Materials Sector Review: 7/25/24
Losing Its Shine? The most visible precious metal in Gold last week did something technically unsound and may have predicted this recent softness. Notice on the WEEKLY chart below how intraweek it poked its head above a bull flag formation, but was rebuffed at the very round 2500 number and CLOSED almost one hundred handles below the highs for the week. We know from FALSE moves come fast ones in the opposite direction and both silver and gold are trading off as of this writing at 7am London time. Sure anything can happen the rest of this week, but with all the uncertainty globally with Israel and the assassination attempt one would have thought the metal would have behaved better. The longer-term MONTHLY chart shows how apprehensive gold has been looking for a 4th straight month CLOSING well off intramonth highs following the breakout above the 2100 bullish ascending triangle in March, following back-to-back doji candles in January and February. The breakout on the MONTHLY chart carries a measured move to 2600, and one should remain constructive, as nothing goes up in a straight line. Look for the 2300-2350 area to hold.
Industrial Sector Review: 7/25/24
Delivery Status: Some notable names in the industrial arena reported earnings yesterday and for many, it was simply business as usual. The most high-profile name was UPS and it "delivered" its 8th negative PRICE reaction in its last 10. It slumped 12% and is now 33% off its most recent 52-week highs and has now been making lower highs since February 2022. This looks like it wants to at least test the MONTHLY double-bottom breakout near 110 from July 2020, and it is now well below the big overall market rebound from last October. Both of its 50 and 200-day SMAs are sloping lower, the latter for one year now which truly shows the secular trend. It brings up the age-old question is this a function of poor management, or is it speaking of weakness in the overall economy? Or is it a function of AMZN simply imposing its will in the delivery services space? The same "issues" plaguing UPS do not seem to be affecting FDX, although it does feel a bit heavy just above the very round 300 number. This name is only 4% off its annual peak, excellent relative strength compared to UPS a third off its own. PCAR and AOS also crumbled Tuesday after REPORTING and falling to the tune of 10%, and each unraveling recent double-bottom breakouts.
Technology Sector Review: 7/23/24
Top Holding Lurking: We have spoke about the software carrying the baton in our 7/8 Technology Note as the semiconductors took a breather. Could they be ready for another leg higher? It has held up better as of late off just 4% from its most recent 52 week highs, while the SMH still lingers 9% from it own annual peak. A big part of that was last weeks action with the SMH slumping almost 10%, as the IGV lost less than 3%. This week so far heading into Tuesday the semis are snapping back adding 4% Monday as the IGV gained 1%. Below is the daily chart of ADBE and it shows this could be ready for the spotlight once again. One could interpret the pattern as a cup with handle but that comes in more clearly on the WEEKLY chart, as one can see here it fell more than 200 handles during a 10 of 17 week losing streak the weeks ending between 2/9-5/31. The add on after the entry through the daily bull flag would be a buy stop above the WEEKLY cup with handle trigger 580.65. Notice the volume during the 5 week win streak that added a combined 33%, and how it has tailed off the last 2 weeks as the handle took shape, just what you want to see if you are a bull. And it is doing so just above the 50 WEEK SMA too.
Technology Sector Review: 7/22/24
Breakout Negated? The Nasdaq recorded its second worst WEEKLY loss of 2024 last week falling 3.6%, and ending a 6 week win streak in the process. WEEKLY doji candles are rare for the Nasdaq with just 5 since the beginning of 2023, with two significant ones at the very round 10000 number putting an end to a very sloppy 2022. They were an excellent indication of a low being put in and the tech heavy benchmark nearly doubled in PRICE to this months highs. The week ending 7/12 recorded another doji and there was another recently the week ending 6/22, which was the middle candle in a bullish three week tight breakout for the Nasdaq which makes this weeks action a bit more concerning. We know the best breakouts tend to work right away, and if they fall apart rapidly afterward it is a red flag. The week ending 7/5 jumped 3.5%, during a traditionally strong holiday-shortened week, so for the index to retreat so powerfully this week should keep investors cautious.
