Douglas Busch

Industrial Allure:   The industrial space has been on a roll in 2025 as it is the best performing of the major 11 S&P sectors YTD with a gain of more than 9%. It has been buoyed by defense, waste management, heavy construction, and of course defense. Let us dive into some influential players within. Top ten XLI holding ETN displayed some brute strength Monday getting the week off to a good start breaking above a bull flag. The WEEKLY chart is taking out a cup with handle and notice volume tailed off within the handle suggesting sellers were reluctant to part with their positions. Other top ten component GEV is consolidating a very powerful move here as it sets up its own bull flag and a move above the very round 500 number could see a break toward 700, and a breakout would negate a couple of doji candles from 6/3 and 6/13. DE which has been steadily outperforming peer CAT is eyeing a bull flag trigger of 526 which could see a measured move to 616. If the overall bull flag mention sounds redundant it is a good sign that stocks are digesting big moves and looking for another continuation move higher. For those looking for international exposure, remember that from the start of 2025, ERJ may be starting to get the upper hand on rival BA as it breaks above a ratio chart downtrend. This could see a possible move to 61 from Monday's bull flag breakout above the very round 50 number.

Pharma Rolling:   Is the recent outperformance in the PPH over the XBI signifying "risk off" in the healthcare arena or is there room for both to behave well? I think the latter even though the daily chart below comparing the two shows pharma pulling away against biotech. My belief is that the XBI will grind higher into the very round par number into the latter part of the second half and I keep coming back to the MONTHLY chart here which shows the break ABOVE the bearish head and shoulders formation in December 2023 and we know from FALSE moves come fast ones in the opposite direction. It moved quickly to the very round par number which it could not jump above throughout most of 2024. Notice it backed off toward the 70 area with a huge bullish hammer candle in April, where it found a bounce four previous times in 2018, 2020, 2022, and 2023. The ratio chart does indicate it has done nothing against the more mature IBB for 3 years following the 2021 downtrend. One name in particular I am paying attention to is INCY as it gets comfortable above the 200-day SMA after not being deterred by the upside gap fill from the 3/14 session (and acting well POST breakout above bullish inverse head and shoulders breakout). Enter with a buy stop above a 71.07 cup with handle trigger. 

"Refining" Success: The refiners have been enjoying a nice run within the energy space. PRICE action is the best way to verify that and below is a prime example with the daily chart of MPC. The stock is now 11% off its most recent 52 week highs, but that is a bit misleading as it trades just off 8 month highs here. The last 3 1/2 weeks have digested a big move during a 6 week winning streak the weeks ending between 4/11-5/16, with the last 5 of those weeks CLOSING at or near the top of the WEEKLY range. Looking at the WEEKLY chart it is going for its fifth straight CLOSE above the 50 WEEK SMA and it is offering up an add-on above a double bottom trigger of 174.72 in the near term. It is always a good sign when peers are acting well, as you do not want to see a prospective long be the only name doing well and as one can see here VLO has carved out a double bottom with handle trigger of 135.67. If this can get above its 50 WEEK SMA it could be off to the races as it was pushed back there 5 times since the start of Q4 '24. 

Too Much Too Fast? It is hard to be bearish this market and remember there are usually a couple 2-3 month windows each year when you feel like you can really put your foot down on the accelerator and play with size. We have been in the throws of one, but with a nearly 5000 handle move in the Nasdaq the last 2 months has the "easy" money been made? The WEEKLY chart below of the tech-heavy benchmark is coming back to the very familiar 20000 number, which it was unable to take out to the upside in a bull flag formation just several weeks after last year's election. We know that from FALSE moves (bull flag broke downward) come fast ones in the opposite direction. The Nasdaq did not stop declining until hitting briefly below 15000 and touching the 200 WEEK SMA. The DAILY chart here shows last Friday registering a doji candle with a very tight intraday range which suggests some indecision. Additionally notice the Bollinger Bands constricting to some of the tightest levels in the last 6 months which indicates a big move, in either direction, is likely imminent. The last time this occurred in February saw the index break lower in a robust fashion. Remember the market tries to confound the most, so whatever you think is likely to happen be open-minded to the other side.