Douglas Busch

Amazon Envy: Can the bifurcation of the two most popular retail ETFs be explained by a single stock? The case can logically be made with the XLY currently trading just 1% off most recent 52 week highs. The performance of the XRT is a far cry from that, now lower by 16% from its most recent peak. The starkly different compositions of the funds has a lot to do with it. AMZN carries just a 1.3% weighting in the XRT, while the tech behemoth represents nearly 24% of the XLY. AMZN has run nearly 600 handles from the late December lows, and there could be a very valuable moral to the story. Concentration works better than diversification, when one has the right stocks.  Builders Momentum Building: The ITB just enjoyed its first 4 week winning streak last week, for the first time since late December '17 to early January '18. The ETF has lost ground just 3 times in all of April so far, and the 4/2 session was lower by a whopping 2 pennies. DHI its largest component at more than 14% is in the midst of a 16 month double bottom base. LEN recently broke above a cup with handle base, with the trigger aligning with the very round 50 number. Below is the ratio chart of the ITB compared to the S&P 500, and its strength shows no sign of stopping with interest rate weakness a tail wind. Examples: Name changes rarely go over very well. Often it is an attempt to rid oneself of a poorly run company or reputation. Of course there are exceptions to every rule, and the Alphabet name change has been pretty good (AAXN from TASR not so bad either). Below is the chart of TPR and how it appeared in our 3/5 Consumer Report. The former COH now trades 45% off most recent 52 week highs in a thriving overall market environment. It has lost ground 8 of the last 11 weeks and this week is off to another rocky start down nearly 6% already. This stock is now below its December lows and is challenging the March lows here too.

Canary Candles: The Nasdaq is flirting with all times highs once again, and there is the tendency to think a double top is being formed. It pays to be a skeptic as investors should always try to manage risk and take care of the downside. Other than that savvy market participants let their winners run. I happen to be a big fan of the candlesticks, although there are always secondary to PRICE action by itself. But they can give good clues as to what can potentially happen. This week the Nasdaq CLOSED less than 2 handles under the very round 8000 number. Monday, Wednesday and Friday recorded doji candles (Thursday a bearish engulfing) which often signal a fatigue of the underlying trend. Will they end up being yellow birds in a coal mine? Mister Softee: The last couple of weeks we have been stressing the importance of strength in AAPL to the overall markets being the Nasdaq's largest component. It has acted very nicely up better than 2.5% this week. This week lets see another "old tech" influencer in MSFT. These two names have leapfrogged each other recently for the worlds most valuable company. The behemoth will report earnings next Thursday after the close (last report fell 1.8% on 1/31, after the prior FOUR all rose by 5.8, 1.8, 1.6 and 2.4% on 10/25, 7/20, 4/27 and 1/31/18). On its WEEKLY chart it has acted well POST breakout from a nearly 5 month cup base pivot of 116.28 taken out the week ending 3/2. Examples: Below is the chart of HPE and how it appeared in our 4/8 Technology Report. This name is higher now 15 of the last 17 weeks, and is acting much better than HPQ which spun the name off in November '15 (HPQ is now 24% off most recent 52 week highs and has made lower highs and lower lows since the beginning of October last year as the Nasdaq has been doing just the opposite). HPE has lost ground just 3 sessions in all of April thus far, and is now 2.7% above a double bottom breakout pivot of 16.22 taken out on 4/10. The best breakouts tend to work out right away and this one is showing good action POST breakout.

Tens In Focus: One of the oldest intermarket relationships is the way interest rates and financial stocks correlate (yields and stock prices too, but yields have been in a downtrend as markets rise powerfully). The banks could get a lift if this nascent strength in the ten year continues. Below is the chart, and it displays lower highs and lower lows, and one has to wonder if the new found vigor is just a dead cat bounce. It is now above a bearish descending triangle, and moves that break in the opposite fashion as they normally do, can lead to robust moves. On a weekly basis the ten year is looking for back to back weekly gains, for just the SECOND time since last September, to demonstrate just how soft the instrument has been. Round Number Roadblock? We have spoken about what AAPL means to technology and how it is battling with the very round 200 number, and that battle continues here. Not as important as it once was to the banking space, GS is currently witnessing rejection at the same number. It last approached 200 after its best day in 10 years, after its well received 1/16 earnings reaction. It was unable to make much leeway above the level, until recently with 9 of the last 10 sessions CLOSING above 200 (the lone exception was 4/15 its latest earnings report and finished just 9 pennies below).  Examples: The asset manager space has been a mixed bag, but when investors look to deploy their capital they should look where the creme rises to the top. Below is a good example of that with the best of breed FII and how it appeared in our 3/15 Financial Report (that was the last time we profiled the group as it was an overall laggard). It is also a good example of how the best stocks offer add on buy points, with FII acting well POST breakout from a 27.28 cup base pivot taken out on 2/6. Round number theory came into play with the bull flag trigger forming right at the 30 number. Since the breakout on it has advanced 10%. Truth be told or stop was too tight, but it did find support at an upward sloping 50 day SMA on 3/25.