Douglas Busch

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. 

Regional Differences:  The regional banks and the overall banking space via the XLF have been trading in harmony since the start of Q4. Could the KRE start to reassume leadership, as it did on the chart here how it did this summer, especially in July? The daily chart below of the fund shows very taut overall trade and it is back to testing the bull pennant breakout here from 11/22. It is still trading in the upper half of the range between the round 60 and 70 numbers, from where the last bull flag broke from and not from a previous ascending triangle. It has declined 8 of the last 11 sessions but the pullback has been somewhat pedestrian now 6% from its annual peak. The MONTHLY chart shows nice action POST breakout above a double bottom pivot of 61.77 in November. Bears likely feel this is a double top at the round 70 number from the last 2021 and early 2022 time period, where the ETF did register back-to-back doji candles in December 2021-January 2022. Top holding MTB will carry some weight as to where the KRE is headed and Wednesday touched its rising 50-day SMA at the very round 200 number for the initial time following a bull flag breakout above the 195 pivot. Stay long with a CLOSING stop below 190.

Bears Caught With Hands in the "Honey" Jar?  The XLI is under a bit of pressure and it makes sense to look at some of the top holdings to see if it may make a stand. Below is the MONTHLY chart of HON and notice in November it recorded a huge breakout in big volume above a cup base. We know the best breakouts tend to work right away so bulls want to see this firm right here. It is not exactly a general in the sector as seen it lagging the last 4 years against the XLI, but it makes up more than 3% of the fund so it can move the needle. The daily chart shows 6 examples of support near the very round 200 number and the 200-day SMA, and Tuesday recorded a bullish engulfing candle and it now has its sights on a double bottom base pivot of 233.81. BA which seems to be a shadow of its former self, could be an interesting long here as it touches the 200-MONTH SMA, something it seems to do every 2 1/2 years. Notice the bullish hammer candle in November to CLOSE above the secular line. And then we have UBER, which still amuses me that it is in the ETF, down 25% from its most recent 52-week highs, and has even been outdone by rival LYFT since August. The recent breakdown below a bearish head and shoulders pattern is worrisome.

Round Number Speedbump:  When one sets out on a destination there are often pitfalls that come along the journey. The daily chart below of TSLA shows how it recorded a bearish spinning top candlestick at the very round 400 number Monday. I am still very bullish on this name, but candles can help one get a better basis, or shave around a core position on weakness or strength. This may be for the latter. This is probably a good time for one of my favorite thoughts for long-term investing, "When you're in a nice trade, great entry, solid plan, well thought out target and you're getting that itch to tap out early, remember what the old man told me on the NYMEX floor 'Hey kid if you want to take the train to California, you don't get off in Chicago". (Jimmy Jude). My belief is this is still headed toward the 480 measured move from the bull flag breakout but may need to catch its breath near 360 first. The MONTHLY chart shows how it came very close to a 414.60 cup base pivot Monday morning that started with that doji candle in November 2021. Keep an eye on peer RIVN which we wrote about in our 8/19 Consumer Note and how it was feeling fresh at the very round 10 number.