Technology Sector Review: 7/19/24
Leader Flexes Its Muscles: Like in war as in markets, participants will often take their cues from the generals. Thursday the semiconductor boss made a stand. Will peers get the bullish notice? Some things occurred that gave us some heads up that a correction was due for the chief, as in it did not make a higher high with the SMH on 7/11 and it did just come off a 10:1 split on 6/10. Often splits will begin a period of softness, as the discretionary dignitary CMG did after a 50:1 split on 6/26 (although it did record a spinning top at the upward-sloping 200-day SMA which suggests selling pressure may be abating. The WEEKLY chart shows NVDA off 7.5% heading into Friday and if that holds would be the worst return in 2024 besides the week ending which slumped 13.5%, but notice how the strong rebound began right away the very next week. There have been some dubious WEEKLY candles with a doji candle and shooting star during the weeks ending 6/28 and 7/12 and this one is carving out an engulfing candle but that could change Friday. The overall group will be influenced by this name. Friday feels like a very important session.
Healthcare Sector Review: 7/17/24
New Beginnings? Biotech has made a robust move, and one can question the motives until the cows come home. Is it the emergence of a likely Trump victory (spare me the politics) or the thought of higher interest rates dissipating? I judge my actions solely on how PRICE is behaving and one can not deny the power the XBI has displayed. Below is the daily chart and it is not shying away here from the very round par number, at least not yet, like it did earlier in 2024. On the WEEKLY chart, 100 played a critical role as well with a sharp rejection there, with the second week of March recording a bearish dark cloud cover candle at the 200 WEEK SMA. This Friday will be vying for its first CLOSE above that secular line too. The MONTHLY timeframe looks excellent and remember we have been speaking about the break ABOVE the bearish head and shoulders formation and we know from FALSE moves come fast ones in the opposite direction. Now it has carved out a bull flag pattern with the neckline right at the 50 MONTH SMA and a break above 103.50 by 7/31 would carry a measured move to 144.
Energy Sector Review: 7/16/24
Equipment Check: There is a "rotation" going into some value-related sectors and energy is one of the beneficiaries. But if we "drill" a little deeper into the group, pun intended, we will see the equipment names (picks and shovels) are acting better than the ones in the exploration space. Over the last one month period the OIH is up by 12%, while the XOP has added 4%. Below is the daily chart of the OIH which is nearing a double-bottom pivot and has not recorded back-to-back daily losses in the last 4 weeks. The MONTLHY chart I feel has room to the 350 area by the end of Q3 where it may stall near the consecutive doji candles from August-September 2023 and the bearish dark cloud cover from this April. The chart here comparing the OIH and XOP shows the former overtaking the XOP for the first time since the start of April (they traded with a very strong correlation in February and March). Seasonality will be a tough sell, and perhaps investors were already positioned for that with a weak April, May, and June which have been strong over the last 4 years. Notice the extremely robust Q4 average gains of a combined 22%, although with big volatility as October and November which advance on average by 10 and 6.6% only CLOSED higher 50% of the time (2 of the last 4 years).
Technology Sector Review: 7/15/24
Complexion Change? Will Thursday's action prove to be something sinister going forward for the major averages? My take is something feels different this time around, famous last words. My belief is that the Nasdaq will hit the very round 20000 number by the end of 2024, but I think it will take a detour lower in the near term. If one is to look at the seasonality during the last several years for the Nasdaq July has averaged a gain of 5.6%, and at the intraday highs last week it was higher by 5.3%. And looking at the next 3 months between August-October advances have been muted or none at all with September seeing a loss of nearly 7% dating back to 2020. The WEEKLY chart should give one cause for concern with the doji candle, although that same candle the week ending 6/21 did not bring about the fatigue or possible trend change that they often forewarn. Bulls will maintain the break above the 3-week tight pattern (weeks ending 6/14-28 all CLOSED within just 44 handles of each other) the week ending 7/5 that added 3.5% (holiday-shortened weeks historically tend to be positive) has legs and I am still constructive on markets but think a tactical drawdown of 3-5% is a possibility before a late year resumption of the rally.
Is It Time to Look Abroad?
