Douglas Busch

Does Size Really Matter? Often to get the real picture with what is transpiring one has to take the long-term view. Below is the MONTHLY chart of the XRT, the more "equal weighted" consumer ETF compared to the XLY, and although this may be lagging as seen on the ratio chart PRICE is very taut. Between 2020-22, this traveled from 25 to the very round par number and over the last year has been building the right side of a potential cup base. The WEEKLY chart shows multiple dubious candlesticks with a couple of bearish engulfing, shooting stars, and a dark cloud cover. This week is looking for its best WEEKLY CLOSE in almost 3 years and headed into Friday has advanced 5.6%, and if that holds would be its best WEEKLY gain in 2024 so far. The DAILY chart traded very wide and loose which makes me hesitant but if this can clear the round 80 number PRICE action is omnipotent and all you need to go by. One could make the argument for a bullish inverse head and shoulders (with multiple clavicles). Think this fund could make a round trip to the very round par number sometime in the first half of 2025.

Round Number Rodeo: Long-time readers of mine know my affinity with round number theory and some of the major benchmarks are colliding with them. The S&P 500 is sniffing the very round 6000 number after Wednesday's break above a short double-bottom pattern just days after the bullish harami candle at the 50-day SMA on 11/1. Below is the daily chart of the Nasdaq and it is kissing the 19000 figure. This was a robust move today, with some organic buying and some short covering, a lethal combo, but things do not go up in a straight line. In my humble opinion, the best thing that can happen now is to absorb these gains and try to set up some bull flag continuation upward patterns. We have a Fed meeting this week and overall, gap ups on indexes used to be a rare occurrence. They seem to be happening regularly now. I feel that bullish seasonality will play out into year-end and perhaps we see 20000 on the Nasdaq by the end of 2024. That would not be going out on a limb with a bold call as that is "only" 5% from today's PRICES. The signature of a powerful bull market is one that shrugs off bearish candles. On the Nasdaq WEEKLY chart, we can see we are now negating the bearish evening star completed in mid-July and this week's potential bullish engulfing candle follows last week's bearish engulfing and the prior 2 before that both spinning tops. Expect further strength but perhaps let the indexes catch their breath first. 

David Versus Goliath: It seems like market participants are still favoring mega-cap consumer names over smaller ones. At least if you are looking at the ratio chart of the XLY over the XRT. At the bottom of the daily chart below the break above a cup base pattern is holding and it is slightly inclining since the move in early September. This is in large part due to the nice 1-2 combo of the top-heavy holdings in TSLA and AMZN in the XLY. The former has been a volatile one and is now looking to recapture that break above the 260 bullish inverse head and shoulders pivot from the week ending 10/25 that rocketed higher by 22% in a base 13 months long. In my opinion, it must reclaim the 260 pivot in the next week or two as the best breakouts tend to work right away. AMZN we have spoken of too and it is now less than 1% away from the very round 200 number and is still above the MONTHLY 188.41 cup base pivot taken out in June and this carries a measured move to 280. This is nowhere near overbought if you look to the RSI between 2015-20 being above 70 for a good chunk of that time. Let's not forget that the AMZN of South America in MELI, it REPORTS Wednesday after the CLOSE and it to looks like it is putting the very round 2000 number behind it with 3 consecutive CLOSES above the figure (although September was a doji), a level of resistance during 2021. Former resistance is now support. 

Killing Time: Last Friday brought us our MONTHLY candlesticks for those that like to emphasize the long term. Well the MONTHLY chart below of the XBI is a good example of the saying is PRICE wont wear you out time will. Notice how this fund has been banging up against the very round par number, and the 50 MONTH SMA all throughout 2024 and this could be exhausting on the shareholder psyche. Notice the bull flag at this level too and a break above the 103.50, which could easily occur with some election volatility, and we could be presented with a possible beach ball held under water breakout. We have spoken about this MONTHLY chart previously in a bullish light and the reason I am optimistic this will eventually break to the upside is now it has worked ABOVE a bearish head and shoulders and we know from FALSE moves come fast ones in the opposite direction. The daily chart has meaning at that 103 level as it would be the pivot in an ascending triangle pattern would carry a measured move to 115 on a shorter time frame.