Chartsmarter Insights

Google It:  This week may be a little lighter on the earnings front than last week, but some significant names are REPORTING numbers. AMD is lower 8 of the last 11 months and it would not be surprising to see it move toward the very round par number in the near term. It is not encouraging that it is now well underneath the former cup with handle breakout pivot of 132.93 from December 2023. SPOT is a European communication service play that has behaved brilliantly in the face of a soft tech space and is now above a cup base trigger of 506.57. A move back toward that level if a negative earnings reaction occurs should be bought. Perhaps it bodes well as NFLX scored a solid beat and was stopped cold right at the very round 1000 number, registering a bearish filled-in candlestick on 1/22, but has since carved out a bull flag formation. A break above 1005 could see a measured move to 115o. Below is the daily chart of GOOGL which is just above the very round 200 number, with 3 consecutive CLOSES above the figure and has broken through the bull flag there. The WEEKLY chart broke above a cup base trigger of 191.38 and bears had ample time to disrupt it but that never happened. Look for a measured move toward 234 sometime in the first half of 2024.

Defensive Posture: As the tech-heavy Nasdaq once again has issues at the very round 20000 number and upside gap fill from the 1/24 session is it time to park some capital in a conservative stance? Consumer staples get very little attention but may be deserving of your funds. Notice seasonality wise February tends to be a flat month but perhaps investors will be looking forward to March which over the last 4 years (recency bias) has easily been its best advancing every March since 2021 by an average of 4.5%. Of course, good stock pickers can provide alpha there and outperform. The WEEKLY chart below of the XLP shows a possible gap fill and then a double bottom base can set up. In January the MONTHLY chart successfully retested a bull flag breakout. Looking at a couple of names inside the space that look somewhat attractive include HSY and EL. EL is now at an inflection point and a move above 85, both resistance and support the last 6 months, next week could see this push swiftly toward the very round par number. And what happened with all the HSY euphoria surrounding MDLZ? Market participants as usual were reckless and now that the jubilation has subsided could it be worth another look near 145, where it previously broke above a MONTHLY bull flag.

Goliath Energized:  Amazon and Tesla will always dominate the discretionary conversation as they make up the lion share of the XLY. Between the two of these heavyweights, they make up almost 40% of the ETF. As they go so does the fund. But is the XRT looking to turn the table on the XLY? The daily chart of the XRT below is saying to the XLY to hold on as it may be waking up, not long after failing to break above a bull flag formation. It broke forcefully above a double-bottom trigger Thursday and it is showing that the consumer group has solid breadth and seeing some rotation into it. On a YTD basis they are both up in the 3-4% neighborhood, but the smaller (David) provides a larger dividend yield of 1.5%, compared to the XLY at .7%. The WEEKLY timeframe looks attractive as well as its recent pullback successfully retested a prior bullish ascending triangle breakout. Its MONTHLY chart looks to keep the one month up and one down since last March intact as a bullish hammer takes hold with just Friday left in January. Par feels like it will have a magnetic pull into the second half of 2025 where it last touched with the bearish shooting star candle in November 2021. 

"Electric" Earnings: As a bevy of big earnings announcements were reported this afternoon, some of rising on "weak" numbers. This is classic bull market behavior, but I do not think the recent volatility we have experienced is going anywhere. The daily chart below of TSLA showed a 100 handle decline in just the last 6 weeks and Wednesday CLOSED right at the rising 50 day SMA. The initial reaction was right down toward 365, which I still feel will be touched again before the rally resumes. The WEEKLY chart still has to deal with the bearish shooting star and doji candle the weeks ending 12/20-27, but those are at much higher PRICES. This could be reminiscent of the prior WEEKLY doji candle recorded the week ending 7/12/24, which started a 5 week losing streak. We have spoken about this before but Friday marks the end of January and bulls want to see a CLOSE above the 414.60 cup base pivot in a pattern that began with the MONTHLY doji candle in November 2021. Notice December was well above it but did not manage to CLOSE above and if one has a sanguine view on the name it would not look good with 2 consecutive MONTHLY CLOSES below the 414.60 trigger. It has Thursday and Friday to make sure it does. Buckle your seat belts. Will this one has gas to pull off the breakout?

Toppy Behavior: I will state once again that I feel 2025 will be the year of stock picking, against the individual indexes. In this light, some stocks will advance despite a potential soft benchmark. Sure a rising tide lifts all boats, and vice versa, but names that exhibit relative strength should be admired. That being said the Nasdaq continues to trade in a very volatile fashion which is indicative of toppy behavior. My mind will be changed when the very round 20000 number is decisively taken out to the upside. Until then call me skeptical. The rest of this week will see the tech heavyweights REPORT earnings and the Fed tomorrow morning could announce a cut which would give a bid to long-duration assets. My opinion, not advice, is the gap from late last week, which completed the bearish island reversal (after the gap up last Wednesday) will be filled then more softness to follow. Of course, I could be very wrong and PRICE will let me know.