Consumer Picky? Many declare we are in a "rolling bull" market, and that it is a negative as certain defensive spaces are taking the lead, while growth related areas pause. But technology is still asserting itself with the XLK higher by 28% YTD. The conservative group they speak of is real estate, as the XLRE is the third best performer up nearly 24%, but just above it is the XLY in the third spot. The ETF is higher 4 of the last 5 weeks, and the lone down week ending 6/28 CLOSED at the top of its weekly range. It has made its presence felt over the last one month period being the best major S&P sector performer up nearly 6%. Again bears will mutter that it is mostly the discount names showing the way within retail, but respect PRICE action among the individual names that deserve it. Search and you shall find. Some Breakups Are Not Hard To Do: Consumer have changed not only their spending habits, but how much they value their time. The casual dining space caters to both of the aforementioned issues. They get there food quickly, and the wallet does not take a beating. Standouts that have taken advantage of this have benefitted dramatically. Stocks like WING are up almost 50% YTD, and below is two other heavyweights in the arena. Interestingly CMG was a spinoff from MCD back in early 2006, but both have gained handsomely as of late. There may be some reversion to the mean however as the ratio chart suggests. CMG has risen 74% in '19 thus far compared to MCD higher by 20%. Both names have recently broken above bull flag formations, and expect both to grind higher for the remainder of the year. Examples: Bull flags happen to be one of our favorite patterns, and for good reason. A healthy consolidation after a strong move higher shows a reluctance with the bears being able to push the stock down. They work on both the bull and bear side and are continuation formations, meaning they break out in the prevailing direction. Below is a good example with the chart of SBUX and how it appeared in our 7/2 Consumer Report. Notice after a 10 point run in early June, it traded sideways for the last couple weeks. Give credit for a decent showing Monday on a somewhat soft tape too.
Nasdaq Proxy: Apple once was the largest component in the Nasdaq, now it is third behind AMZN and MSFT, but it still commands respect. If there is a proxy for the Nasdaq, it is AAPL. Especially after its recent run back above 200, a number that gave it plenty of trouble (Mondays CLOSE above was the first in nearly 2 months as 6 sessions between 6/18-27 was above intraday but unable to finish north of it). A healthy AAPL should be viewed as a "risk on" feeling for not only technology, but the overall markets. It is the second largest name in the S&P 500, and it is one of just 6 names in the DOW over 200, and keep in mind that is a price weighted benchmark. The stock still trades 13% off most recent 52 week highs, and if it should hit all time highs sometime this year, put on your seat belts. Software Acting Anything But: Our readers know we like to keep a check on the two most important groups within technology. Semiconductors seem to be making frequent pushes, but they are having a tough time knocking off the perennial leader software. Over the last one year period the IGV holds a commanding lead higher by 21%, tripling that of the SMH up 7%. On a much shorter time frame the IGV was a powerful outperformer rising 3.1% this week compared to the SMH eking out a .6% advance. Do not count out the SMH yet, as it has the look of a handle developing on its current cup base. But on an individual stock basis software has an abundance of leaders, and look for the group to continue to make their presence felt. Examples: New highs tend to beget more new highs. Things in motion then to stay that way, whichever the prevailing direction is up or down. Add to that a name that is within a strong group and your odds of success become more pronounced. Below is the chart of CDW and how it appeared in our 7/1 Technology Report. This name is on a current 7 week winning streak and is now a couple of handles above the suggested entry. This holiday shortened week it rose 2.5%, after the prior two rose a combined 6.4% in energetic trade. Look for higher prices going forward.
