Douglas Busch

Brute Strength: The industrial sector is taking on all rivals as of late. On a one-week, one-month, and three-month look back period the XLI is the second-best performer of the major S&P sectors, and impressively on each of those time frames there are different groups just ahead of them. On the one week it is technology, the one month is energy, and the three month the utilities. On the WEEKLY chart, we see it is not out of the ordinary to see robust runs. Notice the 20 of 22-week win streak between the weeks ending 11/3/23-3/29 and then digestion until the bullish WEEKLY piercing line candle the week ending 8/9. The ETF has now gained 9 of the last 10 weeks, and it is certainly plausible for another 10-12 weeks of firm PRICE action into the traditional solid seasonality period (and notice the lagging action on the WEEKLY ratio chart versus the S&P 500 since the start of 2023 is not doing that any longer since this summer). 

The "Lindor" of the Semi Space:   As my beloved NY Mets advanced to the NLCS Wednesday evening, a good analogy came to mind comparing Francisco Lindor to the semiconductor group. This man has carried his team on its back since late spring. Will NVDA start to do the same following its break above a symmetrical triangle on the daily chart below? Now Lindor has certainly had some best-supporting actors with the likes of Alonso, perhaps he can be compared to AMD. This name has been on an impressive run, and it may be tiring as one can say either it met some selling after hitting the 175 level at the top of a bearish rising wedge pattern, or the quick failure of a cup with handle breakout above a 168.83 cup with handle pivot from 10/4 (notice the doji candle on 10/7 and the bearish engulfing candle on 10/9 too). But getting back to NVDA, the WEEKLY chart shows the name on the verge of a possible break above a bull flag, and the MONTHLY chart has recorded 4 consecutive dubious candles with a shooting star in June and then three straight spinning tops.

Nothing "Soft" About It: Software stocks are firming. How is that for an oxymoron? The daily chart below shows the IGV looking intent to travel toward the very round par number in the near term (instruments that trade through 90 often go on to reach 100 and above). And this is with MSFT, now the third largest name in the fund, floundering. On its WEEKLY chart, it is becoming too dependent on support at the 50 WEEK SMA, touching it three times now in such quick succession, and a bearish ADX signal is now upon us. But give credit to top ten component PANW for the follow-through after the breakout above a double bottom pivot of 352.70 Tuesday. Others that are lagging in the top ten include CDNS and SNPS down 15-16% from their most recent 52-week highs. Keep in mind in the mid-cap software space there has been some M&A with SQSP SMAR and PWSC to name a few in 2024. On the MONTHLY IGV chart, it is now above a cup with handle pivot of 88.92 taken out in September in a base 3 years in duration, suggesting this could be just the beginning of a big move upward. Notice the shakeout in August with the bullish hammer candle with a long lower wick.

Size Matters:  Or not? In the top-heavy XLY, the two largest holdings in AMZN and TSLA have been having some issues. The recent softness in AMZN on the MONTHLY chart looks like a blip and it is still in the vicinity of the cup base breakout pivot above 188 (the caveat would be the MONTHLY bearish RSI divergence dating back to late 2018). TSLA has its Robobtaxi event on Thursday so that should be a market mover and its MONTHLY chart could be explosive with a break above a symmetrical triangle which could also be interpreted as a bull flag. Interesting is the strength in the homebuilder periphery plays and this is happening in the face of rising interest rates. The chart of the ten-year yield shows some interesting developments as RSI has run quickly from the oversold 30 to overbought 70 figure (often signals that instrument has further to run higher in PRICE from current levels). Bears will say it has now filled in the upside gap from the 8/1 session and Tuesday recorded a doji candle. HD, the third largest component in the XLY is acting well POST breakout above a MONTHLY cup with handle pivot of 391.86. Notice how it has negated two bearish evening star patterns and a doji from August. The daily chart below of the XLY is now sporting a bull flag and any improvement from AMZN TSLA and HD could see this achieve a measured move to 218 by year-end.