The Drip Lower Getting Louder? The industrials, earlier in '19, had a firm hold on the top of the leaderboard with the 11 major S&P sectors. It has slowly descended and has now been leapfrogged by energy, and is now the third best group with real estate hot on its tail. We will soon see if the ratio chart below comparing the XLI to the S&P 500 can undergo a soft landing, with the steep recent decline. MMM the second largest component, has not been garnering much attention with BA and FDX smothering it, but if this name can CLOSE above the round 210 number (been above intraday 6 times since 12/1/18 but recorded just one CLOSE above 210) it could give the ETF a boost. Transport Trickledown: One would have to be living under a rock to not be aware of the softness in the transports lately. Sure FDX was the big news today, but airlines have had their share of disappointment. The rails have been holding up in a lukewarm fashion with names like CSX and UNP off by just 4 and 6% from their most recent 52 week highs. Their counterparts however are a whole different story. Rail part makers like RAIL, GBX and WAB are now 65, 43 and 37% off their most recent ascents. The reason for the shortcoming is unknown, but the PRICE action is speaking volumes. As always pay attention. Examples: There has not been much to like in the industrial arena as of late, but if one searches they could find some relative strength. Below is the chart of FSS and how it appeared in our 3/7 Industrial Report. The stock is higher 4 of the last 5 weeks, with 3 of the 4 rising by more than 5, 6 and 7%. This week is higher by 1.5% and this is a good showing following the prior weeks gain of 5%. It is holding nicely above the double bottom breakout trigger of 24.64 on its WEEKLY chart.
The big news after the bell delivered courtesy of FDX, pun intended, should not have been such a big surprise. This certainly will be a one two body blow the industrial group will have to endure with the BA debacle last week. FDX is down 10 handles overnight, and barring any big turnaround tomorrow it will record its FIFTH consecutive negative reaction. Drops of 12.2, 5.5, 2.7 and 1.2% were witnessed on 12/19, 9/18, 6/20 and 3/1/18. PRICE action has been reflecting its weakness and below is how we looked at a ratio chart between UPS and FDX in our 2/26 Industrial Report. Losing RedHeaded Stepchild Status: Contrasting big names on ratio charts, is a good way to illustrate which stocks the market is deploying capital too. Today we look at the relationship between UPS and FDX. The former has been a notable out performer compared to FDX. UPS is peeking its head above its 200 day SMA here, while FDX still lingers 40 handles below the long term secular line. Many like to play the mean reversion game, but we prefer to buy strength and sell weakness. UPS now sits 11% off most recent 52 week highs, while FDX trades 32% off its own. The dividend yield is also more attractive with UPS at 3.4%, and FDX at 1.4%. This is how we profiled the name in our 2/8 Industrial Report. It came very close to being stopped out, but the 185.75 stop was never hit on a CLOSING basis. The break below the bearish rising wedge has a measured move to 158. Transport giant higher by 12% YTD, but lower by 28% over last one year period. Dividend yield of 1.4%. Up 5 of last 6 weeks but little progress into big volume 3 week losing streak that fell 35% weeks ending between 12/7-21/18. Poor relative strength still 32% off most recent 52 week highs. Peer UPS is just 14% off its own most recent 52 week highs. Short here after recent gap fill from 12/18 session and downward sloping 50 day SMA resistance. Entry FDX here. Buy stop 185.75. If you liked what you read why not take a 2 week FREE trial at www.chartsmarter.com.
Consumer Confidence: Consumer confidence rebounded in March after a three consecutive declines, almost certainly occurring with the ongoing rebound in the equity market. Price always has a good gauge on sentiment. As it applies to the consumer discretionary sector, AMZN the 800lb gorilla in the room, has plenty of sway as it comprises nearly one quarter of the XLY. Therefore it makes a lot of sense to look at its chart for possible direction of the space going forward. Below is the daily chart and notice the tight trade between the 50 and 200 day SMAs (the Bollinger Bands "squeezed" this month too). It has the beach ball held underwater effect, and the ball has been released and the path to least resistance looks primed to advance. The Spinoff That Got Away: Break ups are often a source of frustration, some more than others. The spinoff 12 years ago, divesting all of its shares, of Chipotle from McDonald's has left a bitter taste. The ratio chart below shows dominance in the strength of CMG compared to MCD. We are talking growth versus value here, as MCD sits just 4% off most recent all time highs, not shabby at all. But when one looks at the YTD gains of the two, CMG is higher by 54% and MCD by just 3%. The round numbers came in handle as they often do as CMG burst above a 501.98 double bottom pivot on 1/10, and then motored past a bull flag at the 600 figure. Examples: The automobile names have been a tricky play as names like F have been dead money at best for years, and that stock still bleeds 29% off most recent 52 week highs. GM has had recent issues with the round 40 number, but its acting somewhat better than F, off 15% from its most recent ascent. Below is the chart of RACE and how it was highlighted in our 2/27 Consumer Report. It continues to ADD to its 14.3% weekly gain ending 2/1, and is racing toward an add on weekly double bottom pivot of 142.62 in a base nine months long, pun intended.
