Prudent Pause: As the Nasdaq starts another week looking for a 7 week winning streak, bulls must be looking for some sideways trade. Five of the last six weeks CLOSED in the upper half of the weekly range, a bullish trait, but a pause would seem responsible. The tech rich benchmark trades well above both its upward sloping 50 and 200 day SMAs, and looks like it could be forming a bull flag formation. Even on the daily chart it is making a habit of CLOSING at the top of its daily range, a good sign as the old saying goes "amateurs open the market and pros CLOSE them". The Nasdaq is sitting right at overbought status regarding the RSI, but that is a function of a bull market. The best of breed climb to the top. The SMH looks like it is bull flagging, the IGV is stalking its 221 double bottom pivot, and the ETF recorded its first CLOSE above the round 220 number that has been pesky resistance since the beginning of July. Still I for one would like the Nasdaq to digest recent gains, and perhaps let its 50 day SMA catch up to PRICE. We never get what we want with markets, but bulls have to be feeling jolly at the moment. Somewhat Recent Software New Issue Maturing: There has been much discussion about how recent IPOs have been scrutinized, and for good reason. Some will certainly come back as the stronger names will come to the fore, and leave their peers who perhaps should have never come to the public markets behind. Below is the chart of MIME, in the software sector which seems to be making a stand once again. It came public 4 years ago, and still sits in bear market mode down 20% from most recent 52 week highs, even after last weeks jump of more than 7%. It broke above a WEEKLY double bottom pivot of 43.68 in an 8 month pattern during a 3 week winning streak between weeks ending 2/1-25 that rose 34%. On its WEEKLY chart it could be setting up another double bottom base with a potential 51.49 trigger. Interestingly it has spent nearly the same amount of time below its 200 day SMA on the WEEKLY chart between last October and this February, and presently. A break above its 200 day SMA could set this name higher in robust fashion. Recent Examples: Betting against the semis has been a losing play as of late, unless one was fortunate enough to be involved on the short side of a CREE XLNX or and MXL (all three are down in the 30% off their most recent highs neighborhood). Below is the chart of NXPI and how it appeared in our 11/1 Technology Note. We are looking WRONG on this set up, as we paid more attention to the bearish, rare gravestone doji candle on 10/29. PRICE always is the number one reason for entering or exiting a trade. We did like how it was behaving but thought we could capture a quick play to the downside, instead of being aware of trying to stick to the basic trend higher. It is a good example of riding a trend, whether up or down, as they are more likely to continue than they are to reverse.
Dead Weight: We have been taking a look at the biggest influencers on the Nasdaq, in terms of weighting the last few weeks. MSFT and APPL look very good, GOOGL CLOSED above the very round 1300 number Thursday and Friday this week (all three of theses aforementioned names are trading right at all time highs). AMZN is on a 4 session losing streak, and below we round out the top 5 components looking at FB. It displayed some relative weakness this week falling 1.4%, and all 5 days CLOSED at or in the lower half of the weekly range, while the Nasdaq rose just more than 1%. It is backing off near the round 200 number like it did in late March, and it was able to spend a few weeks above the figure in July, before backing lower. AMZN and FB are both near correction territory, and each chart trades wide and loose, hallmark bearish traits. MSFT AAPL and GOOGL conversely all trade taut. The Nasdaq is on a current 6 week winning streak its third such of 2019, including the tech heavy index starting the year higher 10 in a row. It should have no problems shrugging off the woes of AMZN and FB, but if any of the other 3 begin to falter, then it would be time to get concerned. Software Firming? I have mentioned it before, and will do so once again. It is impressive how well the Nasdaq is holding up, despite the software sadness if you will. If this group can gets its act together, it could fill in as a possible leader while the semiconductors take a healthy breather. With some of the astonishing moves lower, the IGV does still remain just 5% off most recent 52 week highs. With short memories investors quickly forget that the ETF began 2019 with a powerful 10 week winning streak, and rose 70 handles between January-August. With the top four components acting well, with MSFT ADBE ORCL and CRM less than 7% off their recent yearly peaks, it is not out of the realm of possibility the fund and group can gets its act together and give the technology arena a turbo charge. Let's not forget the HACK that we spoke of recently has as of today CLOSED above the round 40 number and has advanced 12 of the last 13 sessions. Recent Examples: Software, like we mentioned, may be getting its groove back. Couple that with a resurgent European stock market and the chart below of SAP, and how the large cap software name appeared in our 10/25 Technology Note, could turn out to be a winner. We were WRONG about this name as we though good risk/reward would be offered on the short side with a move into a gap fill and a bearish engulfing candle. In fact now it looks like the scenario may be a potential cup base pivot of 140.71. The stock is on a current 5 week winning streak, and has not looked back since an impressive 9.4% weekly gain the week ending 10/11. The pause between July-October now looks like just a rest after a nice 18 of 28 week winning streak between weeks ending 12/28/18-7/5 (during that run 9 of the 10 down weeks fell 2% or less). It sits just 3% off most recent 52 week highs, and feels like there will be a magnetic pull into year end toward the possible entry through a 140.72 cup base pivot.
