Chartsmarter Insights

12 Feb 2024

Financial Sector Review: 2/13/24

By |2024-02-12T16:28:06-05:00Monday|

Finnies Swimming Upstream: An old belief that I have not heard mentioned in some time, is that any rally without the financials participation should be viewed as suspect. With their recent, sanguine action perhaps we will be hearing how that may benefit the recent powerful rally off the late October lows. The XLF has now advanced 12 of the last 15 weeks, with the weeks ending 12/8 and 12/22 falling but CLOSING near highs for the WEEKLY range, losing mere pennies. The MONTHLY chart below shows the ETF reaching for a fourth consecutive advance in February, which would be its first jump of that kind in 3 years. The top holding in the ETF is BRKB, which represents more than 13%, and it like many other instruments is dealing with round number theory at the 400 figure, but give it credit for acting well POST breakout from a cup with handle of 369.47 from 1/23. The best that could happen here is for some sideways consolidation and a bull flag to shape. JPM, the second largest component, is perhaps giving some foreshadowing as to what the XLF may do on its MONTHLY chart, which has broken firmly above a cup with handle (notice how round number theory came into play at the bottom of the cup at 100 in September-October 2022).

10 Feb 2024

THE WEEK AHEAD: Starting 2/12/24

By |2024-02-10T12:49:32-05:00Saturday|

"Whenever you find yourself on the side of the majority, it is time to pause and reflect."  Mark Twain Size Matters? It was refreshing to see last week's small caps put up the best showing with the Russell 2000 gaining 2.4%, compared to the Nasdaq up 2.3%, the S&P 500 higher by 1.4%, and the Dow UNCH. They are often thought of as leading indicators and of course, they often can give clues to the direction of interest rates, as most small-cap names need financing to survive in their formative years. Like most of the major averages, the Russell 2000 is dealing with round number theory as it inched above the very round 2000 figure Friday. The WEEKLY chart has the look of a bull flag which also recorded a bullish engulfing candle, but I would love to see a decisive break above 202, which would carry a measured move to the 240 area. Interesting to see here how in 2024, while small caps are in pursuit of the big three major averages, it is catching up first to the Dow which is beginning to flatline. The top holding in the Russell 2000 ETF is SMCI which at just more than 1%, is three times the size of the second-largest component in ELF. Wonder how much that is skewing the performance of the IWM? The bottom line is above the 200 number keep a constructive bullish point of view. The MONTHLY chart shows a cup base possibly taking shape which could travel toward 240 by the end of 2024, which would confirm the measured move of the WEEKLY bull flag.

8 Feb 2024

Consumer Sector Review: 2/9/24

By |2024-02-08T17:23:57-05:00Thursday|

Noteworthy Tesla Move:   The automobile space has been a bifurcated one and we all have seen the comparison to best in breed TSLA to TM recently, and we have been on that bandwagon with Toyota strength for some time. The stock is benefitting not only from regional strength with the Nikkei at 34-year highs but on its own individual merits. It is higher by more than 50% over the last one year period and pays a dividend of 2%, and is continuing to dominate rival HMC. Now we have been speaking about the concern of the ratio chart with the XLY against the XLP and lots of the weakness for the XLY was due to TSLA (AMZN is doing its part as it carves out a bull flag formation). Could TSLA be ready to start helping the ratio chart? Both bulls and bear can paint their individual biases as the former would point to the possible double bottom and the pessimists that it is just a retest of the bearish head and shoulders breakdown. The daily chart below shows a good risk/reward play to the long side if this week's lows can hold on a CLOSING basis. A gap up would complete a bullish island reversal in the coming sessions, and last week's spinning top candle, a very tight range (bullish) after the prior week slumped 14% could be a positive sign. It suggests bears were unable to push follow-through lower.

7 Feb 2024

Industrial Sector Review: 2/8/24

By |2024-02-07T19:43:53-05:00Wednesday|

Cat Out of the Bag: The industrials as a whole are having a pedestrian YTD move thus far, now the 6th best major S&P sector up 2.4%. The XLI is trading at all-time highs as has advanced 13 of the last 14 weeks and is up another 1% this week heading into Thursday (12 of the 13 weeks CLOSED at or very close to highs for the WEEKLY range). On this chart, you can see how this group has acted better than the Nasdaq to show how firm it has been. UPS, not the bellwether it used to be, but still worth following in the group may have put in a bottom last week after a bullish hammer and dragonfly doji candle on 2/1 and 2/2 which also filled in the gap from the 11/13 session. There is still work to do there but one could remain constructive above last week's lows. Below is the daily chart of CAT, the largest holding in the XLI, and this has backed off somewhat after its most recent earnings reaction on Monday. I think this one could gravitate lower a bit in the near term, totally understandable given the more than one hundred handle run from late October after a WEEKLY doji candle. This has still yet to meet its measured move to 360 out of a bull flag. Look for that possible achievement in the second half of 2024.

6 Feb 2024

Technology Sector Review: 2/7/24

By |2024-02-06T16:27:57-05:00Tuesday|

Software Anything But:   If I had a dime for everyone I spoke to who is bearish, I would not need to trade. And yes plenty of "evidence" suggests a meaningful pullback could be upcoming. Seasonality has been discussed ad nauseam, breadth being weak, new 52-week highs struggling, negative divergences, etc. I think you get the picture. And to be frank I have been skeptical if this rally could continue. And to be honest all of the above-mentioned worries, none of them matter, zero, until PRICE confirms. It is the essence of technical analysis. Below is the daily chart of software via the IGV, and yes there are some dubious candlesticks in there including a doji on 1/26 and some hanging men the last couple of sessions. Now something that would get me bearish is if we witness a break BELOW the bull flag, as we know from FALSE moves come fast ones in the opposite direction. My inclination, and remember the market could care less what I think, is that this breaks higher just for the simple fact that so many are on one side of the (bearish) boat. But I am happy to wait for PRICE confirmation to direct me in either direction, long or short. Sometimes doing nothing is the best trade until the signal reveals itself.