Douglas Busch

There Is No Place Like Home: With money pouring into bonds, as market participants around the world are starving for yield and parking their capital where it is treated best in the world, it is keeping bond yields depressed to say the least. This is certainly keeping a bid under the homebuilding group. The ITB is on a 3 week winning streak, and higher 6 of the last 7. This week it rose .5%, besting the S&P 500 which fell by 1.25%. DHI and LEN, the 2 largest holdings in the ITB that make up more than one quarter of the ETF, are having banner 2020's up 17 and 27% YTD respectively. The periphery plays are being supported by the underlying groups strength, with perhaps the best example being Home Depot. It rose fractionally this week by .1%, but now trades well above a cup base pivot of 239.41 taken out on 2/10. Even the toxic name Lumber Liquidators is on a 7 session winning streak jumping more than 32% this week (and that was with it CLOSING 12% off intraweek highs), not a typo.

Recite The Alphabet: As the Nasdaq approaches the very round 10000 figure, currently about 2.5% away, one has to keep in mind just how robust this run has been. In 2020 thus far it has recorded back to back losing sessions, just once on in 1/24-27 which lost nearly a combined 3%. The argument that there is no where else to allocate capital too, and that liquidity controls markets still resonates clearly. Among the "big five" tech names, GOOGL seems to be holding up the best as of late. We did mention we thought FB was a short on an upside earnings gap fill from the 1/29 session, and that looks relevant thus far. Give AAPL and AMZN credit for just trading 2% off most recent all time highs, and MSFT could be the next one to soften in my humble opinion. The chart of GOOGL below is my favorite of the mega cap bunch. Each of the last 4 weeks seems to be digesting the 14 of 15 week winning streak the weeks ending between 10/11/19-1/17. Do not be surprised if this march continues higher in firm fashion, IF a breakout occurs.

Biotech Boogie: The group via the XBI seems to be gathering some steam as it demonstrates it is not afraid near the very round par number. It is above the double bottom pivot of 97.74, albeit fractionally so, and is higher by more than 1% this week, after rising 2% the week before, and 7% the week prior to that. It is gathering courage as it nears the round 100 number which has been pesky resistance. There have been some interesting developments in the space, with Warren Buffett making a purchase of BIIB. The chart is showing nice momentum, but it seems like an odd play for him, as I remember him a few years back saying he only invests in things he understands inside and out. It has been outperforming AMGN, which has been the king of the "big four" (CELG was bought out and GILD has been dead money for a few years). Bears will probably be proclaiming the Oracle's venture into the space is a sign of a top. As always ignore the chatter, and focus on PRICE action.

Amazon Effect: With the performance of AMZN recently, and give it credit today for recording a bullish engulfing candle AFTER such a big run higher, one would have thought the relationship between the discretionary and staples fund would be a bit more pronounced. However looking on the ratio chart below the XLY has broken above a long digestion period, but only fractionally so. That breakout may go on to powerfully advance, but given that Amazon has jumped 300 handles in the last 13 sessions, one has to give credit to the staples group hanging around. It seems market participants are buying the more speculative stocks in the consumer space, and also purchasing the more conservative names as "hedges" against them. Companies like KO PEP COST and MDLZ are acting very well. On a YTD basis the XLY is doubling the XLP's advance up 5%, but looking under the hood of both funds has some very interesting opportunities. 

A Good Fight: Healthy competition could be a good thing. Dating back to my tennis days I remember improving a lot when I was pushed by a better player. Perhaps that analogy is what is going on within the two heavyweight sub sectors within the most important technology group. And that is a win win for the markets here, as both the IGV and SMH try and vie for leadership. The SMH did jump 5% this week, on the back of some solid earnings reports. NVDA enjoyed a huge advance of 15% this week (its first double digit weekly advance in 11 months) and is now just below a 16 month WEEKLY cup base. AMAT was able to break above a long WEEKLY cup base this week rising more than 8%. For the second week in a row the SMH outshined the IGV, and ratio chart here displays the tug of war. As always search for leaders within these funds, in software SVMK could be one to watch going forward. This was the first Friday in the last 4 the Nasdaq did not reverse hard upon its lows. Perhaps Tuesday they will do just that to do what they do best and confound the most. If weakness appears have your leader watchlist ready to nibble.