Amazon Vulnerable? The supertanker in the retail arena (many still consider it a technology play), did not participate in the decent session Thursday. This should not come as to much of a surprise, since as recently as last week it was 300 handles off its most recent 52 week highs. AMZN still makes up more than 22% of the XLY, more than double that of the second largest component in HD, and I have declared before as long as it holds the 1700 number, it should be fine. But that scenario is looking a bit softer as it has been rejected at its 200 day SMA for the second time in as many months. Monday morning quarterbacking will point to the double top near the very round 2000 number between August-October '18 and this July. The ratio chart below shows the smaller more nimble names in the XRT are able to skirt the AMZN worries much better than in recent years. The trend in the XRT's favor began this summer, but it is holding true this week too as the ETF is higher by 2.4%, while the XLY is DOWN .3%. More work is needed to declare the XRT the winner, as it is lower by 9% over the last one year period, as the XLY is UP by the same amount, but momentum is in the XRT camp. Retail Disparity: In every group of course there will be leaders and laggards. Some are more glaring than others. The consumer space does seem to be dominated by fewer and fewer generals, with mega caps like WMT COST and HD among them, but if one was lucky enough to pair them up with some of the weaklings below, careers have been made. The misfortunes of some former best of breed names, and good examples of why not to add to losers, are GOOS and ETSY. One can see the very different directions they have traveled this year. Trends are more likely to persist than they are to reverse, and as the XLY is off fractionally this week so far, both of those aforementioned names are down more than 8%. They are also both more than 40%, not a typo, from their most recent 52 week highs. ETSY is lower everyday this week, and has declined 8 of the last 9 sessions. GOOS was rejected firmly at its 200 day SMA on Monday, and the last 3 days has slumped 14%. Why have they encountered such distress? Who knows, but PRICE is telling you exactly what you need to do, avoid them. Recent Examples: Leisure plays have been somewhat soft with EXPE and MTCH having "experienced" strong drawdowns this week. There has been some discussion how MSFT in Japan is seeing productivity gains from a 4 day work week, so perhaps if this is adopted in the coming years in other countries, the space could flourish. Another name in the arena that has had a tough go of it recently, is CHDN and the chart below is how it appeared in our 10/22 Consumer Note. The stock lost 3.3% last week, and this week is tacking on more losses falling another 4.3% with one session left in the week. It is a good lesson of how the best breakouts tend to work right away. Notice the weakness for CHDN after not being able to CLOSE above a bull flag, reversing intraday on 10/21. Today ended a 5 session losing streak, with all 5 finishing in or at the lows for the daily range. The track seems to be a little slippery for the time being on this one, pun intended.
