Technology Sector Review: 4/25/24
Nasdaq Nausea? Wednesday afternoon starts a 24-hour period where 3 of the 7 largest companies on the planet will report earnings. It is always wise to keep some powder dry during this time. No one knows what is going to happen and I think by the end of the week we shall have some more clarity as to the direction for the next few months. How will META GOOGL and MSFT react? On the WEEKLY Nasdaq chart, it recently recorded just its second bearish MACD crossover since late 2022 and the last one in August 2023 saw a 2000 handle decline from roughly 14500 to 12500, a drawdown of 14%. Will this one duplicate that? Who knows but one can see that it eventually found cushion at its rising 50 WEEK SMA last October before the very spirited run following a bullish morning star pattern. Notice that the line currently sits near 14500 but will travel higher as time goes on and there is no certainty that it will even make contact with the moving average. Again I think better risk/reward bets will come Friday afternoon when all the dust has settled.
Technology Sector Review: 4/24/24
Semis On Standby: No one has to be told how vital the semiconductors are to not only technology but the overall market. They are in basically everything we use and we may have gotten ahead of ourselves with the importance to the AI recently, but the group will be tested here. The 10% haircut NVDA took last Friday did not feel normal, yet market forces are back in buying mode. Of course, that is a very myopic view as that occurred just 2 days ago. But other examples were TSM slumping 5% on a supposed "good" number on 4/18. Another reason why technical analysis matters to me, as PRICE is omnipotent. The chart below of the SMH recorded a bullish harami candle Monday and did follow through to the upside Tuesday adding 2.4%. We will hear from TXN tonight after the bell and the WEEKLY chart trades very wide and loose, hallmark bearish traits. LRCX describes round number theory succinctly with three rejections at the very round 1000 number each with a bearish candlestick including the gravestone doji on 3/21. Thursday INTC will report after the close and this one has been the dog now one-third from its most recent 52-week high, and was actually down Tuesday on a strong tape, although it did record a doji Monday. I think the SMH, and tech in general could have one more day of gains Wednesday, and then META GOOGL and MSFT could make or break the space. As for the SMH, I think it has room too the 50-day SMA and then we can reevaluate thereafter we see how it reacts.
Technology Sector Review: 4/23/24
Google It: Earnings season is going to kick off in a big way this week and it is always a good time to keep your powder dry, as markets tend to gyrate plenty. Some big tech names that will be REPORTING include SPOT before the open Tuesday. It has gained ground 4 of the last 5 times after numbers, but remember it is a very bad strategy to buy blindly into the print. It did fill in a gap Monday from the 4/2 session and found some support, although it could be temporary, and notice how the weakness began following the bearish evening star pattern completed on 4/9 (with a doji candle on 4/8). META will REPORT Wednesday after the CLOSE and it has done little since breaking above a bull flag pivot of 480, not the most bearish stance although investors are surely waiting until they hear the number. Thursday brings MSFT, the largest company on Earth, and it is holding the very round 400 number, and I could see a move toward 420 which could compete a bearish head and shoulders pattern. Below is the chart of GOOGL and it will deliver Thursday after the CLOSE too. An argument could be made that it is acting better than all that have been mentioned trading well above its 50 and 200-day SMAs, something the others can not state. Does that mean it has further to fall? We shall know by the end of the week and these should all be trading nowhere near where they currently are. Do not be a hero in front of it.
Consumer Staple Review: 4/22/24
Staples Brewing: When consumers cling to the staples sector it is thought of as defensive and a possibility of wobbly economic times as they gravitate toward what they need rather than want. The group is known for its dividend yields which also appeal to a certain demographic but some will sport solid chart action that demand one's attention. The daily chart below of the XLP shows a bit of a hiccup starting the first few days of April, however, it may be looking to end it on a positive note. Its MONTHLY chart has a nice complexion too as March completed a rare 5-month win streak (the only other one in the last decade was between June-November 2018 which did see a big drawdown in December that year). It is carving out a cup base and one can enter with a buy stop above the 77.12 trigger. The group was the 2nd best major S&P sector performer out of 11 last week, bested only by utilities, and if this conservative stance picks this may be a nice space to hide out in for the near term.
