSE moves can come fast ones in the opposite direction. It is vying for a third consecutive MONTHLY gain, and every time it has occurred in the last decade (boxed on the chart) it has gone on to at least one more month of gains. Monitor too the potential for a MONTHLY bullish MACD crossover for the first time since December 2020 into end of March.

Material World:

  • Over the last one month period there have been no major S&P sectors stronger than the materials. During that time frame the XLB has advanced by more than 7%, and take note of the defensive stance the overall market has taken with the top four being energy, utilities, and staples. Of course, gold has been a big contributor to this performance but notice that subgroups within the materials and one would see some broad participation (we are all aware of the lagging nature the miners have had compared to the metal itself, since mid-January with the circled area, best seen here). The nonferrous metals have been the strongest group within, which include copper and aluminum. Commodity chemicals have played a role and this is a good economic sign. Steel has been the laggard in the space, and this was before the cratering of X which has filled a big gap from the 12/15/23 session, but that is a do not touch for me. Let's take a look at a couple of names that should be deserving of your attention in the sector in CCJ and EMN.

Cameco:

  • Uranium play down 5% YTD and up 69% over last one year period. Dividend yield of .2%.
  • Name 20% off most recent 52-week highs and WEEKLY chart shows nice action POST breakout above symmetrical triangle. Spinning top candle last week suggests selling pressure is abating and change in the prevailing direction possible.
  • Earnings reactions mixed up 8 and 3.3% on 10/31 and 4/28/23 and fell 6.9 and 3.8% on 2/8 and 8/2/23.
  • Enter at 200-day SMA support.
  • Entry CCJ here.  Stop 38.

Eastman Chemical:

  • Commodity chemical play up 3% YTD and 15% over last one year period. Dividend yield of 3.5%.
  • Name 1% off most recent 52-week highs and on 5-week win streak with all 5 CLOSING at or in upper half of WEEKLY range. Volume growing on WEEKLY chart with each successive week and break above inverse head and shoulders pivot at very round number carries measured move to 113.
  • Earnings reactions mixed up 3.5 and 4.6% on 10/27 and 4/28/23 and fell 2.7 and 1.4% on 2/2 and 7/28/23.
  • Enter after break above cup base.
  • Entry EMN here.  Stop 88.

This article requires a Chartsmarter membership. Please click here to join.

"He will win who knows when to fight and when not to fight" - Sun Tzu

Dodgy Dow?

  • As the hype with technology reigns, more specifically the semiconductors meteoric rise, the Dow that was gaining some of the spotlight in the latter part of 2023 has subsided. And its chart is displaying that melancholy. Perhaps one would say the Dow is meaningless but on this chart, one can see it has had the propensity to lead in years past as seen here. Truth be told since the start of the year the Dow has been lagging and could this be a canary in the coal mine if it breaks below this recent digestion and its 50-day SMA? On a YTD basis, the Dow has advanced by 3%, while the Nasdaq and S&P 500 have risen by 6 and 7% respectively. This is a PRICE-weighted index (and the higher-priced names are more influential) so particular attention should be paid to UNH, which is below its 200-day SMA and 12% off its most recent 52-week highs. MSFT, the second largest component which we spoke about in our Friday Tech Note is the one to watch as it may have recorded a failed breakout Friday. It registered a spinning top candle the day after a CLOSE above a cup base pivot of 420.14, but give it the benefit of the doubt and remain bullish as triple witching may have skewed the technical picture Friday. One can see that UNH has done the damage and the Dow has held up but if Microsoft buckles that could be a shot across the bow.

Rates Feel Perky:

  • With all the hoopla surrounding interest rates, many believe the market takes care of the Fed's work. If that is the case could it be saying that rate hikes could be in the future? The daily chart of the 10-year yield suggests that is possible, if we can see a break above the bullish ascending triangle. The WEEKLY timeframe has some appeal as well as it recorded a bullish engulfing candle as it continues to ride the comfort of its rising 50 WEEK SMA (which it has done since last December). That was the first touch since the breakout above a prior double bottom which is often an optimal entry, but to be fair one would like to see a "springboard" off the moving average and not a lazy stay of 3 months and counting. Last week it also rose more than 5%, its best return in many months, and notice too that the Bollinger Bands are starting to constrict which often signals a big move could be imminent (also back above the middle line, the 20-day SMA between the bands for the first time since last November). Peering at the 20-year bond the TLT which was rejected at the very round par number on the WEEKLY chart with a doji and shooting star candle in the last 2 weeks of 2023 looks ready to resume its downtrend. Of course, the big question is whether this nascent strength in rate will finally be a headwind for equities?

