2Oct 2023

Consumer Sector Review: 10/3/23

Monday|0 Comments

"Teary" Eyed Shareholders? If one were to inject an I in the middle of the chart symbol below in ONON it would spell the vegetable that when sliced produces a teary event. That event that could further cut the stock is Investor Day this Wednesday. I would never make an investment based on something like that but this name has been displaying relative weakness for the last couple of weeks which suggests something is up. Perhaps bad news in a couple of days or a stock offering announcement. I have no idea, but PRICE is telling us the probability of something negative occurring is a real possibility. Is this saying something about the health of the luxury consumer? Again I would be a charlatan if I said something concrete about it, but there is a gap that I would not be surprised if it was filled from the 3/22 session just above 22. That was the day before a huge earnings-related move of 26%. The stock benefitted from the NKE move last Friday, but it could not hold, and the big distribution weeks ending 5/19 and 8/18 that dropped 18.8 and 12.4% give the chart's complexion a nasty look. Will this be a Roger Federer unforced error this week (8% owner)? 

30Sep 2023

THE WEEK AHEAD: Starting 10/2/23

Saturday|0 Comments

"There is no way around the hard work. Embrace it." - Roger Federer Monthly Suspense: With everyone on edge over a possible government shutdown this weekend, let us relax and take a look at the MONTHLY technical picture for the most widely followed benchmark. If bullish seasonality kicks in to start Q4, these current back-to-back MONTHLY losses could be considered a cup with handle pattern. In my opinion then the lows of 4200, a bullish ascending triangle breakout on the WEEKLY chart need to hold. Below one can see how rare 3 month losing streaks are, and the last 2 Octobers rose robustly by 8 and 7% respectively in 2022 and 2021. For the less sanguine outlook, if that 4200 level does not hold a move back toward the rising 50 MONTH SMA comes into play, which could be near the very round 4000 number as PRICE catches down. One aspect of the chart below that is concerning is the possible false signal on the MONTHLY bullish MACD crossover that just happened recently. If that were to break back below it looks very similar to the rocky behavior during COVID. That could be the catalyst for a 7% plunge lower.

29Sep 2023

Technology Sector Review: 10/2/23

Friday|0 Comments

"Old Tech" Shortcomings: The mature, "old tech" stocks once totally in vogue are suddenly becoming shunned. They were not too long ago clamored for their defensive nature and dividend yields, but not any longer as the overall market has been shaken out too. HPQ can not blame the recent market fragilities for its softness. Its weakness began with a bearish dark cloud cover candle on 7/12 and has now shaved one-quarter off its value during a current 7-week losing streak. The stock pays a dividend yield of 4%. ORCL slumped 13% after an ill-received earnings reaction on 9/12 and it looks like it is on a collision course with the very round par number near its 200-day SMA. IBM slumped nearly 5% this week after the prior week recorded a double top just above the 150 level and it is on a 7-session losing streak. Below is the chart of CSCO and on 9/21 it completed a bearish island reversal (following the gap up on 8/17) after announcing it was purchasing SPLK. I prefer to act on these events on more mundane, generic news but this is starting to take on the look of a bear flag as well.

28Sep 2023

Technology Sector Review: 9/29/23

Thursday|0 Comments

Software Carrying the Load: Perhaps that is about to change as the semiconductors sprang to life somewhat Thursday. Of course, one day does not make a trend but it is something to keep an eye on heading into Q4. This week with one session left the SMH is flexing its muscles higher by almost 2% as the IGV is down fractionally. Notice the SMH recorded a doji candle Wednesday after a 21-handle drop during the last couple of months (following the 7/31 peak with a doji candle too). Perhaps the semis will give the IGV some breathing room, as we have always said competition is a good thing. Give credit to the IGV for not undercutting the August lows, something the SMH did already,  so maybe the IGV needs to do that to wash out some impatient shareholders. A break below a bear flag in the top 5 holding INTU below the very round 500 number may expedite that process (ADBE is cliff-hanging at the same 500 area). CRM looks shaky at the very round 200 figure, but ORCL did record a bullish engulfing candle after its recent earnings flap. PCE Friday morning should get these names moving fast. Buckle the seat belts.