THE WEEK AHEAD: Starting 4/22/24
"You can also commit injustice by doing nothing." -Marcus Aurelius Playing Defense: The quote above certainly has a multitude of ways to discern it, but in a market sense, it can be viewed as holding onto losers longer than we should. The current environment we see ourselves in is a difficult one, and for that reason, one should remain small with a hefty cash position. Markets seemed to say last week that we have been wounded and the best thing would be for some well-deserved rest. The moves off the October lows have been substantial and we are in the process now of giving some of that back which is prudent. The S&P 500 is now on a 6-day losing streak with all 6 of those sessions CLOSING at or very near lows for the daily range, a bearish trait. Technology is now UNCH in 2024 if one can believe that and AAPL, the second-largest company in the world has been in a tailspin since the doji candle on 12/14/23. It fell every day last week, losing 6.5% its worst WEEKLY decline in exactly one year. MSFT the biggest stock on the planet is back to the very round 400 number, the fourth time it has done so since late January and my belief is the more times a line is touched the less likely it is to be supportive. Perhaps it will bounce near the very round 400 number and go on to form a bearish head and shoulders with a bounce toward the 420 level. Large levels of cash is a prudent position at the moment.
Technology Sector Review: 4/19/24
Bellwether Bottoming? The leading semis have been one of the only names that have been holding up. The old saying goes eventually they come for all of them. But the other side of the argument states that stocks that hold up best in the storm will be the first ones to charge out of the gate once the group catches a bid. The daily chart below of NVDA encapsulates that theme best here and there could be some good risk/reward here after Thursday's bullish harami which CLOSED above its 50-day SMA after being below the line intraday. My feeling is that one can dip their toe in with a stop below the session low and if it holds a double bottom pattern is taking shape. Its WEEKLY chart incredibly met its measured move to 900 from the WEEKLY bull flag breakout, and it overshot it and last week recorded a doji candle which can often signal a change in the prevailing trend so let's keep this on a short leash. Notice on the ratio chart against AMD this is vastly outperforming with NVDA up 76% YTD compared to AMD rising a scant 5% in 2024 thus far. That all being said this market is in a downtrend so this favors a move to the downside so respect your stop below 824.02 on a CLOSING basis.
Industrial Sector Review: 4/17/24
Recession Tell: The big delivery service plays have always been watched to give clues on the possibility of recession. In years past FDX was considered a better economic read than UPS, then UPS was the better actor as seen here between 2018-2023 on the MONTHLY ratio chart. Since Q4 '22 FDX has again taken charge and for that reason it is the better way to gauge strength. The daily chart below shows it still well above its 50 and 200 day SMAs, something UPS can not say. Another good way to compare stocks against each other is by how far they are trading from their most recent 52 week highs. FDX is "just" 9% from its annual peak, while UPS is more than 3 times that at 28%. On a YTD basis FDX is higher by 5%, as UPS is lower by 9%. If FDX were to lose the 253 level that in my mind would be a big negative for the economy and overall market. The MONTHLY chart of FDX looks healthy as it retreats into a retest of a double bottom with handle breakout in a pattern 3 years long. I think this name will see the very round 300 number where it was rejected in June 2021, by the end of 2024.
Energy Sector Review: 4/16/24
Energy Assessment: Even though energy is the best-performing major S&P sector YTD it will not be immune from the overall market selloff. Round number theory, not surprisingly played a role with the recent weakness in the XLE. It has set up a bull flag formation just below par, and last Friday was actually above intraday but ended up CLOSING below it and that was an ugly reversal. Monday followed through lower to the downside and we know from FALSE moves come fast ones in the opposite direction. Below is the WEEKLY chart of the XOP, and it is going to be tested this week and as it may not perform on an absolute basis I believe it will continue to outperform on a relative basis until the nascent softness subsides. Its daily chart perhaps gave a hint like the XLE the day before the ugly reversals Friday with the hanging man candle last Thursday. Select coal names, classified as energy, showed some decent relative strength Monday. HCC is holding just above a 62 bullish inverse head and shoulders breakout pivot, which carries a measured move to 72 which would put it above the encapsulated cup base shown.