Golden Coil:

  • The incessant chatter about the Gold rally dampened somewhat this week. After a 8 session win streak that ended this Tuesday, it is doing exactly what it needs to do, taking a well-deserved rest. The metal has obeyed round number theory that we spoke about in a WEEK AHEAD Note in late January with the 2000 figure acting as both support and resistance. On the MONTHLY timeframe, that level was also notable as it was nearly impossible to CLOSE above 2000 even though the marked months of August 2020, March 2022, and April-May 2023 were all above intramonth but none of them were able to CLOSE above it. Since the finish above last November it has traded below 2000 intramonth or extremely close and all have CLOSED above it, giving the impression that former resistance is now support. Notice on that MONTHLY chart the 2100 level is important, as a CLOSE above would carry a measured move to 2600. First things first the precious metal would need a CLOSE above 2175 on the daily chart below for the next leg upward.

Commodity Lift:

  • Oil strength could be a double-edged sword as it could be a sign of economic strength, but also inflation (of course supply and demand issues come into play). We are seeing the firmness as well in soft commodities with the robust move in the DBA. Last week it surged 5.2%, its largest WEEKLY gain in 2 years, ignoring a doji candle too from the prior week. PRICE is putting distance between itself and the cup with handle pivot of 21.61 made during the current 9 of 10-week win streak. Below is the updated daily chart of crude oil and the gradual, rounded bottom it started putting in last November, now looks like it has some stamina to push for further upside. Sellers earlier in March tried with vigor (volume) to push this below the 200-day SMA, but the secular line remained resolute. Interestingly the 200-MONTH SMA also is playing a role here as oil may be breaking ABOVE a bearish head and shoulders formation and we know from FALSE moves can come fast ones in the opposite direction. It is vying for a third consecutive MONTHLY gain, and every time it has occurred in the last decade (boxed on the chart) it has gone on to at least one more month of gains. Monitor too the potential for a MONTHLY bullish MACD crossover for the first time since December 2020 into end of March.

Material World:

  • Over the last one month period there have been no major S&P sectors stronger than the materials. During that time frame the XLB has advanced by more than 7%, and take note of the defensive stance the overall market has taken with the top four being energy, utilities, and staples. Of course, gold has been a big contributor to this performance but notice that subgroups within the materials and one would see some broad participation (we are all aware of the lagging nature the miners have had compared to the metal itself, since mid-January with the circled area, best seen here). The nonferrous metals have been the strongest group within, which include copper and aluminum. Commodity chemicals have played a role and this is a good economic sign. Steel has been the laggard in the space, and this was before the cratering of X which has filled a big gap from the 12/15/23 session, but that is a do not touch for me. Let's take a look at a couple of names that should be deserving of your attention in the sector in CCJ and EMN.

Cameco:

  • Uranium play down 5% YTD and up 69% over last one year period. Dividend yield of .2%.
  • Name 20% off most recent 52-week highs and WEEKLY chart shows nice action POST breakout above symmetrical triangle. Spinning top candle last week suggests selling pressure is abating and change in the prevailing direction possible.
  • Earnings reactions mixed up 8 and 3.3% on 10/31 and 4/28/23 and fell 6.9 and 3.8% on 2/8 and 8/2/23.
  • Enter at 200-day SMA support.
  • Entry CCJ here.  Stop 38.

Eastman Chemical:

  • Commodity chemical play up 3% YTD and 15% over last one year period. Dividend yield of 3.5%.
  • Name 1% off most recent 52-week highs and on 5-week win streak with all 5 CLOSING at or in upper half of WEEKLY range. Volume growing on WEEKLY chart with each successive week and break above inverse head and shoulders pivot at very round number carries measured move to 113.
  • Earnings reactions mixed up 3.5 and 4.6% on 10/27 and 4/28/23 and fell 2.7 and 1.4% on 2/2 and 7/28/23.
  • Enter after break above cup base.
  • Entry EMN here.  Stop 88.