"Post-Its" Bifurcation: Two industrial behemoths in the past that were frequently compared to each other, which are still in the Dow Jones "Industrial" Average (in quotes because it is really not an industrial average anymore with just 4 left presently at my count), are HON and MMM. As seen on the ratio chart below there is a clear leader. Technicians do not look for the reasons behind the PRICE divergences, it could be management or any other cause, but the proof is in the PRICE pudding. At the moment HON trades just 3% off most recent 52-week highs and acting well POST breakout from a cup base while MMM languishes 31% from its peak made the first week of 2022. On a YTD basis, MMM is off 30% while HON is up 3%. Capital should be placed where it is treated best and one can make the argument for a pairs trade long HON short MMM. If one wanted to keep it simple take a shot on a long HON toward the 205 area.
"In the end, only three things matter: how much you loved, how gently you lived, and how gracefully you let go of the things not meant for you." Jack Kornfield Nasdaq Charm: The above quote is relevant to the markets here in the last third of the sentence. Of course, there is no guarantee that the bear market action is over, but one has to be open-minded that their negative bias may be incorrect going forward. Below is the MONTHLY chart of the Nasdaq and with November ending this past Thursday and providing a MONTHLY candle, it suggests that a new "growth" phase could be upon us. At least good risk/reward exists with the CLOSE back above its upward-sloping 50-day SMA which has signaled the end of drawdowns three times prior dating back to 2016 after bullish MONTHLY candles were recorded. The range top to bottom for the Nasdaq in November was 12% and it CLOSED less than 25 handles from the highs. The bearish gravestone doji recorded in November 2021 warranted caution and could this November's hammer propose risk is back on? Time will tell.
Diamond In The Rough: Apple commands clout in the markets being the largest company in the world via market cap. What happens with the stock has dramatic effects on domestic benchmarks, and surely it is among many of the top 10 mutual and hedge fund holdings globally. Since a spirited run from 130-176 in July-August, the name has been floundering and has given back the vast majority of the move. It now has the look of a bearish descending triangle but a break ABOVE the 150 level could see a powerful move as from FALSE moves come fast and furious ones in the OPPOSITE direction. The chart below shows that would also be a break above a diamond pattern. Is the fact that AAPL is lagging behind technology an ominous sign or is the market's performance without its participation a bullish tell? Of course, we will not know that until hindsight but with the Nasdaq up 8% over the last month period with AAPL higher by just 2%, if Apple does begin to cooperate could that ignite a robust technology run? The 150 level will be a key to watch.
Dog No More? The software names have been among some of the wobbliest in the tech sector. With one month left in 2022, many are looking to put the year in the rearview mirror. Will the space be hit with year-end tax selling and see further declines? Stocks down more than 70% YTD, not a typo, include TWLO ASAN and COIN. Other larger cap names that were pulled down with the overall weight are ADBE CRWD TEAM DOCU WDAY and INTU. Looking at the MONTHLY chart below of DDOG, could this name be looked at as a turnaround candidate? Of course, only PRICE will let us know but the round 70 level has been influential in the past and will likely continue to do so. Last month it traded with an intramonth low of 66.45 but CLOSED just below 76. In May 2021 it touched the number and went on to advance 7 consecutive months. If it can stay north of 70 perhaps 2023 will look kindly on this name. Its daily chart on Wednesday recorded a bullish engulfing candle, which also filled in a gap from the 11/9 session. The bulls song theme for 2023 could be "Who Let The Dogs Out." If the level fails to hold look out below.
Rooting For The Underdog: Often we like to compare the XRT to the XLY to judge sentiment or define somewhat the "risk on-off" relationship regarding the consumer sector. From the ratio chart below it can easily be determined that the names outside of TSLA and AMZN are acting better than the top-heavy XLY. It is now nearing 3 months of outperformance and expect that relationship to continue as we know trends are much more likely to persist than reverse themselves. As AMZN has gained on a WEEKLY basis just 4 times since mid-August and is 46% from most recent 52-week highs, TSLA is 53% off its annual peak made in January at the very round 400 number (although it did record a WEEKLY bullish hammer off its rising 200 day SMA last week). They say do not judge a book by its cover and if you look under the hood perhaps the consumer group is acting better than what the XLY is conveying. RCL has nearly doubled in PRICE from 30-60 since July as a leader in the cruise space, HOG is also bull flagging, BKE in specialty retail is building the right side of a WEEKLY cup base, WING jumped 100 handles from late May. Do your homework and feed capital to the leaders, and starve the laggards.