THE WEEK AHEAD: Starting 3/20/23
Going It Alone: The Nasdaq's relative strength is eye-opening against the major benchmarks, which in itself is a good thing, but can it really do all the heavy lifting? Below one can see the sizable differences as it is now higher by double digits again YTD after a powerful last week rallying more than 4%. The tech-heavy index is the only one of the quartet above its January highs, and the Russell 2000 and Dow Jones Industrials are now negative for 2023. The latter of course is outdated with just 4 of the 30 names in the PRICE weighted average true industrial names in BA CAT HON and MMM. Many will say that the "rolling" bull market is healthy as different sectors take their turn demonstrating leadership, (not too long ago we were speaking about just how firm the industrials were acting). Currently, nothing is "rolling" anymore, and in fact, on a one-month look back period the XLK is the only one of the major 11 S&P sectors in the green. This to me speaks of others needing to pitch in, because eventually, they come for all the groups. Tech is giving others a chance to catch their breath. Will they take that opportunity and recharge?
Energy Sector Review: 3/20/23
Is the Dam Breaking? The energy space is seeing money flow from the formerly very robust group into technology. Last week the XLE was the worst-performing major S&P sector dropping 7% in more than double the average WEEKLY volume, undercutting its 50 WEEK SMA in the process. On a YTD basis, it is the only major sector of 11 down more than double digits, and keep in mind this is the same group that rose more than 50% in both 2021 and 2022. It certainly has a target on its back with that type of outperformance and remember once trends are in motion they are more likely to stay that way than to reverse. Inside the arena, the energy equipment names were holding up best but the OIH is now in "bear market mode" 23% from highs made just in late January. It has now recorded back-to-back double-digit WEEKLY losses as the group lost its leader. We spoke of how it was unlikely to duplicate that consecutive yearly performance in our 2/1 Energy Note and it is looking more and more likely that may be the case.
Financial Sector Review: 3/17/23
High Yield Perking Up: As financials are still the worst-performing major S&P sector over the last one-month period, even acting worse than the cratering energy group, there are some very small green shoots. There are some better-looking candles currently, and remember these give you a good risk/reward entry as opposed to just blindly trying to catch proverbial falling knives. The XLF recorded a bullish engulfing candle Thursday after a spinning top candle the day before. Even the hardest hit KRE has not yet undercut the long-legged doji candle it registered on Monday. The IAK has a nice Thursday, although it did fill in an upside gap from Tuesday's session. Below is the chart of the JNK, which many market participants like to gauge "risk on" behavior with and it is ever so slowly breaking ABOVE a bearish head and shoulders pattern. Its 200-day SMA is sloping higher and has been support twice since the 6% haircut made from the bearish island reversal from 2/2.
Technology Sector Review: 3/16/23
Rotation Ongoing: If one was able to skirt the weakness in energy and the banks, and were overweight technology the recent pain would not be as formidable. Of course, that is a lot easier said than done. It was not too long ago that we were talking about how the Dow was leading, and now it is lower by 4% YTD, while the Nasdaq is up 9%, S&P 500 by 1%, and the Russell 2000 is off 1% thus far in 2023. These major benchmarks have played musical chairs at different points in the first quarter which is quickly coming to a close in a couple of weeks. Semis have been holding their own, and software is starting to sprout while others groups falter. Below is the chart of the Nasdaq which has been catching some rotation, perhaps out of energy (OIH was down 9% at one point Wednesday). The tech-heavy benchmark was a clear "leader" again UNCH on the session while the Dow and S&P 500 were both off to the tune of nearly 1%. Respect strength. META is acting well POST breakout from a cup with handle 190.46 on Tuesday. GOOGL feels like it's coming to life too.
Consumer Discretionary Sector Review: 3/15/23
Battery Charged: In our last Consumer Discretionary Note on 3/3, we looked at the chart below of TSLA just how it was annotated here. The note's title was Battery Running Low. Perhaps with the pit stop and rest at the rising 50-day SMA it can indeed make another challenge toward the very round 200 number. That would be a big help for the XLY as this is the second largest holding in the fund. AMZN is trying to maintain ground above the very round 90 number, but the follow-through today after Monday's bullish piercing line candle was tepid at best. The XLY itself did record a bullish counterattack candle Monday, and in my opinion, this must remain above 135 or this will be a very long next quarter for the consumer space overall. Concerning is the action comparing the XRT to the XLY. The more "equal weighted" XRT is up 2% YTD compared to the XLY up 8%, and over the last one month period is down 13% while the XLY is off 8%. Bulls want to see more "participation".
Technology Sector Review: 3/14/23
Software Raising Its Hand: The software group has played second fiddle to the semiconductors for some time now. But that could start to change. Looking across the single stock leaderboards, not only today but for the last several sessions, within technology and they will show a plethora of software plays. Monday overall the IGV performed better up .7% compared to an UNCH move in the SMH. That could have been the result of investors clamoring for some mega-cap names in the uncertainty with MSFT up more than 2%, the IGV's second-largest holding. The fourth largest component in ORCL recorded a bullish engulfing candle. Other names acting nicely to start the week were HUBS which bounced off its 50-day SMA and now sports a double bottom pivot of 414.10 its strength can materialize. PLTR registered a bullish engulfing candle. Below is the chart of the IGV and it can back to a level of former resistance after a quick 10% haircut from the very round 300 number on 2/2. It is clear that bulls and bears are in a fierce tug of war right here in the 270 area line in the sand.