Technology Sector Review: 4/15/24
Tech Listlessness: The old saying goes too "never short a dull market". And looking at the XLK WEEKLY chart below shows little movement, now just 3% off most recent all-time highs and falling 5 of the last 6 weeks. That could be the bullish take. Bears would state this indicates fatigue and churning action. Notice the doji candle 3 weeks ago that is often a good sign of at least exhaustion, and worst a change in the prevailing direction. Many would say that AAPL is the culprit, and with a good point as it makes up nearly 20% of the ETF, and it did display good action toward the end of last week, up more than 4% Thursday (easily its best advance of 2024), and Friday showed excellent relative strength up almost 1% with the Nasdaq off 1.6%. It did decisively recapture the 21 day EMA, and notice it is a rare name showing positive RSI divergence (a bit misleading as that was able to occur because of its prior outsized weakness). My feeling about the XLK is a visit to its 21-day WEEKLY EMA will give it a chance to reset, as it did in late October 2023. That would be roughly another 3% haircut from here and put it in a 5-6% correction mode, which could then after the rest give it stamina for the seasonally strong second half of the year.
Technology Sector Review: 4/11/24
A League of Its Own: Some names are simply outliers. They are just different and all others would be happy to be mentioned in the same sentence. The daily chart below of NVDA is a classic example. It has sprinted above the competition and will likely not look back. It is looking at a possible 3-week losing streak, but notice on its WEEKLY chart, each time it has recorded a 3-week losing streak the very next week has advanced since late 2022 (keep in mind there were only two examples, both in the second half of 2023 in quick succession). Take note of the seasonality strength in May, the second-best month of the year the last 5 years up almost 17% and CLOSING the month higher than it started. As it has receded volume on the WEEKLY chart has been tame, especially compared to trade during the 11-week win streak that transpired immediately beforehand. Looking at how far it is to its most recent 52-week highs one has to respect that NVDA is "just" 11% from its annual peak while peers SMCI and AMD are 26 and 27% from their respective peaks.
Technology Sector Review: 4/10/24
Slippery Slope: It is well known that technology has not been living up to its traditional leadership role. On a YTD basis, it is still in the middle of the pack up 7%, and of course, with tomorrow's CPI a lot could change quickly. The daily chart of the Nasdaq feels like it is stalling, although give it credit for being just 2% off its most recent all-time highs even though it has declined 4 of the last 5 weeks (one could interpret that as churning too). The WEEKLY chart shows it is also still nearly 2000 handles above its 50 WEEK SMA. Peering inside the sector semis are bending, but have not buckled yet with the SOXX hanging in and CLOSING positive Tuesday even with NVDA and SMCI off 3%. The latter is now about 100 handles below the very round 1000 number which we wrote recently about the level being a bearish island reversal (notice now it is clinging to the 50-day SMA and it does not feel like it has a very firm grip). If one were to look at the Bollinger Bands they are tightening which speaks to a big move coming the direction however ambiguous. Tighten your seat belts for the rest of this week.
Industrial Sector Review: 4/9/24
Undeterred Ascent: Industrial strength is nothing new as it has powered higher and if one wanted to cherry-pick a timeframe over the last 6 months it is the second-best major S&P sector out of 11 up 25%, bested only by financials. Heavy construction has led the way and perhaps we should not be surprised with wars around the globe and bridges collapsing. If one looked to the bottom of the subsectors within, they would see the only one in the red, albeit very fractionally, was the delivery services. Airlines have been a bit of a laggard, if you could say that as they have advanced 13%, and give the JETS ETF credit for holding its rising 50-day SMA following the break above the bullish inverse head and shoulders breakout. Overall the XLI, via the daily chart below, has been minding its business and climbing upward. With the exception of the first couple weeks of 2024 and and last 2, it has advanced in a very orderly fashion. The WEEKLY chart shows the fund up 20 of the last 23 weeks and last week recorded a bearish hanging man candle, but notice it brushed off the doji the week ending 3/15. Would not be surprised if it brushes off last weeks pause.