Monthly Archives: August 2024

Gaining "Steam": Steamboats were a significant invention during the "industrial revolution", and the sector as of late has been on the ascent. The group since mid-November has been a stellar performer and if one squints here they can see they are the second-best actor of the major 11 S&P sectors trailing only the financials. It is the black line on the chart and last week overtook both communication services and utilities. Within the space, railroads are continuing to move higher, a good sign of economic activity, with leaders UNP and NSC adding 4 and 6% last week. The former recorded a breakout above a WEEKLY double-bottom pivot of 246.27 last week and the MONTHLY chart took out a cup with handle trigger of 254.62. I am not endorsing them but the airlines could be making a move with an unsure crude direction as the JETS are on a 4-week win streak following a bullish counterattack candle the week ending 8/9. Defense stocks have been putting on a show and the ITA MONTHLY chart registered a bullish hammer candle in August. The group is firing on all cylinders and look for it to continue to do so if this "value versus growth" story keeps playing out.

Roadblock Weakening? Biotech has been a tough place to be since the 2021 top. The MONTHLY chart below shows the visual pain investors have had to endure following the bearish shooting star candle in February of that year. The ETF declined 13 of the next 17 months hitting a peak near 175 to a low of 62. From there the fund vacillated roughly between the round 70-90 numbers before breaking above 90 this February and that stubborn line of resistance now looks like support as it was firmly retested and held in May and July. We know that the vast majority of instruments that trade through 90 will reach par and beyond and that is where the ETF has been stuck. Notice the 50 MONTH SMA resides there and the XBI was above that line intramonth in February, March, and July this year but all three were unable to CLOSE above it. It has now formed a bull flag and it will be interesting to see where this finishes August on Friday. The daily chart this time around, for the time being, has held up better than the early and late July examples. That's a good start. Let's see where we finish to end the week and August.

All Eyes on Us: The semiconductors will be in full focus as investors have been anxious about the direction the group will navigate following NVDA's earnings announcement Wednesday after the CLOSE. The name still trades 9% off its most recent 52-week highs but has sported a robust run off the very round 90 number on 8/5. It has carved out a handle on a double bottom pattern which can also be interpreted as a bull flag. Will a well-received number already been PRICED into perfection? Below is the chart of the SOXX and NVDA is now the second largest holding at just under 10% of the fund and behind AVGO. Its WEEKLY chart has something for both bulls and bears, and bulls would state the completion of the bullish morning star pattern the week ending 8/16 which jumped more than 9%, and the taut trade that has followed the last couple of weeks. Bears would claim that trade has been very volatile and choppy as of late, classic topping behavior following the 70-point decline from the bearish WEEKLY shooting star candle the week ending 7/12 (notice negative divergence too with lower RSI highs in February and July as PRICE made a higher high).

Industrial Pause? Monday was a risk-off session as energy, staples, and utilities led. Tech took a back seat but the industrials are a group we have been monitoring for their strength for some time. The daily chart below of the XLI trades a bit wide and loose, hallmark bearish traits, but if one looks under the cover there are some individual names that are thriving. CARR, for example, is now above a double bottom trigger of 69.59 taken out on 8/21 and for the time being is ignoring last Thursday's doji candle. MMM which trades in an opposite manner of CARR, very taut, is now above a bull flag pivot of its own which began at the very round par number and the move above 125 suggests a 150 target is plausible into year-end. To keep a balanced approach the airlines just can not seem to get off the ground, pun intended, and the JETS have been week since the MONTHLY bearish evening star completed in August 2023 (notice doji candle in July). Unless it can CLOSE above 19.06 by Friday it will have recorded its fifth straight MONTHLY decline.