Douglas Busch

Size Matters: In our 9/9 Consumer Note, we spoke at length about the possibility of the XRT bottoming, and so far that theory has held up. The ETF still trades 6% off most recent 52-week highs and took a little while to get started last week, falling on Tuesday and Wednesday (albeit marginally) as the XLY rose every day last week. The XLY is just 1% off its most recent 52-week highs in comparison and below is its daily chart. Monday recorded a bullish harami, a very small range after the previous session on 9/6 slumped 2.5% with a wide intraday range of more than 3% from top to bottom. Of course, this waterlogged fund relies heavily on its top 2 components, AMZN and TSLA which make up almost 40%. AMZN sat out the Friday rally as it nears a double bottom trigger of 190.70. As impressive as its rally has been, notice on the ratio chart it is being overshadowed by MELI, as the latter is cementing itself above the very round 2000 number. TSLA recorded a bullish harami cross (doji) on Monday which was a good sign that some strength was on tap. Look for an upside gap fill near 245 from the 7/23 session in the near term, and sometime in Q4 to potentially take out an add-on cup base pivot of 271.10. Last week Tesla rose more than 9% compared to rival RIVN's 2% gain.

Pick Your Bias: As a technician, one can change their mind pretty quickly depending on PRICE circumstances, but at the end of the day, they need to take conviction. The MONTHLY chart below of the Nasdaq has something for both the bull and bear case. Something that I did not point out on the chart was the last 3 months CLOSING very taut within just 132 handles of each other. This type of tight overall trade is often resolved in the direction which it came from and has the tendency to be very powerful if a breakout occurs. The back-to-back bearish MONTHLY candles the last 2 months should give bulls some trepidation but it my experience over decades of trading, bearish candles do not seem to act as well in an uptrend, as bullish ones do in a downtrend at the bottom. As long as the breakout to the upside remains intact stay optimistic. PRICE is omnipotent in my opinion. On the daily chart, a break above a symmetrical triangle pivot of 17625 would carry a measured move of 3000 handles with the width of the triangle trading between roughly 15700-18700.

The River is Flowing Again:  Denial is a river in Egypt, and perhaps what AMZN bears are feeling with this nascent push upward, but the Amazon in South America is gushing here. It feels like there may be a magnetic pull toward 200 in the near term, the location of a bearish gravestone doji candle on 7/9. The was the canary in the coal mine before the break BELOW a bull flag, and we know from FALSE moves come fast ones in the opposite direction. But it has since reset and one month ago it reclaimed its 200 day SMA and Wednesday its 50 day SMA. Baby steps. Below is the daily chart and this should gravitate toward the double bottom pivot near 190 soon, and its MONTHLY chart shows August recording a bullish hammer candle with a 40 handle range, but CLOSING just below the long cup base pivot of 188.41. It found support at the 50 MONTH SMA and notice volume has been indecisive since 2023. This action could be misleading, as volume tends to pick up once the naysayers convert to believers. Of course, it may or may not happen but a purchase here with a CLOSING stop of 175 seems like good risk/reward. 

"Banking" Gains?  The banks via the XLF have witnessed some strong moves in 2024 thus far being the second-best acting major S&P sector YTD up 19%. Action in the ETF as of late should have investors antennas perked with the volatility which is often indicative of topping behavior. PRICE action has been wide and loose and with the moves in best-of-breed names like JPM and GS was eye-opening Tuesday. JPM undercut its 50-day SMA bouncing off the very round 200 number with an 18 handle range (notice the doji candle from 8/29 near the end of an 18 of 19 session win streak). GS never really felt comfortable above the very round 500 number, rising above it 3 times since mid-July before quickly losing altitude. Bulls should be watching the JNK as it approaches the very round par number and Tuesday recorded a rare bearish engulfing candle. The last time that occurred on 8/1 saw a quick haircut back to the 50-day SMA. This fund is good to monitor risk on/off behavior not just for the financial group but the market overall. 

Software Holding the Baton:  Until semis get their act together? It could be a while before the chips firm up, but for the moment software is trying to keep technology afloat. It may be too much to ask, but with everyone talking about seasonality maybe the SMH will put in a positive run before everyone expects them to. After all, the market tries to confound the most. But the ratio chart below tells the story and the IGV is now just 5% off its most recent 52-week highs while the SMH flounders 22% off its own annual peak. This is even with some software names strggling. Of course, MSFT is the whale in the room and it is attempting to remain above the very round 400 number, and notice the bearish evening star pattern completed on 7/9 was accurate in calling a change in the prevailing direction (bearish head and shoulders formation). For a real laggard how about SNOW which is looking for its ninth consecutive MONTHLY decline, not a typo. The very round 200 number has been a thorn in its side starting with August and September 2022 and then the doji in January and the shooting star in February (notice the bearish shooting star at 400 in November 2021 too).