Douglas Busch

Benefit of the Doubt: Although I am not an index trader, I admit I have been hesitant about being sanguine regarding the Nasdaq's prospects. I still am a bit but my tune is changing quickly. My big green light will be a decisive CLOSE above the very round 20000 figure. Notice it is still trapped between the 19000 and 20000 range basically since November. Contrary to many technical beliefs that the more times a line is touched the greater the support or resistance becomes, I think the opposite. The Nasdaq in my opinion is becoming more familiar with this PRICE territory and therefore more comfortable. Notice the Bollinger Bands are tightening, much like they did just before the election, and that is a good indication that a big move is imminent (the direction is ambiguous). Comforting the bears belief that 20000 is a brick wall is the numerous dubious candlesticks there including a harami on 12/17, a doji on 1/6, and a dark cloud cover on 1/24. It has not been able to record 3 straight daily CLOSES above 20000, but this week has the first WEEKLY CLOSE above 20000 after 5 prior weeks were above it intraweek dating back to last December. We are now past earnings season for most of the notable tech names and survived, another notch the bulls can put in their hat. Paint me bullish. The onus is on the bears here and next week feels like it will determine the near-term trend for the first quarter at least. The long weekend will not provide much comfort for the uneasy grizzlies.

When the Facts Change..... I do to sir, what do you do? My belief has been a bearish slant with technology lagging in 2025 (it is now the second worst major S&P sector on a YTD basis) but the group has to be given credit for shrugging off some poor mega-cap moves. Names like AMD which is now more than 50% off its most recent 52-week highs (filled in gap from 2/5 Thursday and CLOSED well off session highs) without the courtesy of a 2:1 split (a weak stab at humor). MSFT is UNCH over the last year period, GOOGL slipped 7% after an ill-received earnings reaction and perhaps it will fill in its gap near 176 from 12/9. TSLA was more than one-third off its annual peak but recorded a bullish harami on Wednesday and Thursday followed through by 6% as a potential double bottom base takes shape. Despite all this, the Nasdaq is now just 1% off its all-time highs. Call me still skeptical with the index doubling off the start of 2023 lows, but the market could care less about my opinion. The WEEKLY chart here shows the back-to-back doji candles to end 2022 and start 2023 at the very round 10000 number to the present PRICE of 20000. Perhaps this is just a bull flag with a measured move to 23000 on the horizon. The daily chart below shows a push above the diamond pattern, and for me to give a bearish outlook does not make sense anymore even with many individual stocks blowing up on earnings. This will be the year of the stock picker.

Silver Lining: Silver was a solid actor Wednesday, up better than 1% as its precious metal rival gold was UNCH, an interesting divergence. It normally has a strong correlation with another commodity in copper, and that has been the case since the start of 2025 as seen here. An alternate view of looking at the daily chart of silver is the bull flag that began at the round 30 number and a break above 33 would carry a measured move to 36 which would obviously clear the double bottom with handle trigger of 33.32 seen below. On its WEEKLY chart, it recorded a doji candle, just the fourth one in the last 2 years, two of which were inconsequential, and the end of 2022 example saw a quick thrust lower before the metal bounced at the very round 20 number. The MONTHLY chart shows how important the round 30 number is, as it is the level where a long cup base broke out from last May (notice how the number was a hindrance in August 2020 and February 2021). That wall of former resistance has now likely turned into support and the measured move is to 43.

Heavyweight Bifurcation: The two giants inside the XLY dominate the vast majority of attention. TSLA has fallen dramatically since 12/18 when it recorded a bearish hanging man candle and is now 33% off the highs made that session, and has now fallen to "just" the 10th most valuable company on the planet and is in jeopardy of losing its trillion-dollar status. The daily chart below of AMZN has put its head down and ignored the noise. It is trading in a much tauter overall way, hallmark bullish trait, than some of its mega-cap tech heavyweights like MSFT, GOOGL, and NVDA. As shareholders look forward seasonality in March is at a perfect 4 for 4 in CLOSING higher than where it started since 2021 with an average gain of better than 4%. With TSLA in freefall, AMZN is going to have to do much of the heavy lifting in the XLY. There is only so much the other components can do, even with the MCD and HD at almost 12% of the fund. The latter is trying to start a handle on a cup base and the potential pivot would be 426.29. Notice how it is outshining rival LOW on the ratio chart, as HD is 5% off its most recent 52-week highs while LOW is double that off 10% from its own annual peak.

Software Loafer: Software overall has taken the baton from the semis as seen here on the ratio chart comparing the IGV to the SMH. Notice how it retested the break above a cup base from early November during the start of 2025, and like most leading instruments do it has now formed an add-on buy point above a bull flag pattern. Below is the daily chart of the second largest holding in the IGV in MSFT and one can see its struggles. It is now 12% off its most recent 52-week highs and has now formed a bear flag formation after its second straight 6% earnings-related decline on 1/30 (after its Halloween debacle). Its WEEKLY chart shows the frailty is nothing new as it has been underperforming its software peers since last summer. I believe it needs to shake the trees for some soft shareholders and a possible double-bottom base may start which would retest a former bull flag breakout from the first week of 2024. Notice it is potentially going to record its third consecutive WEEKLY CLOSE below its 50 WEEK SMA for the first time in almost 2 years. Contrasting it too perhaps the most important semi-play NVDA one can see how both are trading wide and loose in an erratic fashion, hallmark bearish traits.