Douglas Busch

Rotten Apple:  With the recent softness in AAPL and strength in NVDA, the fruit has surrendered itself as the world's largest company by market cap, and it has MSFT breathing down its neck (these 3 stocks are the only ones with market caps beyond $3T). NVDA is now trading into the ugly bearish engulfing candle from 1/7 that cratered more than 7% (trade has been a bit wide and loose, hallmark bearish traits). As we have been doing this week taking a look at the top holding in a major S&P sector ETF, today we analyze AAPL for the XLK. The WEEKLY chart below of AAPL shows how it has fallen precipitously from the tree. The bears will state the market is on fragile ground because of Apple's softness, but the bulls will correctly declare tech is holding up despite it. Its daily chart shows a bullish hammer candle Monday after nearly touching its 200-day SMA, which should provide a little cushion. It is now quickly 15% off its peak made less than one month ago, and notice on the ratio chart against the XLK it has in 2025 already given up its entire contribution from the election into year-end 2024.

We Bring Good Things to Life: I am old enough to remember that slogan when it was a conglomerate. It has since spunoff some major players to unlock shareholder value with GEV a leader in the sustainable energy space, and GEHC which is now sporting a bull flag, which did record a bearish counterattack candle Friday. As both of these names look attractive so does the largest holding in the XLI and below is the daily chart of GE. Last week the stock scored a robust advance of 6.5% in well above average WEEKLY volume. Just 5 weeks ago it recorded a bullish WEEKLY hammer candle off the 50 WEEK SMA, its first touch in more than 2 years. On RSI it is now touching the bullish zone threshold 50 number and the last 2 times it did that in late 2022 and 2023 PRICE responded in a vigorous fashion. To show its consistency between the start of 2023 and May 2024 it never registered a 3-week losing streak (and fell in back-to-back weeks just 6 times). Watch for a WEEKLY bullish MACD crossover (although there was a false whipsaw last October). The MONTHLY chart of the largest holding in the XLI recently put up a bullish golden cross, is bull flagging, and has room to a measured move to 230 based on the long cup base breakout above a 135.17 pivot (from July 2016 that recorded a bearish gravestone doji candle). 

Banks Brimming:  Banks, although not the most exciting space, have continued to make nice progress. The daily chart below of the XLF shows nice action since the bullish piercing line candle on Monday. The fund is now right at a 49.27 double bottom breakout pivot and may take a temporary pause at the very round 50 figure. Like most other sectors it traded back into the election gap from early last November and looks ready to head higher once again. The WEEKLY chart, heading into Friday is showing a bullish engulfing candle up 5%, which would be its third-best gain since the week ending 11/3/23 jumped 7%. The MONTHLY chart, shows a break above a cup base pivot that traded between the round 30-40 number from the start of 2022 to the beginning of 2024. Of course, the big names started REPORTING and JPM is moving above its cup base pivot of 253.10, from the intraday high on 11/20's bearish shooting star candle (Thursday's candle was not too convincing with a spinning top). Top-holding BRKB is moving its way back above its 50-day SMA and that could go a long way to giving the overall group power to venture upward. It has been a drag on the fund as seen on the ratio chart against the XLF, but Tuesday completed a bullish morning star and is a good level to play against on the long side (notice the short-term tops were called with shooting star candles on 9/3 and 11/27).

Home Sweet Home: The homebuilders have sprouted higher this week, and the question is if this is a dead cat bounce or the start of something inspiring. Of course, no one knows but the daily chart of the XHB showed zero follow-through below a bear flag breakdown, and then consecutive bullish piercing line candles added to the bullish theme. Not seen on the chart below was the gap fill from the 7/10 session too. What is most impressive to me is that as it has advanced 3 of the last 4 days all of them CLOSED right at highs for the day and volume has been firm. I always like to mention there is no reason to catch a falling knife until a technical catalyst presents itself and that is precisely what has taken place. Notice on the WEEKLY chart it is trying to put an end to a 6-week losing streak with a bullish engulfing candle heading into Wednesday, with CPI which will certainly have a big move. Interestingly the 10-year yield, which has a dramatic impact on the ETF, recorded a doji candle Tuesday, which was also a bearish harami cross. As often is the case the technicals will sniff out the situation before anything else as the last 4 days for the XHB may have predicted the ominous candle on the TNX. I think this may have room back to the bull flag breakout near 4.6%.

Nvidia Still Extended? Is the king of semiconductors, NVDA, and briefly the world's largest company by market cap with the intraday high of 153 on 1/7 still ahead of itself? The MONTHLY chart below shows just how extended the stock can be with an RSI still near a white-hot 80 level. There have been a succession of tiring candles as well with a doji and several spinning top candles since mid-2024 which often indicate exhaustion. Bulls may state that bears have been given ample time to drag this down and they have been unable to. Is a visit to the 50 MONTH SMA in store sometime perhaps later in 2025? That would be a dreadful move for the stock, and would certainly affect the overall market. Of course, as long as the line continues to slope higher PRICE will catch up so I am not declaring a move toward 50 where it currently sits, but notice the stock does tend to make contact with the line every 3-4 years, doing so back in 2019 and 2022. Notice the leadership the stock displayed on RSI, regularly trading above the overbought 70 RSI number the last decade, with two exceptions, and an undercut below that level saw PRICE descend to the 50 MONTH SMA. Deja vu?