Douglas Busch

Commerce Clues: I live just outside NYC and near some of the channels that surround Manhattan, and frequently a large container ships will pass by. Many have the Maersk sign on the side of the vessel, and it is a good thing to see, as global commerce pushes on. Remember stocks are discounting mechanisms, so they will often deliver accurate scenarios as to what may take place 6 months out. The marine transportation space is a small one, but AMKBY has good company with names that are acting well. CMRE is trying to approach the very round 10 number. MATX was rejected at the round 70 figure on Tuesday, but today filled in a gap from just Mondays session. It has demonstrated solid PRICE action POST breakout above a double bottom pivot of 59.74 taken out on 1/6. The chart below of AMKBY is acting very well itself with a clean break above a bull flag formation. Perhaps the overall group is giving investors a sanguine feeling about economic prospects internationally this year.

"Providing" Relief: As sexy biotech names capture most of healthcare investors attention, and deservedly so, the healthcare provider names have been under the radar. The group probably does not mind the focus elsewhere, as the funds PRICE action puts its head down and grinds higher. The ETF itself stormed higher by 6.6% last week in robust trade, and give big time credit for the consolidation the 8 weeks immediately preceding that, which digested the 11.6% romp the week ending 11/6/20. This week so far, albeit short lived, is stubborn in giving back any of those gains. The top holding in UNH has carved out a cup base pivot of 368.05, although it looks a bit reluctant to break above the trigger, but losses the last 3 sessions have been negligible. CVS, the second largest component, took out a cup base trigger of 74.74 on 1/8 and is quickly approaching the round 80 number, which has been tough to climb above dating back to 2017. This space has mojo, and that is often hard to reverse once it gets going.

Key Group: Looking on a very myopic viewpoint, with the sample of 2021 very small so far, technology is lagging somewhat as the XLK is down on the year, albeit fractionally by .3% (energy, materials and financials are by far the top 3, with the XLE up 11%, and the XLB and XLF each up better than 5%). The Nasdaq, S&P 500 and the Dow are each up better than 1% this year, and the Nasdaq did bounce, ever so slightly, but precisely off the very round 13000 number. A big bulk of technology strength emanates from the semiconductors, which rose 1.5%, solid relative strength as the Nasdaq  fell 1.2%. Leaders that added more than 3% Monday included stocks like CREE MTSI and TSM. The latter name looks somewhat vulnerable here as it deals with a bearish engulfing candle from last Friday, at all time highs, which came in the largest daily volume in the last 4 months. AMBA rose more than 6% today, and was last profiled in our 12/18 Technology Note. All the names mentioned in this paragraph need to cool off, and perhaps that would be a well needed rest at their respective 50 day SMAs as PRICE catches up.

Ready To Take The Baton? The software group made a nice stand the last couple sessions this week to eke out a fractional gain of .3%. Volume was exceptional, although it could be a bit misleading. The ETF saw huge volume, on the only declining days this week on Monday and Wednesday, dropping 2 and 2.4% respectively. We enjoy comparing the software group to the semiconductors, and interestingly enough the SMH outshined the IGV this week, rising 5.5%. It was eerily similar to the week ending 12/18/20 that saw the IGV gain 5.6% and the SMG fall 1.1%. On a very short term time frame the SMH did record a bearish counterattack candle Friday at all time highs, after a recent bull flag breakout. That is not the action one wants to see so quickly after a breakout. SNOW, which could become a bellwether in the group, recorded an excellent session on Thursday adding more than 13% on robust trade. The recent IPO, now 30% off highs made exactly one month ago, however CLOSED 25 handles off intraday highs Friday. Stock selection is going to be of upmost importance in 2021.

Trends Persist: We often mention here at ChartSmarter that trends tend to persist, more likely than they are to reverse. The sentiment could be akin to the famous quote, "markets can remain irrational, longer than you can remain solvent". Of course in a nutshell it is laborious and expensive to fight a tape, whichever direction it is leaning. A good example of this could be, the is the ratio chart of the XRT compared to the XLY, and how it appeared in our 12/24 Consumer Note (first paragraph of the report). Fast forward to today, and for the week heading into Friday the XRT advance of 6%, is doubling the 3% gain of the XLY. The strength in the more "equal weight" consumer ETF is demonstrating force, and although I am a believer in a more concentrated portfolio, than a diversified one, the composition of the portfolio is important. AMZN is by far the largest holding near 23% (new addition TSLA should help being the second largest weighting), and it has weighed on the fund going nowhere essentially since September.