Douglas Busch

Material Gains?  The materials over the last one-year period were not the place to park your hard-earned capital. One can see here that over the time frame, they were the only major S&P sector in the red (figures were coming into Thursday). Looking at the daily chart below of the XLB it shows a waterfall move downward with a 14-session losing streak, not a typo, with every single day CLOSING in the lower half of the daily range between 12/2-19. The streak ended with a 4% combined loss on 12/19-20, and now it is sporting a bear flag pattern, although there have been some bullish candlesticks recently. The WEEKLY chart did record a doji last week, an encouraging sign of a possible bottom, but PRICE must confirm with a decent rally Friday. Notice it is testing potential support here from an area of former resistance. On the MONTHLY chart, notice December was a big move lower but the last 4 times since the COVID era lows in the first half of 2020 saw the very next month rise. There will be volatility but look for a rebound by the end of the month. Seasonality may suggest otherwise with just one MONTHLY gain in the last 5 years averaging a 2.1% decline.

Round Number Rejection: Long-term readers of mine know my affinity for round number theory. It is coming into play with a couple of the major benchmarks. The S&P 500 never really felt comfortable above the very round 6000 figure and after dropping every day last week it is now "just" 4% from its recent all-time high. Bears are salivating over the possible break below the head and shoulders pattern with a break below a 5850 pivot carrying a measured move to 5600. The daily chart below of the Nasdaq shows some ominous signs with a couple of very brief breaks above the 2000 number, suggesting it is not yet comfortable above the figure. It fell all 4 days as well last week on increasing volume with each session, and volume was not as timid as expected into year-end. Taking a look at its MONTHLY chart notice the bearish shooting star recorded in December. It looks similar to the gravestone doji candle seen in November 2021 which led to a 6000 handle decline to the very round 10000 number in October-November 2022. Am I calling for a crash like that, absolutely not, but a prudent pullback could be healthy. Watch for which names hold up best if a steady selloff should arise.

Semi Satisfaction:  Semiconductors have resided in the shadows of software this year, and could that change in 2025? Of course, but obviously, no one knows. The ratio chart here comparing the two shows semis actually recorded a better first half of 2024, and it may have simply retested the bull flag breakout and is now ready to outshine (notice potential bullish MACD crossover with the black signal line below zero). NVDA will play a major role in the semis comeback or demise, and Monday recorded a bullish counterattack candle and still has a double bottom base in focus. There is still plenty of work to do but it is grinding back ABOVE the breakdown from the head and shoulders and a break in early 2025 above a double bottom pivot of 146.64 would negate the doij candle from 12/5. Below is the MONTHLY chart of the SMH and Tuesday is likely to CLOSE with yet another very taut PRICE. It is setting up a bull flag, but bears may wonder if the consecutive spinning top candles speak to fatigue. Play each individual name on its own merit. 

All Things Created "Equal"? Imagine if one was able to see how the Nasdaq 100 stocks would act if each component were trated the same? Well at ChartSmarter we have you covered and today we take a peek below at the daily chart of the QQQE compared to the QQQ. One can see since mid July the QQQE (blue line) has led even if it was just ever so slight against the QQQ. The discrepancy widened in its favor in late November into early December, but the last 2 weeks has acted uncharacteristically falling sharply as the QQQ whose pullback was more mild. Is this something ominous, a canary in the coal mine to some fragility within technology overall? It is hard to say, but this recent push into the mega caps is speaking to investors displaying a "defenisve" posture. Peering at the candlestick charts, QQQ is technically superior trading above its 50 day SMA and it has done what it needed to with a bullish piercing line candle last Friday and added another .8% Monday. I think this can trade toward the 535 area which may encounter some trouble with the doji there on 12/13, and the bearish harami on 12/16. As the QQQ rose almost 1% Monday the QQQE was flat. Interestingly notice the QQQE has acted poorly against the SPY for at least 6 months. This needs to hold the very round 90 number on a CLOSING basis going into year-end. Give it credit for the "stick save" at the 200 day SMA last Friday.