Douglas Busch

Golden Goose:   Gold bugs have been splattered in the last few weeks and the decline has been anything but orderly. Volume has been robust as PRICE has fallen, and in November the precious metal has advanced just 2 sessions. The S&P 500 finally got the memo this week as it fell playing catch up to the soft-acting precious metal (one can see here the near-perfect correlation of 1 at the bottom of the chart almost every month at some point between June to October). On its WEEKLY chart, there was fair warning as well with the bearish gravestone doji candle the week ending 11/1 and notice this week completed gold's first 3-week losing streak in over one year. The good news for gold bulls is the last 4 times gold recorded a 3 week losing streak the metal went on to gain 2, 4, 2, and 4 weeks immediately following (all occurred in 2023 and boxed on chart). The one chart that looks the most ominous is the MONTHLY chart halfway through November with a potential bearish evening star. There are still 2 weeks to rectify that but I still think risk/reward is on the long side here with a move to the very round 3000 number sometime in Q1 '25. 

"Stapling" Things Together:  As markets have been strong overall in 2024 the staples have settled somewhere in the middle of the pack but in the lower half. On a YTD basis so far they are higher by 12%, nothing to sneeze at especially, for such a defensive group. The daily chart of the XLP below shows it may want to join the party. Notice on 11/8 it completed a bullish morning star pattern and the lows there would be a good area to play against on the long side. On the WEEKLY chart, this has been very consistent (the XLP has only lost ground on a WEEKLY basis in consecutive weeks just twice in the last year in April and October, both circled) with nice action POST breakout above a double bottom in March, a bull flag breakout in August and now another one is setting up. On its MONTHLY chart, there is a caveat as October registered a bearish evening star pattern and could make a move back toward 75 to retest the long bull flag breakout. Longer term that measured move goes too just beyond par. This could be a good place to park money if NVDA disappoints next week with earnings. Not likely, but if it does occur staples could be a nice hedge.

All Aboard:  Amazon is still the largest holding in the XLY, but both it and TSLA are keeping this fund moving in the right direction. It has propelled the ETF to the best acting major S&P sector now on a one, three, and six-month period. It may be masking some underperformance underneath, but overall the group is behaving well and it is what makes stock selection such a critical role in one's success. Below is the daily chart of AMZN, and notice it did break above a cup with handle pivot, and like most leaders do it offered and add-on buy point above a bull flag trigger of 212.50 which was taken out Wednesday. Its MONTHLY chart continues to power higher after its cup base breakout and that carries a measured move to 280. Could this be ready to revisit the white-hot 90 RSI area which it did back in 2018? I would not be surprised but it has underperformed MELI for the last 6 years on the MONTHLY ratio chart, but PRICE action is omnipotent. Talking about MELI just when we thought the very round 2000 number was a level of support it cratered on earnings and this week met resistance right at that figure. It bounced nicely off the 200-day SMA and may be forming a double bottom pattern but wait until that 2000 number records a CLOSE above.

Help Wanted: Microsoft, once the world's largest company, has now slipped to third and is one of just 3 stocks with a market cap north of $3T. For how well the software space is doing, one would have to look all the way down to the 18th-largest name on the planet in ORCL to see the second-biggest software name. We can look at this MSFT dilemma with a bullish or bearish slant, and the former would be to think how much better the IGV would act if Mister Softee got its act together. Below we overlap on one chart the PRICE action of both MSFT and the IGV and it is easy to see the stark difference. The bearish argument can be made peeking at the MONTHLY MSFT chart here and notice how incredibly this traded above the overbought 70 RSI number, proving overbought does not mean overdone PRICE-wise. But this is now recording its first bearish MACD MONTHLY crossover in 3 years and this was a best-in-breed play with evidence showing between May 2016 and December 2021 it fell in consecutive months just 3 times (notice that run ended with consecutive doji candles in November-December 2021). Is it time to hang a "help wanted" sign in front of the Redmond WA office? Software overall would appreciate its participation.