Running On Fumes? In the diverse world of the industrial arena, there have been some overall interesting developments going on. GE is making a strong push higher by 6% this week, fantastic follow through after the prior week rose more than 15% on nearly double average weekly volume. RYAAY in the last 2 months has transformed itself from worst of breed to best of breed within the airlines. The seemingly perennial leader WM is looking at its potential first 3 week losing streak of 2019, and now trades in correction mode down 10% from recent 52 week highs, and Tuesday CLOSED beneath its 200 day SMA for the first time this year. Looking at an overall feel for the group the industrials have made a nice push over the last one month up almost 8%, only behind the financials. On a YTD basis it now trades as the second best actor among the major S&P groups, behind technology. Dating back to 2007 it never finished better than 3rd, so one has to admire its performance this year. A large contributor to the positive move has been the transports. The chart of the IYT may need a prudent pause however, before a resumption of the uptrend. German Industrial Clout? We have mentioned once this week already that PRICE has memory. Sometimes its good, and sometimes it's the opposite. Below is the chart of Siemens which sports a nice dividend yield of 3.6%, and is the third largest component in the EWG (which is on a current 4 week winning streak up a combined 8.5%). The round 60 number is a familiar area where a tug of war has ensued between bulls and bears. This year it has been won by the latter, as 10 of 12 weeks traded above 60 intraweek between the weeks ending 4/19-7/5, however there was just one weekly CLOSE above. It is now back in that area, after an impressive 9 of 11 week winning streak, and is higher by yet another 2% this week heading into Thursday. Has it ran too far recently, or is this just the beginning with a thrust through a prior area of nagging resistance? Only PRICE knows, so pay close attention to it. Recent Examples: Long time readers of our know we have a liking of round number theory. When that is put to work, with a breakout that is successfully retested, that enhances the probability of a profitable trade. Below could be a good example of that with the chart of ACM, and how it appeared in our last Industrial Note on 10/17. The name is among the heavy construction group, which has seen solid action with peers like JEC MTZ and KBR to name a few. Notice the break above a WEEKLY cup with handle pattern, in a base nearly 2 years long, the week ending 10/18. The round 40 number has seen some touches, and is now looking for its fourth consecutive WEEKLY CLOSE above the figure. Tuesday did record a bearish gravestone doji candle, so it may be tested once again. Give the chart the benefit of the doubt however, as it remains resolute in defending the 40 level.
Providers Providing Relief: With an almost incessant banter revolving around the biotechs, some sub groups are flying under the radar. The healthcare providers have been showing some nice quiet strength up 8% YTD, and the ETF sports a nice dividend yield of 4%. The fund has traded between the very round 150-200 numbers for the last 13 months, and now shows a bullish inverse head and shoulders formation. The chart looks very similar to top component UNH, which makes sense as the name makes up 23% of the ETF. CVS, the number 2 holding reports earnings before the bell Wednesday, and recently broke above a bull flag pattern. ANTM has the look of a beachball being held underwater as trades narrows just below its 200 day SMA. CI is riding a 5 week winning streak, and looking to break a string of lower highs on its WEEKLY chart. Rounding out the top 5 components is CNC, which looks attractive as long as it does not trade too far below the very round 50 number, which would be a failed gap fill. The IHF has run as of late, but still trading 12% off its most recent yearly peak suggests the rally could have legs. Sleepy Giant Roused? With most investors short term memory, it is often good to revisit a big market moving event once the noise calms down. Below is the chart of BIIB, and it is not hard to see something significant occurred on 10/22. The earnings reaction was obviously robust jumping 26.1%, but not much chatter has been delivered since. There is something for bulls and bears to take away from the set up, with the optimists stating that it is for the most part holding its gains after the big ramp up, and it still trades 14% from most recent 52 week highs. The pessimists will see stalling with some bearish candlesticks. Peer AMGN recorded a bearish engulfing candle Monday at the round 220 number, but overall that name is fine technically. BMY which is being acquiring CELG registered a bearish counterattack candle last Friday, and has as much distance between it and its 50 day SMA in quite some time. I would however be a buyer of that name on weakness, as it has advanced 12 of the last 15 weeks. GILD has been dead money for sometime. Let's dig in deeper to BIIB. Recent Examples: In the recent uncertainty surrounding the new issue market, some names have remained resolute. The stock below is about to turn 2 years old this week, and has shown nice resilience. Below is the chart of APLS, and how it appeared in our 10/30 Healthcare Note. It broke above the bull flag, and is pausing not surprisingly near an upside gap fill from the 9/11 session. On its WEEKLY chart, if going into year end it can break above a double top in the 32-33 area from the weeks ending 4/20/18 and 9/13/19, the move can be significant. The stock is looking for a 6 week winning streak depending on Fridays CLOSE, and 2 of the 5 prior gainers rose at least 8%. All of the last 5 weeks CLOSED at or near the top of their weekly ranges, a very bullish trait.