Douglas Busch

Nasdaq Fatigue: Is it fair now to proclaim that Father Christmas never made his way down to the financial district? The old saying "if Santa Claus should fail to call bears may come to Broad and Wall" is now in focus as the major indexes feel heavy. On the daily chart of the Nasdaq below the benchmark CLOSED almost 150 handles off its intraday lows after kissing the very round 19000 figure, but CLOSED below its 50-day SMA. Monday recorded the spinning top candle at 20000 and it feels like that will be a range in the near term and a break above or below those numbers could give some valuable clues to the direction of the Nasdaq in the first half of 2025. The WEEKLY chart demonstrated negative RSI divergence with a lower high from the summer that aligned with the bearish evening star (and doji candle in the middle of the pattern the week ending 7/12 which kicked off a 3000 handle drawdown to the low during the week-ending 8/9). Notice too, the distribution (heavy volume on declining weeks) in 3 of the last 4 weeks. The MONTHLY chart shows the bearish shooting star candle at the 20000 figure in the largest MONTHLY volume in at least a decade has been tested so far in January, and with 3 weeks still to go things could change, but this tech-heavy benchmark feels extended. 

"Spinning" Its Wheels: One of the most watched companies in the world, for a variery of reasons, is starting to trade in a very volatile fashion. This type of action is often associated with tops, as bottoms are just the opposite with gradual, taut, rounding behavior. The daily chart below of TSLA does open the door for an opportunity however in the 365 area which would be the initial touch of its 50 day SMA after a recent breakout. On its WEEKLY chart, we can see the dubious candles with a bearish shooting star candle and then a doji the weeks ending 12/20-27. The latter candle is often a good predictor of a trend change from the prevailing direction. Investors could have been put on alert after the bearish counterattack candle the week ending 11/15 (circled), but the name surged right on by. As the negative candles begin to pile up the weight of the evidence gets harder to ignore. The MONTHLY chart shows the failure to CLOSE above the long cup base trigger of 414.60 in December. With all this beiong said if the 365 area holds I think a long position can be taken. Use a CLOSING stop below 348, beneath the intramonth lows of December.

Industrial Instability: The industrials have been a tough place to be. In December the XLI slumped 8% recording a bearish engulfing candle after hitting all-time highs, giving back all of the prior months election frenzied gains. This is not necessarily a bad thing as one can see the other 2 worst months in the last 5 years (June and September 2022) witnessed big advances the very next month. The most recent one comes from an elevated PRICE standpoint compared to the other two, but if we look at some of the top 10 holdings in the fund more than half of the trade more than 10% from their most recent 52-week highs. Some of the better-looking charts however, include HON which we profiled here in our 12/11 Industrial Note. UBER is starting to behave itself and it successfully retested the bullish island reversal with the gap up from 8/6. A bullish morning star was completed on 12/17 (doji candle on 12/16 was a good indication selling pressure was abating), and then it broke ABOVE a bear flag on 1/2. Another name that looks like it is coming into a possible entry is DE. It is nearing a retest of a prior double-bottom breakout.

Nasdaq Revival:  The old saying goes it's not how you start but how you finish. Well, the Nasdaq CLOSED the week out well Friday up almost 2%, erasing a 5-day losing streak, its best advance since the huge move of 3% on 11/6 the session after the election. Thursday undercut the lows of 12/20 and therefore created a legitimate double bottom base (it was also beneath its rising 50-day SMA intraday that day but CLOSED above it). On its WEEKLY chart, it did record a bullish hammer candle and notice each of the previous 3 weeks was above the very round 20000 number, but zero of them were able to finish above it. A CLOSE above it next week could ignite a new buying spree. The MONTHLY candle will likely be something to deal with as the shooting star was recorded in December. One has to remain open-minded to all possible scenarios, and trade each individual instrument on its own merits, but remember bearish candles in bull markets tend to be less success-prone than bullish ones in a bearish environment. Trade accordingly.