Chartsmarter Insights

Heavyweight Bifurcation: The two giants inside the XLY dominate the vast majority of attention. TSLA has fallen dramatically since 12/18 when it recorded a bearish hanging man candle and is now 33% off the highs made that session, and has now fallen to "just" the 10th most valuable company on the planet and is in jeopardy of losing its trillion-dollar status. The daily chart below of AMZN has put its head down and ignored the noise. It is trading in a much tauter overall way, hallmark bullish trait, than some of its mega-cap tech heavyweights like MSFT, GOOGL, and NVDA. As shareholders look forward seasonality in March is at a perfect 4 for 4 in CLOSING higher than where it started since 2021 with an average gain of better than 4%. With TSLA in freefall, AMZN is going to have to do much of the heavy lifting in the XLY. There is only so much the other components can do, even with the MCD and HD at almost 12% of the fund. The latter is trying to start a handle on a cup base and the potential pivot would be 426.29. Notice how it is outshining rival LOW on the ratio chart, as HD is 5% off its most recent 52-week highs while LOW is double that off 10% from its own annual peak.

Software Loafer: Software overall has taken the baton from the semis as seen here on the ratio chart comparing the IGV to the SMH. Notice how it retested the break above a cup base from early November during the start of 2025, and like most leading instruments do it has now formed an add-on buy point above a bull flag pattern. Below is the daily chart of the second largest holding in the IGV in MSFT and one can see its struggles. It is now 12% off its most recent 52-week highs and has now formed a bear flag formation after its second straight 6% earnings-related decline on 1/30 (after its Halloween debacle). Its WEEKLY chart shows the frailty is nothing new as it has been underperforming its software peers since last summer. I believe it needs to shake the trees for some soft shareholders and a possible double-bottom base may start which would retest a former bull flag breakout from the first week of 2024. Notice it is potentially going to record its third consecutive WEEKLY CLOSE below its 50 WEEK SMA for the first time in almost 2 years. Contrasting it too perhaps the most important semi-play NVDA one can see how both are trading wide and loose in an erratic fashion, hallmark bearish traits.

Doctors Appointment: Copper has been having itself a week. The daily chart shows a surge of 3% as it broke above a bullish inverse head and shoulders trigger of 4.45 (notice the double bottom at the round 4 number on 11/14 with a hammer and a bullish morning star completed on 1/3) which carries a measured move to 4.90. FCX is a name many are focused on and this rose every day last week recording a bullish WEEKLY engulfing candle adding 6.7%. The last time it registered one the week ending 11/17/23 jumping 6.8% set off a nice overall run higher (notice the doji candle just 2 weeks before). The 34 level has been an area of a lot of PRICE support memory. This name still trades more than 30% off its most recent 52-week highs while peer SCCO is 25% off its annual peak it made last May. Friday it was rejected at the very round par number putting up a bearish shooting star similar to the candle from 1/17 which saw the stock decline by a rapid 12% just 2 weeks later. Notice the strength it has shown against FCX over the last 2 months, and I would expect this relationship to continue on a relative basis, although both can appreciate on an absolute one.

Banks Looking Bright: Rotation continues in the market and on a YTD basis heading into Wednesday “value oriented” sectors were still firmly in control. Topping the list is healthcare higher by 8%, followed by the financials. Below is the daily chart of the XLF and we have been constructive on the space since the bullish piercing line candle. That set off a nice run with the fund advancing 9 of the next 10 sessions. That day also filled the huge election-related earnings gap from 11/5. The best thing this could do now would be to consolidate after that robust run. Candles have been instrumental near-term tops with a couple of dojis, the first a gravestone doji on 11/27, which sent the ETF scurrying lower 11 of the next 14 days. This time around, at least so far, it does not seem to be affected by the one last week. We frequently like to check in on the top holding BRK/B, at nearly 12%, as this will have a big impact on the group. Wednesday it rose 5% and is approaching a double bottom with handle pivot of 475.03. Fellow top 5 holding V is sporting a solid MONTHLY look, even though it has lagged rival MA over the last decade. The break above the bull flag trigger of 275 carries a measured move to 380. Both these names can keep a bid under the sector if they keep their solid uptrends intact.

Rough Diamond:  As the unkempt trade between the very round 19000-20000 numbers rambles on some new bearish patterns are presenting themselves. Remember this awkward, erratic action is often associated with topping behavior, and when the tech-heavy Nasdaq makes contact with 20000 some bearish candles have been produced. Notice here the spinning tops on 12/12, 12/17, and 12/26 followed by a doji on 1/6 and then finally a dark cloud cover on 1/24. These all indicate fatigue and it feels like the benchmark is running low on stamina. I have spoken about this in lengthy fashion as of late, but I will be open-minded if this 20000 barrier is taken out to the upside as I know markets do their best to confound the most. The WEEKLY chart I have mixed emotions with the bearish RSI divergence with a higher low during last summer and Q4 as PRICE made a higher high. But one could make the case for a bull flag and a break above 20K carrying a measured move to 23000. Technology overall via the XLK is the worst of the major 11 S&P sectors YTD (coming into Tuesday and only one negative). Bulls would say it is likely oversold, bears that the pain could be just beginning.