Douglas Busch

Tech Back in Vogue: Salty veteran traders insist that no rally can persist without the financials participating, but it is always good to see technology thriving. There is a feeling of "risk on" again and could there be more gas in the tank? I believe so as more breakouts are being recorded, and the daily chart of the Nasdaq below shows a strong breakout and follow-through after Monday's bullish hammer Tuesday up another 3%. It has cleared the 200-day SMA and here it could be considered a break above a bullish inverse head and shoulders formation trigger of 18000 (and notice how the benchmark has ignored the doji candle circled from 5/8). The depth of the pattern registered a bullish counterattack candle at the very round 15000 figure on 4/7 and look for this to achieve a measured move to 21000 sometime in early Q2. Nothing goes up in a straight line and bulls should look for some consolidation in this area but tech via, the XLK just crossed into the black for 2025 and wants more. If this rare WEEKLY gap holds by Friday's CLOSE it would be the first in more than 2.5 years and it is now back above the 200-WEEK SMA too.

Material World: The materials space via the XLB recorded a doji candle last week ending a 4-week win streak which investors must be aware of, but the WEEKLY chart below shows this on a likely path to the very round 90 number in a double bottom base and possibly higher into the second half of 2025. As many feel this sector is dominated by gold, the top 2 holdings in LIN and SHW make up one-quarter of the ETF. SHW looks good as long as it remains above the 345 area and this could be in the early stages of carving out the right clavicle in a bullish inverse head and shoulders pattern. ECL, the fourth largest component, has now put a handle on its double bottom base and enter with a buy stop above a 257.38 trigger. Other interesting developments in the top 10 names include FCX starting to outperform SCCO advancing 21% over the last one-month period, with SCCO adding "just" 10%. Keep an eye on MLM which has reclaimed its 200-day SMA in May and is now bull flagging above the secular line. A decisive move above 550 could see a measured move to 610.

Industrial Revolution: One major S&P sector has been making its presence felt over the last one quarter. The industrials have quietly been climbing the leaderboard and this is a group one wants to take a very close look at if this rally is just getting started. Over the last one week the XLI is the best performer up nearly 3%. Over the last month, it is the second best of 11 sandwiched between the surging technology and discretionary spaces, and during the last 3 months, it is the 3rd best behaved. Solid consistency fueled by defense, aerospace, and waste services. Perhaps not the most sexy, and within the most economically sensitive areas are fragile including railroads, delivery services, trucking, and airlines. Ideally, bulls would like to see the IYT play some serious catch up to the XLI on a PRICE comparison chart here. I still get a chuckle out of the top holdings list with UBER being the second largest and it is now well above the 77.68 double bottom breakout pivot from 4/24 and any pullback toward 80 should be bought aggressively (even rival LYFT is up after market handsomely). Remember the days of TSLA up, UBER down correlation? Me neither. Rounding out the entire group is the bullish action of the XLI below. This move could just be getting started. 

Builder Breakdown? Within the diverse consumer discretionary space, investors like to keep a close eye on the homebuilding sector. Of course, homeowners overall feel better about themselves the more valuable their properties are, but looking at the individual names the group feels heavy. That could change very quickly but the daily chart of the XHB below shows very little to like since the election last year. The ETF is down 25% from those highs and its WEEKLY chart shows how it undercut the very round par number, with consecutive doji candles, like a hot knife through butter the weeks ending 2/28 and 3/7. This will be influenced by the 10-year yield which did complete a bullish morning star pattern on 5/1, reclaiming its 200-day SMA in the process. Looking over the top 10 holdings is always an interesting endeavor with just one pure-play homebuilder within with PHM at number 9 (the ITB is a much better representation but the chart looks identical to the XHB). Imagine what the chart would look like if top-holding TT, which is on an 11-session win streak was not current. Notice how it has traded between the very round 300 and 400 numbers over the last month and it has acted strong since the completion of the bullish island reversal with the gap up on 4/30 (after the gap down on 1/27). 

International Internet Slugfest: Scouring the planet and comparing mega-cap heavyweight internet players shows some interesting divergences. As a whole one could look at a ratio chart of our domestic names via the FDN and lay it over the KWEB and one would see a very soft start to 2025, but the FDN is carving out a bullish inverse head and shoulders pattern. If one wanted to look at domestic versus the southern hemisphere, with individual names, they would highlight MELI against AMZN which is lower after hours on a soft earnings reaction. The ratio chart here is clearly in favor of "the AMZN of South America" in MELI since last December, and if the after-hours action is any indication it will take another leg lower. While MELI came within a sniff of 52-week highs Thursday before a small reversal, AMZN is still 23% off its own annual peak made in early February. MELI is yet another example of the growing number of emerging breakouts as it took out a double bottom pivot of 2202.10 on 4/25 but Thursday did record a small bearish dark cloud cover candle into the filled-in black candle from 2/21. Let's see how AMZN CLOSES Friday to end the week. I think as long as this remains above 180 this will take out the add-on double bottom later in the second half of 2025.