27Sep 2023

Technology Sector Review: 9/28/23

Wednesday|0 Comments

Semis on Edge: As technology is most likely in a position where it will be "impossible to catch" (insert famous Secretariat call as the horse hit the turn well out in front at Belmont Stakes in 1973 to win the Triple Crown) from the top 3 major S&P sectors on a YTD basis up 30%, will it back up enough into year-end to let other lagging groups make up ground? A lot of that will depend on the semiconductors inside the diverse space and below is the chart making the argument that its recent decline could accelerate. It is the WEEKLY chart of the SMH which is now 12% off its peak made in early August after a rough double top near the 160 level. Notice there was a precipitous drop from that area in late 2021 with 2 WEEKLY bearish engulfing candles and then an even star pattern completed the first week of 2022. There are some similarities with a bearish engulfing candle the week ending 8/4 and then another the week ending 9/8 that started a bearish 3 black crows formation. Notice as well that on the bottom of the chart the ADX signal line has begun to slope heavily lower and may record a bearish cross if that red line turns above the green. When did that last occur? You guessed it to start 2022 when the ETF rolled over and did not stop for almost a year.

26Sep 2023

Materials Sector Review: 9/27/23

Tuesday|0 Comments

Golden Slump: Gold fell 1% Tuesday as markets slumped as well. It is not acting as the buffer it once did in times past. One has to contemplate if the precious metal can not behave in this type of environment when will it? We wrote about it this weekend in our WEEK AHEAD Note and it is now pressing toward the lower end of the tight range between 1900-2000 which it has done on the MONTHLY chart since March. A pierce underneath 1900 could send this spiraling lower toward the 1600 or 1700 area that it did the last time it backed away from the very round 2000 number in 2020 and 2022. Gold miners have been a drag on the materials sector as a whole as it holds onto a fractional YTD gain going into Q4. But it has not been as much of a weight as aluminum in 2023 as AA has been abysmal. Since touching almost 100 in 2022 it has spiraled lower and just broke below a bear flag pivot which carries a measured move to 22.

25Sep 2023

Consumer Sector Review: 9/26/23

Monday|0 Comments

Making A Stand? The consumer sector Monday, via the XLY, put in what could be a short-term tradeable low, which would be welcome for market participants. Perhaps this low will hold and give the ETF a chance into month end to get ready for a potential big start for the traditional Q4 run. Interesting that the XRT has recorded much bigger bursts higher in October-November, than the XLY over the same time frame. The XRT has gained an average of 12%, nearly double that of the XLY. In order for the XLY to have a nice year-end run of course AMZN and TSLA must cooperate most importantly, but MCD recorded its first 4-week losing streak since February-March 2022. HD and LOW round out the top 5 and each came into this week on a 6-session losing streak and are attempting to find some traction near their 200-day SMAs. BKNG looks the best here as it trades above the very round 3000 number, a must-hold. For the XLY as a whole, the 160 level must hold on a CLOSING basis.

24Sep 2023

Dreaded Doji Candle

Sunday|0 Comments

Dangerous Doji: As the market feels heavy currently, I thought I may share in retrospect how I look for potential topping formations in stocks. There is a variety of ways to do it, and sure it is easy to Monday morning quarterback. But this in the future could help to look for certain candlesticks that should put one on alert to at the very least trim positions, if not sell completely. I share 6 examples here of the doji candle and circled each one so everyone could visualize what it looks like. These candles are often adept at signaling possible changes in the prevailing direction. All of them were preceded by uptrends, so they were a clue to minimize holdings and wait one a better future entry. These work in both up and downtrends (NVDA is a possible example as Friday recorded a doji candle after a 100 handle decline. These are very rare and indicate uncertainty and have the same opening and CLOSING PRICES. Let's take a look at several illustrations.

