Douglas Busch

Goliath Energized:  Amazon and Tesla will always dominate the discretionary conversation as they make up the lion share of the XLY. Between the two of these heavyweights, they make up almost 40% of the ETF. As they go so does the fund. But is the XRT looking to turn the table on the XLY? The daily chart of the XRT below is saying to the XLY to hold on as it may be waking up, not long after failing to break above a bull flag formation. It broke forcefully above a double-bottom trigger Thursday and it is showing that the consumer group has solid breadth and seeing some rotation into it. On a YTD basis they are both up in the 3-4% neighborhood, but the smaller (David) provides a larger dividend yield of 1.5%, compared to the XLY at .7%. The WEEKLY timeframe looks attractive as well as its recent pullback successfully retested a prior bullish ascending triangle breakout. Its MONTHLY chart looks to keep the one month up and one down since last March intact as a bullish hammer takes hold with just Friday left in January. Par feels like it will have a magnetic pull into the second half of 2025 where it last touched with the bearish shooting star candle in November 2021. 

"Electric" Earnings: As a bevy of big earnings announcements were reported this afternoon, some of rising on "weak" numbers. This is classic bull market behavior, but I do not think the recent volatility we have experienced is going anywhere. The daily chart below of TSLA showed a 100 handle decline in just the last 6 weeks and Wednesday CLOSED right at the rising 50 day SMA. The initial reaction was right down toward 365, which I still feel will be touched again before the rally resumes. The WEEKLY chart still has to deal with the bearish shooting star and doji candle the weeks ending 12/20-27, but those are at much higher PRICES. This could be reminiscent of the prior WEEKLY doji candle recorded the week ending 7/12/24, which started a 5 week losing streak. We have spoken about this before but Friday marks the end of January and bulls want to see a CLOSE above the 414.60 cup base pivot in a pattern that began with the MONTHLY doji candle in November 2021. Notice December was well above it but did not manage to CLOSE above and if one has a sanguine view on the name it would not look good with 2 consecutive MONTHLY CLOSES below the 414.60 trigger. It has Thursday and Friday to make sure it does. Buckle your seat belts. Will this one has gas to pull off the breakout?

Toppy Behavior: I will state once again that I feel 2025 will be the year of stock picking, against the individual indexes. In this light, some stocks will advance despite a potential soft benchmark. Sure a rising tide lifts all boats, and vice versa, but names that exhibit relative strength should be admired. That being said the Nasdaq continues to trade in a very volatile fashion which is indicative of toppy behavior. My mind will be changed when the very round 20000 number is decisively taken out to the upside. Until then call me skeptical. The rest of this week will see the tech heavyweights REPORT earnings and the Fed tomorrow morning could announce a cut which would give a bid to long-duration assets. My opinion, not advice, is the gap from late last week, which completed the bearish island reversal (after the gap up last Wednesday) will be filled then more softness to follow. Of course, I could be very wrong and PRICE will let me know. 

Budding Biotechs? The biotech space via the XBI has put up a nice showing as of late. Perhaps investors are anticipating some nice M&A activity, or some tax selling pressure relief, falling interest rates, etc. The daily chart below shows the illustration with a break above the bullish falling wedge pivot of 91 carrying a measured move to 105 (bullish inverted hammer candle Monday). Now it must hold that trigger or all bets are off as we know the best breakouts tend to work right away and those that struggle and falter fast are big warning signs. The MONTHLY chart will produce a new candle Friday and this week is chock full of earnings and the Fed meeting Wednesday. The break ABOVE the bearish head and shoulders pattern is hanging on by a thread, but the 50 MONTH SMA has been a formidable blockade. Remember 2025 will be the year of the stockpicker and if one does their homework will find plenty of names shining in the overcast market shadow. Below is the daily chart of RPRX which was oblivious to Mondays PRICE action and broke above a bull flag pivot of 31, that carries a measured move to 36. Notice how the 12/20 bullish morning star gave the green light rising 2.6% that session is monster volume.