Chartsmarter Insights

Biotech Bandwagon: There is a saying once the train has left the station, stay onboard and enjoy the ride. If the train comes back to pick you up there is probably something wrong with it. One could interpret this as leaving an investment in "cruise control" and let the trade play out, of course as long as it is still working. The chart of the XBI below could be a good case. Between early May and early June the bears had all the reason to push the fund lower, but was unable to do so. Multiple bearish candlesticks could not do the job, and in the middle of June PRICE caught up to a comforting, upward sloping 50 day SMA. A strong, recent 8 session winning streak ensued as the bears gave in, and now a bull pennant has taken shape. The XBI was not lifted on a powerful session Monday, as it was essentially flat, as healthcare overall via the XLV was the "worst" major S&P sector up .9%. ICPT a big laggard before today lost nearly 40%, GILD turned a 3% early move higher to CLOSING lower, certainly did not help. Keep an eye on the largest component in MRNA as it holds the round 60 number and an upward sloping 50 day SMA.

Follow The Leader? The giant in the consumer discretionary room has now advanced 14 of the last 15 weeks, and sits in very close proximity, just 4%, from its most recent all time highs. Below is its daily chart, which shows the strong volume Friday, its largest spike in nearly 2 months, while recording a bearish engulfing candle. Two of the last 3 weeks have registered decent downside reversals to CLOSE near lows for the WEEKLY range, putting up bearish shooting stars. Will the rest of retail take its cue from this very slightly wounded general? My guess is that any correction in this particular stock will be somewhat short lived, but how will the rest of its consumer peers fare? Is it time for the little guy to make their bullish presence felt while its leader catches its breath? On a small time frame that may be already happening as on a 1 and 3 month period the XRT is besting the XLY up 2.4 and 37.3% respectively (XLY has gained .5 and 26.2%). Of course NKE, a top ten component had its issues Friday after an earnings report, but contributing more may be other large holdings in SBUX BKNG TJX each down well over 20% from their most recent 52 week highs. The golden arches are weighing too, off 19% from its February peak.

Digging Its Grave? The rare doji candle, on the Nasdaq, has been flaring up in June, and Tuesdays candle was one of the bearish of them all with the gravestone doji. Keep in mind this occurred at all time highs as well, and another doji was registered on 6/10. With two in such close succession it is worrisome. To be clear the index brushed off others on 4/20, 5/5 and 5/7, but the recent ones are coming near a possible double top, the very round 10000 number, all time highs, and an upside gap fill. PRICE action will be the ultimate arbiter, and to me I think a WEEKLY CLOSE above the very round 10000 number Friday could be a good sign for the bulls. There has been little follow through to the downside following these dojis, and Thursday recorded a strong intraday reversal of well more than 200 handles. The burden of proof is still on the bears, as the bulls have been in charge. It has been a relentless move to the upside, and maybe Portnoy is onto something when he says stocks never go down. Of course that is a stab at humor, but this tug of war between bulls and bears is an epic one and will go down as one for the ages when all is said and done.

Value Skeletons: There are a number of ways many look to determine the value versus growth trade which seems to be talked about incessantly. Could look at the consumer discretionary versus consumer staples for example, but one that is not talked about all that much is the ratio chart below comparing pharma to biotech names within the healthcare arena. Value players have been calling for a shift in their favor over their growth counterparts for years now, and some day it will prove accurate, but that could still be a long way off. A YTD comparison between the two funds shows a stark difference with the PPH lower by 4%, as the XBI has gained 18% thus far in 2020. The XBI did record a bearish shooting star candle Tuesday, and is up 2.5% this week after last weeks advance of nearly 9%. The PPH which trades in an illiquid fashion, filled in an upside gap fill from the 6/10 session recently and slumped 2.5% Wednesday. As always look at each individual situation on its own merits and use risk management.

Giddy Consumer: Retail sales numbers came in strong recently, and whether you want to say it is stimulus checks or any other reason, stocks in the group have perked up. I remember last year Gundlach stating sales data was skewed because consumers were buying on stretched credit cards. All of this could be true, but if you are an investor, all you want is to pay attention to PRICE action. On a YTD basis, the XLY is just one of three of the major eleven S&P sectors in the green up 4%. The ratio chart below comparing, the XRT to the S&P 500, shows how well it has been behaving since the start of April. Sure there have been some illogical moves, with the gains in a M or FOSL (the former met its short term demise at the very round 10 number recording a bearish engulfing candle on 6/9). But they are overshadowed by legitimate moves in AMZN OLLI THO NKE CMG DPZ TSCO BJ ETSY MELI or STMP, just to name a few. Look at each individual situation on its own merits.