"Used" Is The New "New": With all the recent supply issues, the automotive industry has been turned upside down. To this point, some have stated that in certain situations used cars would be worth more than new cars. Of course, the semiconductor problem has something to do with it as well. The auto parts plays have been acting well with AZO now approaching a double bottom pivot. ORLY is right at its own double bottom trigger of 608.32. PAG is now above a flag pivot of 92. Looking at names that actually sell used cars there are none larger than the chart below of CVNA. The stock is now 9% off most recent all-time highs and is higher by 4% this week headed into Friday. Its chart shows it gravitating toward a double bottom pivot of 363.19. Not all names in the space are behaving themselves, however. VRM, which we compare to CVNA on the ratio chart, is now 55% off most recent 52 week highs. It's still below the nasty 2 week losing streak, weeks ending between 8/13-20 that fell by a combined 37%.
"Stick Save" At The Round Number: Did the two doji candles recently on 9/1 and 9/4 do enough "damage" with a quick 400 handle decline? Of course, no one knows the answer to that question as we will only know in hindsight. Wednesday's bullish hammer candle at the 15000 number ended a 5 session losing streak, with all 5 days CLOSING in the lower half of the WEEKLY range. Perhaps investors were looking to get in early a day before Yom Kippur tonight, with the "sell Rosh Hashana, buy Yom Kippur" strategy (hat tip Krinsky). Volume was elevated during the recent 5 day losing streak, and today the volume was soft relatively speaking. That is ok as investors will most likely catch on if this rally into seasonality occurs, and it will show up in volume. Round numbers put a halt to the VIX again at the 20 figure, which has been an irritant for months. A large component in the Nasdaq in AMZN bounced off the 2400 number Wednesday, and MSFT burst above the 300 number to hit an all-time CLOSING high. Not bearish.
Pattern Recognition: As technicians, we are always on the lookout for patterns that tend to repeat themselves. One should always be looking for some kind of edge. Of course, once any strategy becomes too well known it loses its luster. One that may be viable here is that ORCL has become somewhat reliable in disappointing after earnings. On its last 3 occasions, including today it fell and did as well on 6/16 and 3/11 falling by 5.6 and 6.5% respectively. The important thing to recognize is that it marked the short-term bottom. After the March low the stock traveled nearly in a straight line from 65-80, and then after the June report, it went from 76-91 rather quickly, almost in perfect symmetry rising nearly 15 handles each time. If that were to occur again it would trade from today's low near 85 to the very round par number. Just a thought, but probably good risk/reward using a CLOSING stop below the Tuesday low, after today's spinning top candle.
Buffett's Clout: We often speak to knowing what may be in an ETF you may be looking to purchase or already own. The XHB in the homebuilder space for example has just 3 pure-play homebuilders within its top 10 holdings. Interestingly enough the largest component in the finanical ETF is BRKB representing almost 13% of the fund. The stock is now just 5% off most recent 52 week highs and since the start of September, the stock has advanced just 2 sessions. It has gained ground just 2 of the last 5 weeks, but ALL five CLOSED right near lows for the WEEKLY range. BRKB is just one of two names in the top 10 holdings that are underneath its 50 day SMA. Other candidates are more technically attractive like GS, as long as it stays above the very round 400 number, and BAC above 40. BLK came very close to touching its rising 50 day SMA for the first time following a cup with high handle breakout above a 925.07 pivot on 8/23, often a good entry.
Comforting 50 day SMA A Trap? The Nasdaq lost 1.6% this week recording a bearish engulfing candle at all-time highs. To start the week it recorded a doji candle on Tuesday, which is adept at signaling fatigue or a possible reversal of the prevailing direction. The tech-heavy index also recorded a doji on 9/1. Add to that the feeling of the market starting to make a habit of fading late in the day, and a bearish tone starts to develop. Remember "amateurs open the market and pros CLOSE it" is the old adage. We remain steadfast with our 16000 target for year-end, and seasonality factors have a lot to do with what's occurring. The other major benchmark that many do not associate with tech, but should be with the top 7 holdings (AAPL MSFT AMZN FB GOOGL GOOG TSLA NVDA) making up a quarter of the index is the S&P 500. It lost ground every day last week and is on a 5 session losing streak. Much of the weakness Friday in the S&P 500 came from AAPL which reversed hard falling more than 3% on daily volume not seen in 6 months. On the other hand, NVDA is carving out a bull flag pattern. I think once next week is over the overall uptrend could resurface for a strong move into year-end.