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Regional Differences:  The regional banks and the overall banking space via the XLF have been trading in harmony since the start of Q4. Could the KRE start to reassume leadership, as it did on the chart here how it did this summer, especially in July? The daily chart below of the fund shows very taut overall trade and it is back to testing the bull pennant breakout here from 11/22. It is still trading in the upper half of the range between the round 60 and 70 numbers, from where the last bull flag broke from and not from a previous ascending triangle. It has declined 8 of the last 11 sessions but the pullback has been somewhat pedestrian now 6% from its annual peak. The MONTHLY chart shows nice action POST breakout above a double bottom pivot of 61.77 in November. Bears likely feel this is a double top at the round 70 number from the last 2021 and early 2022 time period, where the ETF did register back-to-back doji candles in December 2021-January 2022. Top holding MTB will carry some weight as to where the KRE is headed and Wednesday touched its rising 50-day SMA at the very round 200 number for the initial time following a bull flag breakout above the 195 pivot. Stay long with a CLOSING stop below 190.

Bears Caught With Hands in the "Honey" Jar?  The XLI is under a bit of pressure and it makes sense to look at some of the top holdings to see if it may make a stand. Below is the MONTHLY chart of HON and notice in November it recorded a huge breakout in big volume above a cup base. We know the best breakouts tend to work right away so bulls want to see this firm right here. It is not exactly a general in the sector as seen it lagging the last 4 years against the XLI, but it makes up more than 3% of the fund so it can move the needle. The daily chart shows 6 examples of support near the very round 200 number and the 200-day SMA, and Tuesday recorded a bullish engulfing candle and it now has its sights on a double bottom base pivot of 233.81. BA which seems to be a shadow of its former self, could be an interesting long here as it touches the 200-MONTH SMA, something it seems to do every 2 1/2 years. Notice the bullish hammer candle in November to CLOSE above the secular line. And then we have UBER, which still amuses me that it is in the ETF, down 25% from its most recent 52-week highs, and has even been outdone by rival LYFT since August. The recent breakdown below a bearish head and shoulders pattern is worrisome.

Round Number Speedbump:  When one sets out on a destination there are often pitfalls that come along the journey. The daily chart below of TSLA shows how it recorded a bearish spinning top candlestick at the very round 400 number Monday. I am still very bullish on this name, but candles can help one get a better basis, or shave around a core position on weakness or strength. This may be for the latter. This is probably a good time for one of my favorite thoughts for long-term investing, "When you're in a nice trade, great entry, solid plan, well thought out target and you're getting that itch to tap out early, remember what the old man told me on the NYMEX floor 'Hey kid if you want to take the train to California, you don't get off in Chicago". (Jimmy Jude). My belief is this is still headed toward the 480 measured move from the bull flag breakout but may need to catch its breath near 360 first. The MONTHLY chart shows how it came very close to a 414.60 cup base pivot Monday morning that started with that doji candle in November 2021. Keep an eye on peer RIVN which we wrote about in our 8/19 Consumer Note and how it was feeling fresh at the very round 10 number.

Double in Two Years Frothy? The Nasdaq has now ran from the very round 10000 number at the start of 2023 to sniffing out 20000 this past week. Along the way bullish candlestick patterns have aided long term investors where they could lean in on their long exposure. The last two occurred at the rising 50 WEEK SMA and we are now nearly 3000 handles above that secular line. Bearish patterns have been mixed in the success with a bearish evening star pattern completed the week ending 7/19 resulting in a 16% haircut, but the bearish dark cloud cover candle the week ending 11/15 that slipped more than 3% displayed absolutely no downside follow through. The MONTHLY chart shows it totally ignoring the doji candles in August and October, and shwoing how less reliable the dubious candles are in an uptrend, compared to the bullish ones in a downtrend. Notice the negative divergences but these should not be acted upon until PRICE confirms weakness, as that action can go on for years. As someone who has an affinity for round number theory (Bitcoin 100K, dollar bouncing off par in, and TLT reversing there) I am not necessarily calling for a big reversal here, but be vigilant. Salty investors are always more concerned about the downside. Software continues to be firing on all cylinders and the semis feel like they are wanting back in the mix. That would be a lethal combo going into 2025. Just beware things always feel rosy at the top. Will that be very soon, or months out on the horizon?

Guilty Until Proven Innocent:  When you are trying to succeed be aware of the company you keep. Relating to the stock market that means putting your capital to work in names and areas that are proven and deserve it. The analogy I like to use is if you want to win the World Series you are going to put your all-stars on the field, not your triple AAA players. Looking at the healthcare space with a few weeks left in 2024, the XLV is in the cellar, the worst actor of the 11 major S&P sectors on a YTD basis, albeit still higher. All rallies within the space should be viewed as suspect until further notice. This will be a stock pickers game, as technicians always believe it is, but the odds may be stacked against them. As a rising tide tends to lift all boats, the opposite is true as well. But will investors start to take a look at this beaten-down group with a new regime in place? The first place to look is for individual names that demonstrated relative strength in 2024. And although these names are in the penalty box maybe they have paid their dues, but keep a tight leash (stop) as always as their trust must be earned. The daily chart below of the very diverse XLV paints a pessimistic picture.