Housing Happiness: During a week that seemed so positive, with many strong intraday reversals, keep in mind every major S&P sector lost ground. And the ones that "outperformed" were your defensive groups, like staples utilities and real estate that all fell less than 1%. Give credit to the XLY which did bounce off a rising 50 day SMA Friday, and on a YTD timeframe has still risen nearly 19%. Looking a bit deeper into the space, the homebuilders have been the best acting subsector with discretionary. They most likely are benefitting from a scenario going forward which sees little chances of interest rate increases, which is good not only for them, but the overall markets. When Discount Is Premium: Discount plays are traditionally known for their ability to thrive in downturns, but they show nice appreciation as well. Consumers have become much more savvy and have changed their spending habits. Below is a ratio chart comparing COST to BJ which recently came public once again, with the latter losing more than 4% and now sitting 17% off most recent 52 week highs. Contrast that with COST, which rose 1% this week and now trades just 1% off recent all time highs. It is higher 15 of the last 20 weeks, and this week bounced off its rising 50 day SMA for the first time since a break above a cup base pivot 240.98 taken out on 3/28, often a good entry point. Examples: There were few shining examples of good moves within the retail arena this past week, with the exception of MCD WING and COST. Below is another name that recorded a nice weekly move, OLLI and how it was presented in our 5/7 Consumer Report. It lost ground just six sessions in all of May and is on a current 7 week winning streak and sitting at all time highs. Friday registered its first CLOSE above the round 100 number, and this name deserves plenty of your attention with its standout week, while peers struggled.
Intel An SMH Distraction? The semiconductors are putting in their worst week of 2019 down almost 6% heading into Friday. The SMH has fallen everyday this week, but to its credit it did CLOSE above its 50 day SMA Thursday recording a bullish hammer candle. Volumes trends are worrisome, and the spinning top WEEKLY candle ending 4/26 off the round 120 number, is so far astute in predicting a reversal of the prevailing trend. A big drag on the ETF is INTC, which is almost certain to undergo a 3 week losing streak down nearly 10% so far. The largest component also fell more than 10% the week ending 4/26, and a red flag was the quick reversal after such a promising break above a cup base pivot of 57.70 the week ending 4/19. We know the best breakouts tend to work right away, but perhaps its weakness is hiding the strength in leading semis within the SMH. I believe the latter. "Old Tech" Nordic Knockdown: Over time creme tends to rise to the top. The meaning of the first sentence explains "a good person or idea cannot go unnoticed for long". Well below is the ratio chart comparing ERIC to NOK. ERIC is stepping up, and its outperformance is certainly helping, but the weakness of NOK is contributing a lot as well. It is on a 3 week LOSING streak down more than 13%, and this week is following through lower by another 4.2%. It is lagging badly on a YTD basis down by 15%, while ERIC is higher by 4% (over the last one year period the contrast is even starker with Ericsson up 16% and NOK down 22%). ERIC recorded a bullish harmai cross Wednesday, but was negated today. I still think this is a good entry with a stop below its 200 day SMA, a line it did NOT undercut late last year when the vast majority of names did. Examples: Good things take time. It also applies to stock charts. A good example is the chart below of ATUS, and how it appeared in our 5/6 Technology Report. Tops in individual names, or indexes tend to show very wide and loose trade in a volatile fashion. Bottoms are just the opposite as they should be rounded and formed patiently. If it does so gradually, even better. As we see on the WEEKLY chart of ATUS here, the bottom in the current cup base took its time dating back to the beginning of January '18. It broke above the cup with handle pivot off 22.64 a month ago and most breakouts are retested. This one is no exception, and look for a grind higher from this broadband play.
