Chartsmarter Insights

Size Matters:  Or not? In the top-heavy XLY, the two largest holdings in AMZN and TSLA have been having some issues. The recent softness in AMZN on the MONTHLY chart looks like a blip and it is still in the vicinity of the cup base breakout pivot above 188 (the caveat would be the MONTHLY bearish RSI divergence dating back to late 2018). TSLA has its Robobtaxi event on Thursday so that should be a market mover and its MONTHLY chart could be explosive with a break above a symmetrical triangle which could also be interpreted as a bull flag. Interesting is the strength in the homebuilder periphery plays and this is happening in the face of rising interest rates. The chart of the ten-year yield shows some interesting developments as RSI has run quickly from the oversold 30 to overbought 70 figure (often signals that instrument has further to run higher in PRICE from current levels). Bears will say it has now filled in the upside gap from the 8/1 session and Tuesday recorded a doji candle. HD, the third largest component in the XLY is acting well POST breakout above a MONTHLY cup with handle pivot of 391.86. Notice how it has negated two bearish evening star patterns and a doji from August. The daily chart below of the XLY is now sporting a bull flag and any improvement from AMZN TSLA and HD could see this achieve a measured move to 218 by year-end.

Waving the "Flag":  Gold bugs have had their time in the sun for a while but some bears are starting to come out of the woodwork as they hope that PRICE will "surrender" lower somewhat from here. I am not in that camp, although nothing goes up in a straight line. Two doji candles late last week on the daily chart below of the GLD may put some pressure on the precious metal. The WEEKLY chart suggests this rally still has legs as it has not achieved the measured move to 266 from the bull flag breakout above the 225 pivot. This week will be crucial in my opinion as the possibility of a 3-week tight pattern could develop depending on Friday's CLOSE, as the last 2 finished very taut, within just two pennies of each other. Last week did record a spinning top candle which could see some fatigue, but notice WEEKLY RSI has been keeping near the oversold 70 RSI level, and we know there is nothing more bullish than an overbought situation that remains that way.

"Handling" Its Business: The Nasdaq continues to ascend and it feels if as the bears have had ample time to push this lower. Of course, they did with a 4-week losing streak between the weeks ending 7/19-8/9 that slipped 16% from top to bottom of the range. Notice that the week ending 8/9 did record a bullish counterattack candle off the 50 WEEK SMA to give a clear indication that a short-term bottom was in place (and the doji candle the week ending 7/12 should have had bulls shaving partial longs). And the bears gave it yet another shot with the 6% haircut the week ending 9/6, and the bulls put up a strong defense with the very next week gaining it all back and then some. Bears must be feeling irritable at this point. On the daily chart below, one can feel the air coming out the naysayers sails with a nice bounce off the upward-sloping 21-day EMA, and now a handle, hence the "handling" its business reference, has formed on a cup base that commenced with the nasty bearish engulfing candle on 7/11. With everyone talking big round numbers now on the S&P 500 with 6000 targets, why not a 10% move for the Nasdaq into year-end here with a 20000 objective. With sizable gains YTD, as the S&P 500 is higher by more than 20%, October can be volatile, but Q4 overall tends to be very strong as the Almanac Trader shows here.

Conflicting Signals:  As we head into Q4 the markets overall are acting well with all 11 major S&P sectors in the green YTD by at least double digits with utilities leading and energy in the basement. Technology has had a mediocre year up 16% right in the middle of the pack via the XLK. The MONTHLY chart of the Nasdaq below has been a head-scratcher. It has felt trendless and the last 3 candles have been debatable. On the WEEKLY chart, one can see last week traded right into the doji candle (well known for their ability to predict changes in the prevailing direction) from the week ending 7/12, the middle candle from a bearish evening star. In my opinion, this type of wide and loose trade is indicative of toppy behavior. Many are speaking to the bullish seasonality and perhaps that will make any meaningful upward trajectory for tech difficult. The daily Nasdaq chart Wednesday filled in a small gap (rare for a benchmark) from the 9/18 session and is retesting the breakout above a symmetrical triangle. I would not be surprised which way this traded over the near term. Keep powder dry for a potential late 2024 election rally.

Buy the Cannons? With the escalation broadening out in the Middle East, is the old stock market adage meaningful? Looking at the WEEKLY chart below of the ITA this has been delivering all year long. Over the last year period, it has declined on a WEEKLY basis in back-to-back weeks just twice, a very strong showing of consistency. The daily chart Tuesday broke above a 150 bull flag pivot which carries a measured move to 160, and one of just a handful of firm overall groups on a weak tape. GE is the top holding at nearly 20% of the fund and has behaved powerfully since the break above a MONTHLY cup base pivot of 142.60 in April in a base 8 years long. Notice during the last 2 years it has declined just 4 months, an extraordinary feat and it has registered a bullish golden cross. The second largest component in RTX broke above a short cup base trigger of 123.80 not long after a push through a bull flag. Less impactful plays with nice technicals include CW which broke above its own bull flag trigger of 330 which carries a measured move to 370.