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30 Jan 2024

Healthcare Sector Review: 1/31/24

By |2024-01-30T16:18:34-05:00Tuesday|

Biotech Feels Firm:   As with an abundance of big tech firms REPORTING earnings this week, it may be wise to pivot one's attention to some overlooked parts of the market to potentially capitalize. The biotechs did record a powerful run last year in harmony with the overall market and they have since stalled. No one would fault those who are skeptical given their history, and therein may lie the opportunity. The WEEKLY chart below shows just how well the fund has been holding up at the very round 90 number. The prior 3 times it has tested that level witnessed drawdowns to 75, 72, and more recently 64 late last year, and note it started descending almost immediately. This is now the 6th week it is "glued" to 90 and I think that is encouraging for a move toward par in the near term. The period of the summer of 2022 and the present move to 90 was very similar, each taking roughly 9 weeks, and again the fact that it is keeping this altitude near the figure is a good sign. Some of the large names in the IBB are behaving themselves very well too with the AMGN bull flag, which has found support at the very round 300 within the formation. VRTX has broken above a bull flag and there has been plenty of M&A activity in the entire biotech arena. Taking a peek at the annual returns of the XBI over the last several years shows last year was the first single-digit move since 2017. Is it ready for another strong double-digit advance in 2024?

27 Jan 2024

THE WEEK AHEAD: Starting 1/29/24

By |2024-01-27T08:06:42-05:00Saturday|

"So Much Has Happened, But Nothing Has Changed" Glen Frey Momentum Building: Those lyrics from the Glen Frey song "You Belong to the City" could very well be describing the PRICE action of the S&P 500 as seen on its MONTHLY chart below. The widely followed benchmark is simply back to levels seen roughly 2 years ago. It is just above the 4819 cup base breakout pivot, meaning we could be on the cusp of another major move higher. What has happened between those 2 years is plenty, with the main thing being the 28% drawdown from the top to the bottom of the range. The Dow and S&P 500 have led the charge recently as seen on this performance chart, and impressive is the DOW leading since the start of Q2 (green line). If it is on the verge of another sizable jump, of course, no one knows this, but if so it has to start somewhere. Notice that each time the index has recorded a 3-month win streak, it has happened 10 times over the last decade, all 10 times saw at least another MONTHLY gain and in many cases more than that. So if the S&P 500 can CLOSE above 4870 next Wednesday could the gravy train be getting ready to pull out of the station again? Keep in mind next week has some of the most influential names REPORTING earnings, so a 2.5% move lower the first 3 days of next week (MSFT AMD, and GOOGL release Tuesday after the CLOSE) is certainly not out of the question and could throw a wrench into the program.

20 Jan 2024

THE WEEK AHEAD: Starting 1/22/24

By |2024-01-20T12:51:58-05:00Saturday|

"People who say it cannot be done should not interrupt those who are doing it." George Bernard Shaw Monthly Green shoots: The Nasdaq is now higher 2% YTD and has recovered nicely after the week ending 1/5 slid 3.25%, as the last couple of weeks CLOSED at the top of the WEEKLY range with advances of more than 3 and 2%. Thoughts of the "missed" Santa Claus rally and the "first 5 days of January" indicator that supposedly forecasts negative returns are now behind us. Peaking at the MONTHLY chart of the Nasdaq puts sanguine feelings in bulls. It is acting well POST breakout above the cup with handle above 14446 and look for this to make a move toward the very round 16000 number in the first half or sooner, and that is just more than 4% from current PRICES. I am looking for it to duplicate with the S&P 500 did last week which was to hit all-time highs (notice how this chart shows the S&P 500, the purple line ahead of the Nasdaq for the last 2 years, but before that dating back to 2014 it was the Nasdaq leading). Is it a negative that it is trailing what the supposedly less dynamic, growthier benchmark, or is it just giving it a target to strive for? I think the latter and with the way semis are acting, especially NVDA (although it may prudently pause here after hitting its measured move to 600 from the bull flag breakout). Look for the Nasdaq to reach 16000 by end of Q1 and then maybe it will take a cue from how the S&P 500 acts at all time highs.

13 Jan 2024

THE WEEK AHEAD: Starting 1/16/24

By |2024-01-13T16:21:24-05:00Saturday|

Size Matter? Small caps are often thought of as a leading indicator, and maybe they are, but for me, they are a good predictor of interest rates. Keep in mind the vast majority of smaller companies are unprofitable and rely on financing to stay afloat. The performance chart of the IWM compared to the major three US benchmarks shows a big divergence. Whether one believes the IWM is a good leading indicator or forecaster of interest rates this is not a good development. We will talk about the 10-year yield later in this note, but is the weakness in the IWM trying to convey that rates are bottoming? The WEEKLY chart shows the current 3-week losing streak with the completion of a bearish evening star pattern the week ending 1/5 that fell nearly 4%. On its MONTHLY chart, we highlighted several times that it did see a nice bounce near the 160 level, the area of a prior double-bottom breakout from November 2020. But notice how big monthly gains circled have led to very little follow-through in the past. The IWM is now 6% off its most recent annual peak, with the Dow, Nasdaq, and S&P 500 all at or 1% off their own. Is this shouting "risk off" in play? The benchmarks could use a healthy breather.

30 Dec 2023

THE WEEK AHEAD: Starting 1/2/24

By |2023-12-30T09:50:55-05:00Saturday|

"To think too much is a disease". - Dostoevsky "SPY"tacular: The adage goes "It is not where you start but where you finish", and if we apply that to the MONTHLY chart of the S&P 500 below it was a great way to go out in November and December (to be fair we started 2023 off with a strong January advancing by 6.2%). Notice the nice follow-through last month after the break above the cup with handle, and we know the best breakouts tend to work right away so that is a good omen for 2024. The widely followed benchmark is now on a 9-week win streak and the last 2 WEEKLY candles were spinning tops suggesting some tiring, so a pullback here would be considered healthy (notice on the simple PRICE charts on that link that the Dow is the only one of the major 3 trading at all-time highs). Could that mean a continuation of some strength in the "growth versus value" debate, for the latter, that started recently as one can see where the action is over the last month's period? In my opinion, breadth is expanding and that is benign for all the major averages going forward.