Douglas Busch

"Flying" Away: The airlines took off Monday, pun intended, but underlying strength has been present for nearly 2 months now. The daily chart below of the JETS shows the break above the very round 20 number and a double bottom pivot of 20.05. Is this the start of something very bullish going forward, or more of a reaction to slumping crude (in the face of ongoing conflict in the Middle East)? It is probably a combination of the two but it is hard to see the fundamentals improving with a strapped consumer. Some evidence airline traffic is strengthening comes from the TSA numbers that compare passenger flight traffic each day from the year before. The 2024 figures show 7 consecutive days of increased activity from 2023, and 14 of the last 15 too. Best-in-breed UAL is looking at an 8-week win streak and cruising at an altitude from which it has encountered plenty of turbulence three times previously seen here on the WEEKLY chart. SKYW is one to watch as well as it stands out above the rest on this performance charts against peers. These names never interested me individually but perhaps they are conveying something about the overall economy in a good way.

"Material" Gains: Nice returns have accompanied the materials group with top 5 performances on both a one-week and one-month look back period among the 11 major S&P sectors. The WEEKLY chart below shows the recent 6-month digestion breaking to the upside after a 10-week win streak between weeks ending 1/26-3/29 (notice the consolidation began with the bearish evening star completed the week ending 4/12 that slumped more than 3%). There was a brief break above 4 weeks back then back into the pattern, before thrusting out of it leaving bears exasperated. The last time that occurred was in late 2024 with a "failed breakout" which reversed and started the 10-week win streak earlier this year. Deja vu? The MONTHLY chart displays a nice cup base breakout above 85 that suggests a measured move to 105 is in the cards in the near term (September is looking for back-to-back bullish hammer candles). The DAILY chart did record a bearish engulfing candle Wednesday, and perhaps a move back to fill the gap from Monday makes sense. Let's see how it acts there as the last one to do that after a nice push on 8/1 witnessed a bit of a drawdown.

Glass Half Full: The semiconductors have been somewhat of a sore spot inside technology (notice the weakness still on the ratio chart against software). Its general, Nvidia, was wounded on the battlefield and the group has suffered. Is that weakness subsiding? A lot will have to do with the PRICE action of the daily chart below of NVDA. Tuesday took a step forward breaking above a bull flag formation that commenced at the very round par number. Bears will state it is still in the process of making lower highs the last 3 months. Give it credit for not buckling quickly beneath the 50-day SMA which it did in late July and August. The WEEKLY chart does show its second doji candle last week along with the one recorded the week ending 6/28. Its MONTHLY chart does show 3 straight spinning top candles, but as long as this remains above 115, I think one can be constructive. We will get a sneak peek at how things may shake out in the semis with the MU report Wednesday after the CLOSE. This is the updated chart of the name and how we looked at it in our 9/18 Technology Note.

China Devours Energy: When wondering if this commodity charge will continue, there are a myriad of ways to gauge that. Today we will focus on China. They are very large consumers of commodities and if the region's charts are looking chippper that could be confirmation. Below is the daily chart of the FXI and Monday started the week in fine form nearly breaking above a double bottom pivot jumping almost 2%. This is strong follow-through after last week gained 5%, its second strongest WEEKLY gain in more than four months. On its WEEKLY chart, last week broke above a bull flag pivot of 27 which carries a measured move to 35. Notice too since May that the 50 WEEK SMA is starting to flatten out and how it ignored the doji candle the week ending 8/23. On the MONTHLY chart, there is still technical damage to repair but it has risen 5 of the last 7 months and looks similar to the time period, with that type of positive PRICE action in 2016 after a bullish morning star recorded in March that year that kickstarted a robust run. Deja vu here? Notice how unsurprisingly round number theory played a role with a bearish shooting star at the very round 50 number in February 2021 and the bids that arrived at the 20 figure in October 2022.