Good Faith Deposit: Market participants have been burned multiple times by this group, but renewed faith in the technicals could prove profitable. Over a 3 month look back period, the XLF is the second best actor among the major S&P sectors, outdoing even technology. The 3 weeks ending between 6/7-21 all CLOSED very taut within just .12 of each other, and that type of coiling action often leads to powerful moves. Last week did jump 1.4%, and look for more follow through. C recently broke above a cup with handle pivot, JPM has acted beautifully since filling in a gap on 5/31 from the 4/11 session and GS is trading above the WEEKLY CLOSE ending 1/18 which ripped higher by 14.5%, its best weekly gain in at least 2 1/2 years. And this is all occurring with a 10 year below 2%. Retail Investor Providing Clues?: The saying goes the retail investor is not "smart money", to put it nicely. They can often be used as a contrarian force, pessimistic near highs. If the chart of two of the biggest names in the arena, AMTD and ETFC, are telling us anything at all, it may be that it the benchmarks are most likely looking at more new highs. The price action is revealing in both of these stocks with AMTD and ETFC lower by 18 and 28% from their most recent 52 week peaks. Perhaps there is something more to it, like the competition of Robinhood, but the reluctance of the retail trader to put new money to work with his or her skeptical stance speaks volumes. Until this cynical behavior turns exuberant look at the markets with a rosy lens. Examples: Payment plays have been a big disruptive force in the financial space. Names like GPN, TSS and nearly one year old PAYS have been brilliant actors. The firmness in the group is not contained to domestic names. Below is the chart of PAGS, a Brazilian play, and how it appeared in our 6/17 Financial Report. Full disclosure the 34.50 entry point was never hit as it traded as low as 34.93, but the chart demonstrates not only the power of the bullish inverse head and shoulders pattern, but shows why one should always look at longer time frames, with the WEEKLY chart here. This stock ran into trouble at the round 40 number, last March so it could be a double top here, or on the brink of a huge breakout. Potential trigger is 40.07.
Retail Reveal? We have spoken about the disparity in the weightings between the XLY and XRT, and as glaring as they are one could come away with conclusions. One we mentioned in our previous consumer note was that concentration could be a powerful force. To take a different viewpoint, the weakness in the XRT could be speaking to a softness in the overall consumer space. The ETF still trades 20% off most recent 52 week highs, and one positive is how tight the last 3 weeks have CLOSED all within just of .27 each other. That type of action usually leads to explosive moves, although the direction of the move is normally a continuation of the current trend, which is lower. Driving Away: In the world of Uber and Lyft (both were sharply lower Monday), one could make the assumption that Avis and Hertz would have a tough go of it. However the charts are hanging in there, but as often is the case one will be acting better than the other. Neither of these names would be your so called leaders, but Avis is now trading 11% off most recent 52 week highs, while HTZ is nearly triple that at 30% off its most recent peak. CAR is working on a 4 week winning streak, where as HTZ recorded a nasty reversals at the very round 20 number the weeks ending 5/10 and 6/21. That path is certainly not on cruise control. Examples: Travel names in the leisure space have been in the news as of late. Last February Priceline changed its name to Booking Holdings. Other names like TZOO, which is an illiquid name, have been active as it blasted above an 18.43 cup base pivot on 5/6, but the joy was short lived as the breakout faltered and it is now 34% off most recent 52 week highs. Below is the chart of EXPE and exactly how it appeared in our 6/25 Consumer Report. The breakout occurred last Friday rising more than 2%, and let's look for some follow through soon, as we know the best breakouts tend to work right away.
Chips Continue Climbing Wall of Worry: The semiconductors are getting their mojo back. There is still work to do and we previously mentioned that the space needed a general to guide the group, preferably two or three leaders. XLNX, the prior leader is now higher by more than 11.5% the last 2 weeks, although it is hard to view this as favorable as it still trades 17% off most recent 52 week highs. A more likely candidate is IPHI, however it is grappling with the very round 50 number for the third time since 2017, but it sits just 3% off its most recent peak. There is still time for some future general to make its presence felt, as the ratio chart continues to improve against both software and the Nasdaq. "Old Tech" On Watch: Many of mature technology plays have been acting peculiarly as of late. AAPL enjoyed a 30 handle move since the first day of June, but has been unable to CLOSE above the round 200 number, even though it was above the figure 5 of the last 8 sessions. VMW, a bastion of strength the first 5 1/2 months of 2019, is now nearly in bear market mode down 19% from most recent 52 week highs. INTC fell 1.5% Thursday, on a day the SMH rose by 1.3%. The most intriguing play here may be QCOM. The stock enjoyed a 3 week combined move of 52% the weeks ending 4/19-5/3, and now is at an inflection point as we look at the chart below. Examples: Clusters of evidence is something we mention during our daily major S&P sector notes. This occurs when two or more entry reasons for entry happen at that same price. Below could be a good example of just that with the chart of BOX and how it appeared in our 6/19 Technology Report. In this particular example an upside gap fill formed in conjunction with a previous break below a bearish descending triangle. Shorts have been tough to come by in 2019, but this name was already nearly 40% off most recent 52 week highs. That relative weakness speaks volumes in this type of strong overall environment.