Douglas Busch

Former General Ready? Last week NVDA leapfrogged MSFT to become the second most valuable stock on the planet and perhaps now has its eyes set on AAPL going into 2025. Below is the daily chart, and if this can reclaim the 135 area that would be a break ABOVE a bearish head and shoulders formation, and we know from FALSE moves can come fast ones in the opposite direction. Additionally, I will be watching 137 to add to as that would be a break above the middle line (dotted) on the Bollinger Bands (20-day SMA). It has been stuck under the middle line for a month now except the 3 days between 12-4-6 (prior to that it traded above the middle line as PRICE grinded higher between early September and late November). On its WEEKLY chart, it carved out a fractional advance, demonstrating good relative strength, as the SMH and SOXX fell 2.7 and 3.8% respectively. Bears will state the doji candle is adding up the tally of dubious candlesticks (engulfing, dark cloud cover, and shooting stars boxed) after a long run. Notice too the bearish RSI divergence with lower highs as PRICE makes higher highs, but leaders tend to climb the wall of worry. Pressure is a privilege to them (BJK).

Selling Climax Near? The market has seen some wild moves in a plethora of instruments. This is normally indicative of a top, as we have seen explosive gyrations in the dollar, Bitcoin, and Vix among others. These types of events do create opportunity however with smart entry points. As everyone zigs with TSLA and AMZN inside the strong overall discretionary space let us zag by taking a look at the homebuilders. Of course, they are interest rate sensitive with the Fed meeting Wednesday, and after hours last night, LEN disappointed with earnings. This is the number 2 holding in the ITB at 11% of the fund, and below is the daily chart which could create a long chance for patient investors. Wednesday the ETF plunged 4.1%, its second-largest loss of 2024 (fell 4.8% on 1/23) and it could trade toward the very round par number which is right in my wheelhouse. Additionally, that would be a gap fill from early this summer. I would prefer to see a positive catalyst with a bullish candlestick Thursday, as catching falling knives is a dangerous endeavor. At 102 I think this is a good risk/reward scenario. 

All Decks on Hand:   The consumer space with no question has been buoyed by the strength in both AMZN and TSLA making the group the best-performing major S&P sector of 11 by a wide margin up 12%, doubling that of the XLC. The daily chart below of the RSPD confirms this thought. Sure it is extended on the WEEKLY chart from the break above the double bottom pivot right at the very round 50 number and with last week's bearish engulfing candle it would be healthy to fill in the gap from the week ending 11/22, about 1% from today's PRICES. Some other high-profile names in the space like a COST, which has been recording some dubious candlesticks at the very round 1000 number including a gravestone doji candle on 12/11, a long-legged spinning top on 12/13, and a shooting star on 12/16, may weigh on the space in the short term (4 sessions prior too Tuesday were all above 1000 and zero CLOSED above it). Others like MCD even though trading sideways for a couple of months and sporting a double bottom with handle pivot at the very round 300 number notice on the ratio chart it slumping versus the XLY.

Chemical Reaction:  The materials space is known best for its precious metals exposure, but it also has a good amount of chemical names within. And they are weighing on the group. The XLB is now on a 9-session losing streak and has declined 11 of the last 12. Perhaps the ETF will be able to catch a breather here and try a spurt higher as it trades into the very round 90 number (notice it is touching the oversold 30 RSI number for the first time since July). Scanning the individual chemical names would show stocks like HUN LYB CE and DOW lower between 30-60% from their most recent 52-week highs. Below is the daily chart of LIN and it may be worth a shot here if it can stabilize after the dragonfly doji candle on Tuesday. Begin with a small starter position and add to if strength starts to materialize. If these daily lows are taken out if could be a lookout below scenario as seen on the WEEKLY as that 50 WEEK SMA is getting pierced to the downside for the first time in more than 2 years here. It has been a reliable actor against the materials, but as a rising tide lifts all boats, a sinking one wrecks havoc.