Douglas Busch

Nasdaq Teetering: I believe we are in the later innings of the selloff, and that is not going out on a limb after a more than 25% haircut in the early going Monday from its recent peak just above the very round 20000 number. This is not a garden variety type selloff but it did double in PRICE from the back-to-back doji candles during the last week of 2022 and first week of 2023 from the 10000 figure. One can see my pinned tweet and notice here on the WEEKLY chart at the depths this morning we essentially touched the rising 200 WEEK SMA. My belief is the current environment is very uncertain and trades should be done on a tactical basis. All of the ideas in today's report will be looking for entries on a selloff and take profits with a 5-7% gains. The MONTHLY chart shows 3-month losing streaks are rare in the last decade, with just 3, and each of them appeared near the 50 MONTH SMA where we just came into contact. Each of those occurred at lows, with the exception of the 2022 which kept in close proximity to the secular line before taking off. Bulls can also take small solace that this touch of the 50-MONTH SMA is occurring for the first time after a breakout above the cup with handle, often an ideal entry point (notice the bearish gravestone doji candle that started the pattern in November 2021.

Goldman Fills the Gap:   One of the most prestigious banks in GS is not immune from the overall market carnage. When selling is indiscriminate no one is left alone. The daily chart below shows although it has filled in the election gap, but the gap below the 200 day SMA Thursday leaves a stain. The WEEKLY chart shows the doji (the middle week of a bearish evening star completed the week ending 2/21) which should have had shareholders looking for the exit, or at least playing defense. Without some heroics Friday it will CLOSE below the 50 WEEK SMA for the first time in 17 months. The MONTHLY chart shows the the selling could intensify. Like many names it recorded the doji candle in February (and completed the bearish evening star in March) which was the canary in the coal mine for many. On RSI it can still drop another 15 handles and still be in that area where leaders will tend to floor at 40/45. The MACD is looking likely to have a bearish crossover from a very high altitude and this could in the coming months trend back toward the prior cup base breakout just above the very round 400 number. Of course, this is not a high percentage scenario, but no one has a crystal ball. 

Know Your Holdings:  With the plethora of ETFs that have been born in recent years, it pays to take a look under the hood. Analyzing the semis there are two heavily watched in the SMH and the SOXX. The former has been acting better with the top-heavy fund having NVDA the top component at nearly 20%, and one can see how that hurt the SOXX on the MONTHLY ratio chart below. The more "defensive", or "equal weight" SOXX, Nvidia is not even the top holding. Peering at the SOXX MONTHLY chart though shows it has now successfully retested the cup with handle breakout here from December 2023, and it was just above the rising 50 MONTH SMA. Although the semis have lagged software the last 6 months as seen here, if technology is going to return to a firm uptrend it will need their inclusion. Here is the longer-term MONTHLY ratio chart showing their importance, and it is holding a 5-year plus uptrend. Getting back to the SOXX if investors will be on the conservative side they may have an affinity for the SOXX which includes TXN as its top holding at 8%. PRICE is back to a familiar area of former resistance and bulls will look for that former ceiling to become a floor. And the 3% dividend yield doesn't hurt.

Dojis in the Driveway: The homebuilders have been a big contributor to the success of the discretionary space as seen here on the MONTHLY ratio chart from the start of 2021 to late 2024. A bearish head and shoulders may let another subsector, perhaps the automobiles with TSLA, take the baton but they are a key group to focus on. They can be influenced by the direction of interest rates, most notably the 10-year yield, which is now sporting a bearish head and shoulders formation, and a break below 4.1 carries a measured move to 3.4% which will not only put a likely bid under the WEEKLY chart of the XHB below, but the overall market as well. The dojis in the driveway reference should have investors in the homebuilding space ready for an entry above the very round par number which would set up an add-on buy point above a double-bottom trigger of 113.20. Among the large-cap names in the space, PHM is one to watch. It recorded positive RSI divergence in December and February and is holding the very round par number well in a bear flag formation. If it can break ABOVE 105 look out to the upside above.