The Week Ahead: Starting 3/13/23
"The trouble with the world is that the stupid are cocksure and the intelligent full of doubt". Bertrand Russell Could This Be The Beginning Of The End? Savvy investors always consider one thing paramount. Preservation of capital. Risk management. Gains tend to take care of themselves if left alone after a well-thought-out strategy, but losses if not tended to can spiral out of control. Below is the MONTHLY chart of the Nasdaq, and it may be a little early to be looking at it less than halfway into March, but its shortcomings in finding any resolve springing of the MONTHLY 50 SMA is and has been concerning. It is now almost one year of clinging onto that line, plenty of time for bulls to get their act together in my opinion, and resume an uptrend as it did on rare touches 3 other times during the last decade. I put a MONTHLY ratio chart comparing the VEU, the Vanguard All World Ex ETF, against the S&P 500. Could a break above the downtrend be upon us (the daily ratio chart shows a clear uptrend for VEU since November)? Could Mike Wilson be correct with his 3000 S&P 500 target (round number theory)? The United States' superpower status is fading fast and that could be translated via softer domestic stock market PRICES going forward.
Consumer Staples Review: 3/13/23
Compelling Comparisons: As we examine the consumer staples sector there are some names that are often compared to each other that are interesting. KO and PEP have been spoken of in the same sentence, and KO was in a nice uptrend against PEP from last October to this February but has since formed a bear flag formation. Others names in the beverage group that are often put up against one another would be MNST and CELH. That ratio chart would should a solid uptrend for Monster since last December, and it is now just 5% off its most recent 52-week highs while CELH is 32% off its own annual peak. PM is showing a bear flag against rival MO. TAP was in a steep downtrend for the entirety of Q4 '22 against BUD but is trying to put that to rest. Below is the MONTHLY ratio chart contrasting COST and BJ. Looking at how they have performed over the last one-year period one would see BJ is up 24%, and COST is lower by 12%. Over the last 3 months, BJ is higher by 6%, and COST is down 2%. Does that make either of these a buy? I think in this environment patience is imperative. BJ needs to clear the round 80 number which has been a thorn in its side since last September.
Technology Sector Review: 3/10/23
Semiconductor Dignitary: The semiconductors have been dominant and if technology, which carries a lot of clout even after a tough 2022, is to lead they must be a general. Trade in the SMH has been a bit lackluster with 3 of the last 4 sessions CLOSING at lows for the session, but give its WEEKLY chart credit as it may be carving out a handle on a long cup base in a pattern that dates back to January 2022. Below is the chart of NVDA which is flirting with a bull flag pivot of 240 which has been above each of the last 4 days with just one CLOSE above Wednesday. Of course, the jobs number tomorrow morning will have a big say in this ones direction, it is revealing that it is stalling. One does have to keep in mind this name is looking for a TENTH consecutive WEEKLY winning streak up fractionally heading into Friday, so any pullback may even be prudent. But a decisive move above 240 could see another big leg upward. Peer AMD was holding its own and intraday was above an 86.29 double bottom trigger but faded. Tomorrow is shaping up to be a huge day, and I can make a case for either direction.
Financial Sector Review: 3/9/23
Something Going On At Citibank? Looking over the performance of some of the large-cap traditional money center banks shows some interesting bifurcation. JPM will still assume best-of-breed status as it now trades just 5% off most recent 52-week highs, although it is threatening to break below decisively from its 50-day SMA and what could have been called a bullish ascending triangle. The chart below of C is still 13% off its own annual peak (compare that to WFC and BAC which are lower by 19 and 27% respectively) but is making a nice stand at the very round 50 number, which was also a bullish ascending triangle breakout. This week heading into Thursday it has acted the "best" of the bunch, falling the least off by 3.2% thus far. JPM is down by 4.1, BAC by 4.6, and WFC by 6.4%. This could be very telling action going forward. Citibank also pays a dividend yield of 4%, while the other 3 aforementioned names pay in the 3% neighborhood. Above 50 this should be treated in a bullish manner.
Technology Sector Review: 3/8/23
Market Doubt: Tuesday often known for its "turnarounds", made a move in the wrong direction, if you are bullish. Some clues to today's action may have been the softness in the small and mid-caps Monday which have been stalwarts recently. Those groups followed through lower Tuesday. The IWM was hit directly as the financials, the largest sector weighting in the Russell 2000 at almost 17%, were torpedoed. The chart below of the Nasdaq shows it completed a bearish evening star pattern Tuesday, and AAPL was some foreshadowing to that with its bearish gravestone doji to start the week Monday. On days like today, when weakness was so pervasive every major S&P sector fell by at least 1%, I always like to scour what was acting well on a soft tape as that will often be a tell. Maybe not tomorrow but it usually reveals itself in fine PRICE action in the near future. PINS is a name I will keep a close eye on as it was higher nicely the last 2 days but faded late along with the market. I think the action this week is the start of a candle on a cup base.
Energy Sector Review: 3/7/23
Size Matters: Looking below at the chart of the XLE, XOP, and PSCE one can see the nascent move in the latter which represents the small-cap energy plays. Could this be a sign of "risk on" in the group and smaller names tend to be a good leading indicator overall? The red line highlights the PSCE and one can see it was above its January and February highs last Friday, while the XOP and XLE are not. Taking a look at the last 3-month period the PSCE is handily outperforming up 5%, while the XLE is UNCH and the XOP lower by 2%. Some interesting plays in the smaller names are PUMP, an equipment name that is having issues with the very round 10 number for 2 months, and a declining 200-day SMA, which it has touched 4 times now since last November. A move above could ignite some buying. Another name in HPK looks intriguing as it has traded between the round 20-30 figures, and on its WEEKLY chart since a bullish morning star pattern completed the week ending 12/23/22 it has risen 9 of the last 11 weeks. It now has the look of a bull flag and a move above 30 should see a quick move to 40. On its daily chart, it sports a double bottom pivot of 29.19 for shorter-term traders.