23Sep 2023

THE WEEK AHEAD: Starting 9/25/23

Saturday|0 Comments

"It's the basics that make you brilliant." - Darren Cahill Rates Matter: The S&P 500 broke below the 8/18 lows last week and the rough 4350 level, which everyone ad nauseam has been talking about as the bearish head and shoulders breakdown. I see it as the symmetrical triangle break, and interestingly both patterns would have a measured move to the 4150 area. The 10-year rate, which is the solid black line on the chart below, is starting to diverge in PRICE from the S&P 500 which until late August climbed in tandem basically. The 7/27 session reversed hard right at the very round 4600 number when the 10-year yield first hit the very round 4% number, and it has felt heavy ever since. Last week fell almost 3% its largest WEEKLY loss since the week ending 3/10 and notice how the widely watched benchmark has fallen 6 of the last 8 weeks, with all six CLOSING at the lows for the WEEKLY range beginning with the bearish engulfing candle the week ending 8/4. Its 50-day SMA is curling lower for the first time since last November and with rates on the ascent, this pullback could be ready to pick up some steam.

22Sep 2023

Industrial Sector Review: 9/25/23

Friday|0 Comments

Derailed: Looking at the transports is often a good tell on the genuine health of the US economy. If one was to take a look as a whole in the small field they would come away with not such a sanguine feel. CSX is one of the better actors in the group, and it still is on the cusp of "correction" mode down 9% from its most recent 52-week highs. NSC looks more sickly 23% off its own annual peak, and even more since a rejection at the very round 300 number to start 2022. It is attempting to stabilize here near the round 200 figure after a recent 6-week losing streak. CNI slumped almost 6% last week and CP CLOSED 2 of the last 3 weeks hard upon its lows for the WEEKLY range. Below is the chart of UNP, whose most recent gap-up after its latest earnings reaction was a bit misleading as revenue came in light, but the PRICE jump was most likely attributed to the announcement of the CEO stepping down. This name also has more influence upon the XLI, being its second-largest holding, and the only rail name in the top 10 components. 

21Sep 2023

Technology Sector Review: 9/22/23

Thursday|0 Comments

Software Holding Up Best: Not that that means much on an absolute basis as both are trending lower, just that the IGV is giving up less ground than the SMH. Does that mean that the SMH is closer to a bottom than the IGV? Perhaps, but it is silly to anticipate, and better to look for examples of PRICE potentially firming up via bottoming candlestick patterns like an engulfing, piercing line or morning star. This at least gives one a good risk/reward area to play against. Over the last one and 3 month periods the IGV is essentially UNCH, while the SMH has surrendered 6% over the same time periods. The ratio chart below shows this theme and the IGV was never able to see any follow-through after a potent 3-week tight breakout from the 3 weeks ending between 7/14-28 that all CLOSED very tautly within just .77 of each other, and we know that type of coiling action often produces very powerful moves. So the fact that did not occur was a red flag. The SMH is possibly going to form a bearish WEEKLY 3 black crows pattern if Friday CLOSES in this area.

21Sep 2023

Consumer Discretionary Sector Review: 9/21/23

Thursday|0 Comments

Concentration Matters: There is an old adage that says concentration builds wealth and diversification preserves it. As we take a look at the ratio chart below comparing the XLY to the XRT, we can see the superior behavior of the XLY as it forms a bull flag, which is a continuation pattern that usually breaks in the direction it formed. Again this is a relative chart, not absolute, so this does not mean both can not decline, it just states that the XLY is acting better, and in this current market environment means it is dropping less. In fact, in our Monday Consumer Note, we looked at the top holding in AMZN and were concerned with the number of times it was touching its 50-day SMA in such a short period of time. Wednesday it touched that line, for the sixth time in less than 2 months. I believe contrary to most technicians that the more a line is touched, the less reliable that support becomes. The rest of the week should prove very telling not only for AMZN, but the consumer sector as a whole with the stocks influence. Below we also take a look at how feeble the overall XLY is with, at the moment just 20% of its holdings trading above their 50-day SMAs. Vulnerability is pervasive and is best for a technical catalyst to emerge before doing anything meaningful within the group.