Banks Unfazed By Rate Chatter: With this weeks loss of 2.6% heading into Thursday it looks as if its 6 week winning streak will be snapped. It recorded another 6 week winning run between weeks ending 12/28/18-2/1 before the week ending 2/8 lost 1.5% (the next 3 week all gained ground by a combined 4%). Nothing goes up in a straight line, but this group seems like it's much more fit to keep its overall uptrend in place. It is the best behaved major S&P sector over the last one month period, and the space is not being drained by the chatter of interest rates not going higher, and even some calling for the next move to be lower. Respect the incipient trend, until it no longer exists. Payment Platform Winner Squared Away: Comparing big names in subsectors of their respective overall groups can yield valuable information. The bifurcation with PYPL and SQ is eye opening. PYPL sits just 5% off most recent all time highs, while SQ trades 33% off its own most recent peak. Since SQ hit a wall at the very round 100 number the three sessions of 9/28-10/2/18, it has weakened dramatically. It is lower 2 of the last 3 weeks with the 2 drops falling more than 4 and 6%, and all 3 CLOSED in the lower half of the weekly range. It trades underneath both its 50 and 200 day SMAs, whereas PYPL is doing just the opposite. Examples: The banks are trying to make a stand here and names like JPM and BAC look firm. GS looks to be moving back toward its 200 day SMA, which happens to align with the very round 200 number. Below is another name in the arena and the chart of FRC, and how it appeared in out 5/1 Financial Report. It is not far from recent 52 week highs like JPM and BAC, but has a cloudy technical picture with good risk/reward to the downside. The stock has fallen 7 of the last 10 sessions after dubious candlesticks on 4/25 and 4/29. With several bearish candles at all time highs, the short scenario has a better chance of working out.
Staples Sound: Over the last one month timeframe only five major S&P sectors can claim they are in the green. The financials have acted the best, and the staples a close second. There is some nascent strength here in the last few weeks, but on a YTD basis they are the seventh best behaved group. Below is the ratio chart comparing the staples to the S&P 500, and they could be on the verge of building the right side of a good looking cup base. There has been some big bifurcation in the group with power seen in food and personal products and weakness in tires and drug retailers. Names within the sector are offering nice capital appreciation potential, with dividend yields. Pepsi-Coke Challenge: For those old enough to remember the famous battle over soda supremacy back in the 1980s, Coca Cola was considered superior back in that day. But fast forward to the present and there is no question which is the better equity. PEP sits just 2% off most recent 52 week highs, while KO sits 6% off its own peak. On a YTD timeframe PEP is higher by 13%, while KO swims near the UNCH line, and both carry nice dividend yields better than 3%. Looking at their charts, PEP trades in a much tauter fashion, hallmark bullish traits compared to KO's wide and loose trade. The Vitamin Water KO has in its umbrella is spot on though. Examples: Good things come to those for wait. In stock market jargon its called patience and waiting for your spots. Below is the chart of EL and how it appeared in our 4/26 Consumer Staples Report. This stock reported earnings on 5/1, and the reaction the next day was a 10 handle negative reversal after hitting a wall at the round 180 number. A move back into the 165 level would be would be its initial touch of its rising 50 day SMA (best seen on daily chart), often a good entry point, following a break above a 158.90 cup base pivot on 2/22. There should be a nice foundation there, pun intended.
The Happy Meal for Investors: Some may be disappointed when they see leadership from supertanker names like MCD. It shows defensiveness to them. To me it's all about PRICE action and the chart below of the casual dining leader is just what you want to see. Smooth, gradual trade and it is higher 11 of the last 12 weeks, and all 11 CLOSED in the upper half of the weekly range (just one week rose more than 3% ending 3/15). It sports a dividend yield of 2.3%, and the leaders in the dining space have been strong. One wants peers acting well and CMG and WING, latter reports after close Tuesday, are fine examples. All three of the names mentioned in this paragraph are right at or very near all time highs. Running Away From Global Giant: Adidas not only displayed good relative strength today, but is higher 12 of the last 19 weeks which sounds tepid, but it has gained 40% since the late December lows, and is really taking it to the general in the group NKE. On a YTD basis ADDYY is higher by 36% compared to NKE up 13% in '19 thus far (last week while ADDYY rose 9%, NKE dropped 3%). The stock is trading right at all time highs, and has a higher dividend yield than NKE too at 1.33%. Monday started on the right foot, refusing to be subjected to the selloff is yet another bright sign. Examples: On days like Monday it is always good to see which names will shrug off the weakness best, as they are often the ones that will attract capital into them going forward. Below may be one of those examples with the chart of ANGI, and how it was presented in our 4/30 Consumer Report. This name is trying to reestablish itself as a leader and last week jumped more than 13%. The right side of a WEEKLY cup base is looking much better after the move through the 17.50 area that was 50 day SMA resistance. Monday it was higher showing it may be ready to keep building on its recent big gains.