Douglas Busch

Cathy Comeback? Within the diverse healthcare arena if we drill down into the biotech space we have the "mature" IBB, the more "dynamic" XBI, and one rung lower on the risk angle is the WEEKLY chart below of the ARKG. We know from FALSE breakouts can come powerful moves in the opposite direction, and this one broke firmly ABOVE the 1 1/2 year-long bearish descending triangle the week ending 2/14 jumping 9%. However, the very next week recorded a bearish engulfing candle dropping 8.4% and it is now on a 4-week losing streak. One positive takeaway could be the spinning top last week that bounced in the 22 area. These candles are known for suggesting selling pressure on the downside is abating. Since the lows in Q4 '23 this level has held up 6 times, so perhaps the PRICE memory here could make this a good risk/reward candidate on the long side. There will be plenty of impediments with the ten-year yield now looking like it may have bottomed and starting to build the right side of a double-bottom base. The top 2 components that make up almost 20% of the fund in CRSP and TWST have dubious charts so treat this as speculation and stay small. CRISPR is sporting a bear flag and not responding well to the gap fill from 2/13 and Twist is a bit better with two big bullish engulfing candles and a doji on Thursday (and a bullish MACD crossover). Weakness was forthcoming with the quick failure of the break above a double bottom trigger of 51.41 from 1/22.

Momentum Swings Both Ways:  I always like to mention there is no reason whatsoever to catch a falling knife until a bullish candlestick catalyst presents itself. Did that occur on turnaround Tuesday? I am not sure the bottom is in but keep in mind some of the most violent upward moves occur in bearish downtrends. Below is the daily chart of the MTUM ETF and it recorded a bullish inverted hammer candle well below the 200-day SMA. This is a good area now to play against for a countertrend rally. The WEEKLY chart has pierced the 50 WEEK SMA this week and the precedent in 2023 when it did that three times that calendar year each was shortlived. Will the same transpire this time around? Of course, no one knows and it is hard to find some green shoots, but some recent IPOs have been behaving themselves. It would be wrong to call SNDK a new issue, as it was bought out by WDC almost 10 years ago but has since been spun off and vehicles that come back to public markets often need time to carve out bases. This one is doing so quickly with a 55.01 cup base trigger forming. Again breakouts are hard to trust but one can monitor how it acts if and when it approaches the pivot.

Orderly Selloff? As silly as that sounds it still does not feel like we have seen the white of the eyes of the bulls even with the Nasdaq now 14% off its most recent 52-week highs, and falling 4% Monday. Notice here that the Nasdaq WEEKLY chart Monday undercut its 50 WEEK SMA, an area that was a launching pad after some decent-sized pullbacks in Q4 '23 and Q3 '24. There are still 4 more sessions this week for it to recapture that line, but what would be the catalyst? Perhaps the catalyst is that absolutely no one is talking about a market rally whatsoever, not even a dead cat bounce. I have been fielding a lot of questions from folks I have not heard from in a long time, which says we are likely getting close, but the MONTHLY chart below of Nasdaq 100 stocks above their 200-day SMA is still in the upper 40s. My response to these inquiries is that let that number come into the teens, a number it has hit 5 times over the last decade. The VIX now seems to be comfortable above the very round 20 number, a former pesky level to get above. It is entirely plausible that it may set up a new range between 20-30 like it did in 2022 and notice the pervasive downtrend on the Nasdaq throughout that time period. Again be very nimble in this environment. In "liquidation" phases, technicals do not always matter. Of course, one has to be open-minded to anything happening, but bulls sure need to step up soon. 

"Energetic" Run Ahead?  Energy has been stuck in the middle of the YTD sector rankings as we head toward the end of Q1 having advanced 2% thus far (interesting is the bifurcation of "value versus growth" with healthcare and staples higher by almost the exact opposite that technology and discretionary are). Below is the daily chart of the XLE, and this week has put up a fight and if the lows hold going forward I think Q2 could be a solid one. Friday's advance of 1.7% was adequate follow-through after the doji and engulfing candle and sets up well going into next week. Looking at the two behemoths that make up 40% of the fund in CVX and XOM, the former is still in control and its daily chart is sporting a bullish ascending triangle and a break above a rough 160 pivot could see a measured move to 180. The third largest holding in the ETF is COP and on the WEEKLY chart perhaps this laggard (in secular decline since the start of 2024 as seen on the ratio chart) is now buyable with a double bottom made in the 86-87 area from 2 years ago.