Amazon Envy: Can the bifurcation of the two most popular retail ETFs be explained by a single stock? The case can logically be made with the XLY currently trading just 1% off most recent 52 week highs. The performance of the XRT is a far cry from that, now lower by 16% from its most recent peak. The starkly different compositions of the funds has a lot to do with it. AMZN carries just a 1.3% weighting in the XRT, while the tech behemoth represents nearly 24% of the XLY. AMZN has run nearly 600 handles from the late December lows, and there could be a very valuable moral to the story. Concentration works better than diversification, when one has the right stocks. Builders Momentum Building: The ITB just enjoyed its first 4 week winning streak last week, for the first time since late December '17 to early January '18. The ETF has lost ground just 3 times in all of April so far, and the 4/2 session was lower by a whopping 2 pennies. DHI its largest component at more than 14% is in the midst of a 16 month double bottom base. LEN recently broke above a cup with handle base, with the trigger aligning with the very round 50 number. Below is the ratio chart of the ITB compared to the S&P 500, and its strength shows no sign of stopping with interest rate weakness a tail wind. Examples: Name changes rarely go over very well. Often it is an attempt to rid oneself of a poorly run company or reputation. Of course there are exceptions to every rule, and the Alphabet name change has been pretty good (AAXN from TASR not so bad either). Below is the chart of TPR and how it appeared in our 3/5 Consumer Report. The former COH now trades 45% off most recent 52 week highs in a thriving overall market environment. It has lost ground 8 of the last 11 weeks and this week is off to another rocky start down nearly 6% already. This stock is now below its December lows and is challenging the March lows here too.
The automobile space has been slow to move over the years, pun intended. Names like F have seemed like dead money, HMC still trades 17% off most recent 52 week highs (give GM credit as it battles here with the round 40 number and still pays a handsome dividend of 3.8%). Below is the chart of RACE and how it appeared in our 2/27 Consumer Sector Report. And later we will take a look at its current chart. We always like to mention that the best breakouts tend to work right away and leading stocks will give investors a chance to add to their positions on the way UP. Here is a good example with the present WEEKLY chart of RACE. It has move 10 handles since the flag breakout above and now one can enter or add to with a buy stop above a 142.62 double bottom pivot. The name trades just 7% off most recent 52 week highs, while F is 21% off its own highs, TSLA is 29% off its own recent peak, and NIO is 65% off its September highs.
Canary Candles: The Nasdaq is flirting with all times highs once again, and there is the tendency to think a double top is being formed. It pays to be a skeptic as investors should always try to manage risk and take care of the downside. Other than that savvy market participants let their winners run. I happen to be a big fan of the candlesticks, although there are always secondary to PRICE action by itself. But they can give good clues as to what can potentially happen. This week the Nasdaq CLOSED less than 2 handles under the very round 8000 number. Monday, Wednesday and Friday recorded doji candles (Thursday a bearish engulfing) which often signal a fatigue of the underlying trend. Will they end up being yellow birds in a coal mine? Mister Softee: The last couple of weeks we have been stressing the importance of strength in AAPL to the overall markets being the Nasdaq's largest component. It has acted very nicely up better than 2.5% this week. This week lets see another "old tech" influencer in MSFT. These two names have leapfrogged each other recently for the worlds most valuable company. The behemoth will report earnings next Thursday after the close (last report fell 1.8% on 1/31, after the prior FOUR all rose by 5.8, 1.8, 1.6 and 2.4% on 10/25, 7/20, 4/27 and 1/31/18). On its WEEKLY chart it has acted well POST breakout from a nearly 5 month cup base pivot of 116.28 taken out the week ending 3/2. Examples: Below is the chart of HPE and how it appeared in our 4/8 Technology Report. This name is higher now 15 of the last 17 weeks, and is acting much better than HPQ which spun the name off in November '15 (HPQ is now 24% off most recent 52 week highs and has made lower highs and lower lows since the beginning of October last year as the Nasdaq has been doing just the opposite). HPE has lost ground just 3 sessions in all of April thus far, and is now 2.7% above a double bottom breakout pivot of 16.22 taken out on 4/10. The best breakouts tend to work out right away and this one is showing good action POST breakout.
Good Offense Means Strong Defense: The industrial conversation is often dominated by the transport names like the rails, airlines or truckers (JBHT threw is a clunker this week after earnings and is down more than 7% this week thus far). A space that has not garnered much attention recently are the defense names. The stocks have been bifurcated with GD and RTN down 24 and 21% from their most recent 52 week highs, but LLL is off just 4% from its recent peak. It is trading right at a 215.46 cup with handle breakout pivot taken out on 4/12. Let us take a peek at the chart of the ITA ETF. BA has weighed on the fund, but other components are giving the charts complexion a decent look. Destination Unknown: What determines a stocks value? Fundamental investors will declare its the balance sheet, management, etc. Technicians simply follow PRICE action. Both are correct, and both work, but the ultimate arbiter is PRICE as that is how one is viewed correct or not. Let us look at a ratio chart of two trucking names comparing ODFL to JBHT. The recent vertical move was a reaction to JBHT's earnings report, but overall why is JBHT now 25% off most recent 52 week highs and ODFL is just 8%. Was it an inferior management team? Whatever the reason, it is irrelevant. PRICE tells you all you need to know. Buy strength and sell weakness. Examples: Federal Express used to be the clear leader in the delivery space. To be frank there are not a plethora of names to monitor in the space, but this name was also a global economic bellwether. That may not be the case anymore as the stock currently trades well into bear market mode down 26% from most recent 52 week highs. Rival UPS is acting better but on a YTD basis FDX has risen more higher by 23% as opposed to UPS up by 18%. Sure it is from a much lower plateau, and below is the chart of FDX and how it appeared in our 4/12 Industrial Report. It is coming into a gap fill at the very round 200 number from the 12/7/18 session, and should be very telling how it acts there.
Tens In Focus: One of the oldest intermarket relationships is the way interest rates and financial stocks correlate (yields and stock prices too, but yields have been in a downtrend as markets rise powerfully). The banks could get a lift if this nascent strength in the ten year continues. Below is the chart, and it displays lower highs and lower lows, and one has to wonder if the new found vigor is just a dead cat bounce. It is now above a bearish descending triangle, and moves that break in the opposite fashion as they normally do, can lead to robust moves. On a weekly basis the ten year is looking for back to back weekly gains, for just the SECOND time since last September, to demonstrate just how soft the instrument has been. Round Number Roadblock? We have spoken about what AAPL means to technology and how it is battling with the very round 200 number, and that battle continues here. Not as important as it once was to the banking space, GS is currently witnessing rejection at the same number. It last approached 200 after its best day in 10 years, after its well received 1/16 earnings reaction. It was unable to make much leeway above the level, until recently with 9 of the last 10 sessions CLOSING above 200 (the lone exception was 4/15 its latest earnings report and finished just 9 pennies below). Examples: The asset manager space has been a mixed bag, but when investors look to deploy their capital they should look where the creme rises to the top. Below is a good example of that with the best of breed FII and how it appeared in our 3/15 Financial Report (that was the last time we profiled the group as it was an overall laggard). It is also a good example of how the best stocks offer add on buy points, with FII acting well POST breakout from a 27.28 cup base pivot taken out on 2/6. Round number theory came into play with the bull flag trigger forming right at the 30 number. Since the breakout on it has advanced 10%. Truth be told or stop was too tight, but it did find support at an upward sloping 50 day SMA on 3/25.