Chartsmarter Insights

The "Squeeze" Is On: Rarely is there any discussion of the discretionary group without mentioning Amazon. If makes up nearly one quarter of the XLY, and obviously will have a dramatic impact with its PRICE movement in the fund. There are a few technical factors to like with the name, first as can be seen below, as the Bollinger Bands are beginning to "squeeze", meaning they are contracting as the narrowest range in the last 6 months (they were very compressed in late May as well). This forecasts a very powerful impending move, although the direction is ambiguous. Most likely the next leg will be higher as it trades sideways following a big advance of 105.7% between late March and mid July. The stock has CLOSED the last 3 weeks very taut, all within just .6% of each other. Breaks above that kind of consolidation are often very powerful, especially near all time highs. As Glen Frey used to sign in the "Heat Is On", and he could have been talking to the shorts "the heat is on, on the street (Wall) Inside your head, on every beat "tick"). The shorts must be getting very anxious here.

Software Stalling: The barbell approach was on full display this week once again, as the two best performing major S&P sectors were industrials energy, each up in the neighborhood of 3%. Technology via the XLK was higher fractionally by .2% (the last 3 sessions CLOSED extraordinarily tight within just 9 cents of each other). Whatever ones bias is they could present a solid case in their defense, as bulls could mention it was good digestion of the prior week advancing a powerful 3%. Bears would point to the WEEKLY doji candle that was recorded this week right at all time highs. The doji candle, very rare, is often a good indicator of a possible prevailing trend change. Below is a concern within technology, with the WEEKLY chart of the software ETF, the IGV. As the XLK idled this week, some leaders within software buckled a bit with names like SHOP declining 6% (last 6 sessions have CLOSED at or very near lows for intraday range). OKTA battles the very round 200 number with each day this week above 200, but only one CLOSE (each day finished below its 50 day SMA this week as well). It is also down 10% the last 2 weeks. ZM is now 13% off most recent 52 week highs, and has recorded 4 straight CLOSES below the 50 day SMA.

Seasonality Shrug Off? Consumer discretionary seems to be the Rodney Dangerfield group, that gets "no respect". To its credit the sector has been sitting chilly in this long horse race, riding just off technologies lead. In fact the XLY is the second best major S&P sector on a one, three and six month period and also YTD out of 11. Perhaps the reason for the silence considering that exemplary action is how the industrials have driven themselves into the spotlight, as technology fades ever so slightly from the picture. Or maybe it is the chatter with the financials and healthcare as we head into an election campaign. Or it is being overshadowed with the materials as gold and silver are trading in a volatile manner. The discretionary group is enjoying being outside the spotlight, and another reason to marvel at their altitude, is that they are ignoring some weak seasonality trends as seen below with the XRT chart. Maybe this will start to weigh at some point but PRICE action among leaders so far is attractive. 

Equipment Check: There is some notable bifurcation going on in the healthcare arena. As the biotech arena slowly has air deflating from its balloon the equipment space is happily inhaling it. A glaring discrepancy is taking place this week thus far with the IHI higher marginally, while the XBI is off 4%. With the IHI within spitting distance from an all time high, just 1% off it, the XBI is still hovering in correction mode, off by 10% from most recent 52 week highs. From a pure technical standpoint the IHI is trading very tight with the last 3 weeks all CLOSING within just 1.4% of each other. Its chart sports a bull flag formation just underneath the very round 300 figure, and a CLOSE above 297 carries a measured move higher of 30 handles. Some leaders in the space could take a cue from AAPL and TSLA and split their stocks, as ABMD is trying to maintain altitude above a bull flag breakout at the round 300 number. Peer MTD is honing in on 4 figures with the 1000 number. PEN and TMO round out the triple digit names, and kicking the tires within the equipment club is conveying everything is ok for the time being.