Finnies Swimming Upstream: The sector finished last week on a strong note Friday CLOSING up better than 2%, to record the best gain among the major S&P groups. Monday early on they were among the laggards, but ended the day in the middle of the pack. Below is the ratio chart comparing the XLF to the S&P 500, and it shows the overall group is improving. Keep in mind GS had its best day in 10 years last month, and the space is firing on all cylinders with the exception of some of the exchange names. The XLF itself is looking to challenge its 200 day SMA since last November, and resistance there may be waning. Moody's No Longer Moody: Back in 2011 Moodys along with S&P and Fitch downgraded the credit rating of the United States. It created an uproar at the time, but the stocks troubles seem to be in the rear view mirror. A 30% move off the lows of late December have the charts complexion looking much better. The velocity and trajectory of the move are steep, and perhaps need a pause but this recent move above its 200 day SMA and the inverse head and shoulders has the bulls confident. Examples: Below is a chart of the finnie play MSCI, and how it was presented in our 1/24 Financial Report (that is the last one we have done as the sector did not warrant much attention). It is a good lesson to be aware of leading names, and how they are most likely to be the first ones out of the gate once the market catches in legs. Notice the big move, in bullish taut trade, between February '17-August '18. It has since broken above a 166.25 double bottom with handle trigger on 1/31, and now sports a bull flag formation, with a CLOSE above 176 carrying a potential measured move to 196.
Apple Sauced? The Nasdaq did register its 8th straight weekly advance up 2.4%, but it was the weakest of the major 4 most serious investors follow. It was outdone by the Russell 2000 which jumped 4.1% (the Dow rose 3.1% and the S&P 500 by 2.5%). It was held back by some of the mega caps like AAPL which was UNCH for the week, and still trades 27% off most recent all time highs. AMZN has CLOSED right at lows for the weekly range for 3 consecutive weeks and GOOGL recorded a bearish engulfing candle to end Fridays session underneath its 200 day SMA. Bulls should come away impressed that the Nasdaq is holding up well overall, given the odd behavior of the three aforementioned behemoths. Big Blue No Longer Melancholy: IBM has been not just on the dead money list for which it seems an eternity until recently, but had been a perennial loser sine hitting resistance at the very round 200 number earlier this decade. Its disposition has improved remarkably recently and the acquisition of one of the software leaders RHT has certainly helped at a juicy premium on 10/29/18. It still rests 15% off most recent 52 week highs, but a good risk/reward scenario with its 200 day SMA is now in place. Examples: Spinoffs are not a very common thing, but can often leave the parent company better suited to focus on its core business. And the spinoff benefits as it can excel as it can shine on its own out of the shadows of the bigger entity. Some in the tech space have struggled with DXC and CNDT off by 32 and 42% off their most recent highs. Below is the chart of FTV, which was spun off from DHR, and how it appeared in our 2/12 Technology Report. It has advanced 22 of the last 30 sessions, and is now above the ascending triangle and is now honing in on an 88.44 cup base trigger.
Here are my 2 favorite names right now from your 60 plus Canadian names. Gold play higher by 6% YTD and UNCH over last one year period. Dividend yield of 1.3%. Fell less than 3% the last 2 weeks, very acceptable given prior 2 week rose more than a combined 11%. Enter here after Thursdays bullish engulfing candle and successful retest of cup base breakout trigger of 74.27 from 1/28. Add to above 78.02 double bottom with handle trigger in base 14 months long. Entry FNV here. Stop 71. Quick peek at WEEKLY add on chart. Casual dining leader higher by 22% YTD and 11% over last one year period. Dividend yield of 3.1%. Up 1.8% this week heading into Friday after prior 3 weeks all CLOSED very taut within just .48 of each other. 5 week winning streak, weeks ending between 12/28-1/25 rose nearly 21% after bouncing off very round 50 number. Enter here after bull flag breakout above 63. Breakout carries measured move to 71. Entry QSR here. Stop 61.50.
Seasonality Tailwinds: February happens to be one of the toughest months of the year for healthcare, via the XLV. During the last few years only the month of October has a lower percentage of ending higher than where it started. "Sell in May and go away" would have left some gains on the table as May and July have been perfect, albeit a small sample size. Of the major S&P sectors, healthcare on a YTD basis is the worst performer of the 11, yet still higher by more than 5%. These seasonality charts are obviously lagging indicators, meaning the data is in the rear view mirror, and make solid stock selection and let the winners run, and be impatient with losers. The Bollinger Band Squeeze: A week ago we highlighted the XOP, as an ETF that was showing contracting Bollinger Bands. I predicted a move higher for that energy ETF which so far has proved to be wrong. Keep in mind the Bollinger Bands give no clue as to the impending direction of the potential sizable move, just that some larger than normal volatility can be expected. Below is the chart of the IBB, and it is showing a "squeeze" as well. Perhaps it can be explained as simple as buy strength. The XOP still is a laggard which is 36% off most recent 52 week highs, whereas the IBB trades just 11% off its most recent highs. A bullish inverse head and shoulders has taken shape, and make all your decisions based upon price action in names in the group, or the ETF itself. Examples: I happen to be a big fan of the round number theory. Some round figures are more important than others. Par is a big one. The twenty number, as it rids teenager status happens to be another influential one. The round 90 number is too, especially if it has not been hit before. Below is the chart of EXAS and how it appeared in our 1/24 Healthcare Report. It is now well above the bull flag breakout, and now has formed another one at the 90 number. One can add to their position above 90.25. The best breakouts often offer additional entries on the way UP.
The Nasdaq Nestle: The Nasdaq showed some muscle not buckling Monday after a lukewarm start to the week. Depending on your bias you can paint your feeling either way. The bulls will say the 7 week winning streak is evidence of the index getting its feet back under it. Bears could rightly point out the hesitation at the 200 day SMA, and the bearish shooting star weekly candle last week that CLOSED 1.5% off intraweek highs. Both can remain steadfast in their opinions, but the longer the tech heavy index spoons the line, the better the bulls can maintain their confident stance. Event Driven Downside: I will be the first to admit I have little knowledge about the event driven process. Nor do I need to. Price action tells me all I want to know. Below is the chart of QCOM, which was once a leader in the semiconductor space. It has been described now as a law firm as it battles incessant litigation, but just one look at the chart tells a gloomy story. A rare name that has made a new low in January, completely oblivious to the robust rally the last 7 weeks. PRICE does not lie. Examples: Bottoms take time. Like we have always maintained we prefer to buy strength, but after the debacle late last year, many names were unable to sidestep the damage. Below is the chart of BOX and how it appeared in our 1/18 Technology Report. It still trades 21% off most recent 52 week highs, but has repaired its complexion clearly since 2019 ringed in. It blew past the very round 20 number, and has now CLOSED five straight sessions above its 200 day SMA.