Market Time Out? With the domestic US markets sneezing yesterday, will the international ones catch a cold? The S&P 500 recorded a bearish engulfing candle Thursday although the benchmark has for the most part shrugged off these examples in 2024 in rapid fashion. Will that continue? An interesting development however was the strength of the small caps as the Russell 2000 (IWM broke above a 207.37 double bottom pivot but will the fourth time be the charm breaking above the resistant 210 level) surged nearly 4% as portfolios that were very overweight the mega caps and short the smaller names may be beginning to unwind. Will this potential outflow from the huge domestic names also reveal a rotation into some other international areas? One area of interest is the chart below of the EEM which is acting well and the longer-term WEEKLY has some appeal too. Notice the break above a bullish ascending triangle pivot of 41 in a base more than 2 years long and then the successful retest confirming its legitimacy 2 months ago. The breakout carries a measured move to the very round 50 number.
Consumer Discretionary Sector Review: 7/9/24
Contrasting Narratives: As the XLY has jumped 6.5% over the last one-month period, the XRT has struggled down 3%. The latter is a more diverse and "equally weighted" ETF which may speak to some broader weakness in the consumer discretionary space. AMZN and TSLA has risen like rockets and they are the two top heavyweights in the XLY representing more than 40% of the fund. Amazon we spoke about here with its big potential (in our 6/21 Consumer Note) of breaking above a long MONTHLY cup base pattern. It has since done so and its updated daily chart sports a bull flag formation with a trigger right at the very round 200 number and a break above would carry a measured move to 220. TSLA last week sprinted upward by 27% in its best WEEKLY volume since last November and we spoke about this name on 6/28 in our Tech Note as it set up a bullish inverse head and shoulders pattern. It is now approaching an add-on WEEKLY double bottom trigger of 265.23. The chart below shows the different paths the XLY and XRT have embarked on as of late and notice the RSI for the XLY above the overbought 70 number. This is NOT a sell signal as instruments can remain overbought for long periods. If has just reached that lofty altitude, and remember there is nothing more bullish than an overbought situation that remains that way.
Technology Sector Review: 7/8/24
Software Took the Baton: Have the software names done their job giving the semiconductors a chance for a breather before their next leg up, or can they both enjoy an upward trajectory together? I think the latter, but one can see here just how quickly the IGV has caught up to the SMH here. The daily chart of the IGV below shows the nice action POST breakout from a double bottom base, and we know leading instruments tend to do just that, and not pause at the scene of the crime. Check. If we were to look at some of the top ten holdings in the ETF it suggests it may need a prudent pause. The fifth largest component in INTU could find some obstacles here after a quick 100-handle run that began with a bullish piercing line and hammer candle on 5/31 and 6/5 respectively. It has now filled in the upside gap from the 5/23 session (notice the doji the session before that predicted possible fatigue). On the bright side, CRWD is bull flagging and a break above 395 would carry a measured move to 485. And I never really put much thought into the laggards but what if former leaders like AKAM SNOW or MDB start to resurrect themselves?
Healthcare Sector Review: 7/5/24
Biotech Coiling: Biotech via the XBI is now 12% off its most recent 52-week highs and this week headed into Friday is off 2%. There is something for both bulls and bears and the former could state that the ETF has advanced 8 of the last 10 weeks, but the negatives would be the fund CLOSING in the lower half of the WEEKLY range 6 of the last 8 weeks. We have spoken about the importance on the WEEKLY chart of the very round 90 number, as the level was former stern resistance, and it could be turning into decent support here if Friday can finish above it. Give it credit for the nice run since the bullish morning-star pattern since the week ending 5/3 which jumped 8%. Follow-through has not been that formidable so the jury is still out but one can keep a positive outlook as long as the XBI can CLOSE above 88. The MONTHLY chart shows June was the tautest range in one year and that is generally considered a good thing, and again the importance of the very round 90 number being a brick wall between 2022 and the end of 2023. The top 3 holdings in SRPT UTHR and ALNY have been doing their part with recent surges. The 8th largest holding in BIIB could be ready to make a contribution if it can break above the bull flag pivot of 235 which would carry a measured move to 280.