Douglas Busch

Semiconductor Reversal? The semiconductor space has been a laggard within tech and last week was a big contributor to the overall group's weakness against the market (the SMH and IGV were down 1% last week with the S&P 500 up by the same amount). The XLK was flat and only bested energy finishing 10th of 11 in the major S&P sector ranking last week. In fact, over the last month, it is essentially flat as well. Is the sector resting before a big December? Getting back to the semis in November the SMH rose 3%, compared to a historically very powerful 13.3% over the last 4 years. Will it make up for lost ground into year-end? Of course, no one knows but the daily chart needs to distance itself quickly from the rising 200-day SMA next week. It has been lingering near the line for the last 10 sessions and that should give investors some pause. I think one can start long here and add to on strength. The MONTHLY chart shows very taut trade, a hallmark bullish trait, with the last 5 months CLOSING with a 240 handle. But bears will point out the fatiguing candles with a doji in August followed by three consecutive spinning top candles which suggest some possible back and filling toward the rising 50-MONTH SMA last touched two years ago with a bullish morning star (circled). There are some green shoots with some individual names performing well including SMTC, which next week has the chance to complete a bull flag. A break above 67 would carry a measured move to the round 80 number.

All Aboard:   The rails have been perking up and for whatever reason you want to assign to it does not matter. PRICE is firming in the group and below is the daily chart of UNP. Truth be told it is not acting as well as NSC, but UNP did break ABOVE a bearish head and shoulders formation and we know from FALSE moves come fast ones in the opposite direction. Its MONTHLY chart sports a cup with handle pattern and since 2022 has been essentially digesting the big former uptrend that began in 2016. Sure tariffs are playing a role as seen on this performance chart contrasting NSC CNI and CP, as our neighbor to the north's names are floundering. Periphery plays will be lifted along with the pure play rails, and continuing to look at small and mid-cap plays shows us the daily chart here of RAIL. It is dealing with round number theory and I would be interested here with a CLOSE above 10.25. Monday's bullish hammer was a good start. Notice it is holding up near the 40 RSI level where leaders will not trade below. TRN has formed a bull flag and a move above 38.25 should get one long. That would negate Monday's bearish gravestone doji candle and avoid a derailment (a weak stab at humor).

New Sheriff in Town: Or did TSLA just make a comeback? Its PRICE action should make everyone stand up and pay attention, even with today's later selloff. Comparing it to former best-of-breed RACE one can see why TSLA is now calling the shots in the auto space. Its daily chart below shows the bull flag breakout which carries a measured move higher of more than 100 handles. Regarding other best-in-breed automobile plays GM must be in the conversation. It is not as flashy (we spoke about it here last month), but it hit the round 60 number Monday which was the measured move from the breakout above the bullish ascending triangle. It is now crushing F which is now 23% off its most recent 52-week highs as GM is 2% off its annual peak. An old leader in TM may be looking to drive higher in 2025, pun intended, as it has recorded a very pedestrian 2024. This name looks ready to make a big move suggested by the tautness of the Bollinger Bands which are as tight as they have been in at least 6 months. The move, which should be powerful, can go either way but above 170 remain constructive.

"Stick to the Plan. Not your Emotions" - Unknown Round Number Rodeo Again: Long-time readers of mine know my affinity for round numbers and the fact that the S&P 500 is ready to challenge 6000 so quickly after retreating there just a couple of weeks ago speaks volumes. Last week ignored the bearish island reversal with the gap down from 11/6 (after the gap up from the 11/5 session). Looking at the Nasdaq that too is dealing with round number theory at the 19000 area but is acting well POST breakout above the cup with handle breakout pivot of 18785 from 11/6. Curiously notice, it has not surpassed its gap down from the 11/14 session. Peering at some of the other major benchmarks the IWM has not yet met its measured move to 258 from the ascending triangle breakout of 227 and that was retested precisely and held last Tuesday. Even the Dow has been acting well since the start of Q4 as seen here, slightly besting the S&P 500 and Nasdaq. And this is all occurring with gold and the dollar marching higher. And of course, how can we not speak about round number theory without mentioning bitcoin? It traveled to within a hair of 100K, but on the MONTHLY chart looks great above the cup with handle pivot of 73,800 or the flag trigger of 72,000 which carries a measured move to 123,000.

Equipment Check: On a YTD basis, healthcare via the XLV, while higher, is the weakest of the 11 major S&P sectors. In a group so diverse, you can play defense with pharma (supposedly) or offense with small-cap biotech, there is bound to be strength in some sliver of the space. The performance chart below comparing the major ETFs shows a clear leader in the IHI against the XLV, XBI, or the IHF. The IHI is just 1% off its most recent 52-week highs, while peers XLV, XBI, and IHF are off about 10% from their respective annual peaks. This slow-moving supertanker of an ETF looks poised to trade up to a cup base pivot near 65 on its MONTHLY chart and notice how it just broke above a 2 1/2 year downtrend on the ratio chart against the XLV. Could it be ready to outperform similar to how it did between 2015-22? Leaders in the niche group include MASI PODD and ISRG. All 3 are sporting bull flags and as we come toward the end of November I will be paying close attention to the MONTHLY chart of MASI and if it can CLOSE above the 50 MONTH SMA and a double bottom base that will take shape. If it finishes next week above 175 enter and add to above 198.10 double bottom pivot. Then a possible trip to the very round 300 number later in 2025, a level last touched in late 2021.