From First To Worst: Healthcare is still the worst behaved group thus far in 2019, after being the best actor in 2018. The XLV is still higher by more than 6% YTD, a respectable sum, but lagging groups like the staples and utilities puts into perspective the weak showing. The ETF is making lower highs and lows since the beginning of October last year, and the potential double bottom pattern that was developing is looking worse by the day. Volume trends remain poor, with one having to go back to December of '17 to witness the last week of accumulation. By contrast weeks ending 10/12/18, 10/26/18, 12/21/18 and 3/8 all slumped by 3.4, 4.5, 7.1 and 3.8% in heavy volume. The cold the XLV is experiencing needs to be addressed or it could morph into something more. David Prevailing Versus Goliath In Biotech: The smaller, more nimble biotech plays have been faring better this year than their larger cap plays. This can be seen in the YTD performance comparing the XBI to the IBB. So far in 2019 the former is higher by 28%, and the IBB stuffed fat with the former big 4 names of GILD AMGN BIIB and CELG has gained 18%. Each of the four largest components in the IBB have a 7% weighting, while the more equitable XBI none having more than a 2% representation. The ratio chart below shows the XBI compared to the S&P 500, and it is signaling higher prices head. Examples: The longer the base the greater the space is what the adage proclaims. If that is the case then the chart below of VCYT and how it was profiled in our 3/8 Healthcare Report could be ready for a special run. Earlier this year it broke to all time highs above a 5 year cup base pattern. On a shorter time frame it acted well POST breakout from a 15.60, and we know the best breakouts tend to work right away. From there it recently retested a bull flag breakout, and has recorded three straight WEEKLY CLOSES above the very round 20 number. Notice the name never came close to breaking below its 200 day SMA in the carnage late in '18. A lot to like here.
The "Core" Of The Nasdaq: Old tech names still dominate the Nasdaq, as the top 7 most represented in the tech rich benchmark are MSFT AAPL AMZN GOOGL FB CSCO and INTC. AAPL is close to retaking the worlds most valuable company from Mister Softee, as it has advanced 9 of the last 10 weeks, and this week rose a stellar 7.6%, its best weekly gain since the week ending 8/3/18. The stock has risen more than 30% since 1/3, which slumped 10% in gigantic trade, seemingly flushing out the last of the weak remaining shareholders. AAPL has been essentially a "proxy"for the Nasdaq, and its strength or weakness from here will have a big say in the direction of the benchmark and overall markets. Chips Acting Chipper: In the not to distant past, genuine leaders within the semiconductors was sparse at best. The only name I would be able to classify as a general was XLNX. How things change. The software arena still has better quality and quantity of rulers, but the semis are not lying down anymore. Much has been made that they were one of the first groups to show weakness early last year, and were never able to really recover much of the damage that was done. This week the SMH rose a powerful 5.2%, its second best weekly gain of 2019, and intraday it was above a cup with handle pivot of 106.37, but CLOSED just below it. Last Friday the ETF demonstrated a lot of courage bouncing off the very round par number. Look for the semis to flex their muscles even more going forward. Examples: Software still is the place to be. The space has not really gone anywhere. Other subsectors within technology may have caught up, but software is the gold standard. Below is the chart of ZS and how it was profiled in our 3/11 Technology Report. The name has acted well POST breakout from a 7 month cup base pivot of 48.34. It recently burst above a bull flag, and although Friday recorded a bearish gravestone doji candle, PRICE action remains supreme. The week ending 3/1 screamed higher by 21.7%, followed by and UNCH finish the week ending 3/8 (that week registered a doji as well), and this week tacked on another 11%. The current 8 session winning streak needs a rest, but any weakness in this name should be bought.