Semis Sizzling: At first glance the 45% gain for the SMH in 2020, may look "pedestrian" (in line with software via the IGV YTD), but it has added 127.5% from the March lows. During the March depths, the ETF never CLOSED below the very round par number, even though the 3/17-18 sessions were each below 100 by at least 3% intraday. Most impressive recently may have been the UNCH finish for the week ending 11/13, after the prior week added nearly 13% (the week ending 11/13 was also accompanied by larger than average WEEKLY volume, meaning bears tried hard to push the space lower but were largely unsuccessful). The consolidation the in arena was active with three major purchases by AMD, ADI and MRVL. And each of those three is well higher from the announcement of the news. Look for this to carry into 2021. Stocks do a ton of due diligence before buying another name in the group, and to me thats about as bullish as you can get, when peers see big value in rivals.
Speed Bump? I am well aware that the Tesla cult, thinks the company is much more deserving of being put in the automobile group, but it is what it is. That puts it in the consumer discretionary space too, and the automobiles to be honest have become a bit sexy again, with the exception of NKLA. GM is firing on all cylinders, F is approaching the very round 10 number, TTM has acted well POST breakout from a cup with handle pivot of 10.49 taken out on 11/19. In Japan TM and HMC are holding their own, and RACE and FCAU in Europe are on the ascent. But TSLA is without question the big daddy of them all, and the question is, will the very round 600 number be a temporary roadblock? Or will it be a nemesis in the short term? There has been a lot of anticipation of its inclusion into the S&P 500 later this month, which has undoubtedly assisted its rise. Will the last 2 WEEKLY gains of 20%, need a responsible pause, or is the stock idling before yet another powerful jump? A couple consecutive CLOSES above 600 would give the bulls all the ammunition it needs.
All Time Highs In Focus: "When the facts change I change my mind, what do you do sir?" The famous quote by Winston Churchill could be relevant to recent action regarding the Nasdaq. The tech benchmark has been a laggard for 2 months, but after a brutal week last week slumping 5.5%, this week has easily erased that move and more higher by 9%. Very impressive has been another quick recoup of the 50 day SMA Wednesday, spending just 5 sessions below the line compared to the bout of 7 days last month between 9/17-25. If the index can catapult above the very round 12000 number, which has some PRICE memory their being rejected in both September and October, that in my opinion could ignite a big wave of buying. Remember the more times a line of support or resistance is touched the weaker it becomes. The mega cap names are doing a big amount of the jump higher, with GOOGL FB MSFT and AMZN each up in the 9-12% range this week so far.
Recurring Actions: We all know markets overall are coming into a positive seasonal patterns, and below is the chart of the XLY, and notice if one can look past October, they see the best back to back months during the last 5 years for the ETF. AMZN which is the largest component by far is starting to lag, and it will obviously influence the action, but other top 10 holdings are doing their fair share including NKE and TGT. MCD is hanging tough as well, just 1% off most recent 52 week highs. LOW is just 2% off its recent peak (acting better than HD which is 4% off its recent highs and threatening to lose its 50 day SMA) and sports a bull flag pattern with a breakout above 170 carrying a measured move to 210. Even SBUX seems to be getting its act together after a break above a cup with handle pivot of 80.08 on 8/25 that jumped more than 5% in double average daily volume. Currently it seems to be having issues with the very round 90 number. A burst above that level should give the chart a jolt, pun intended.
Dog No Longer? The software group has been a very robust performer within a very dominant technology group in 2020. The IGV has advanced more than 30% YTD as the ETF attempts to keep its altitude above the very round 300 number. Within the fund there has been some gems, and some that failed to keep pace with the white hot group (software is being bested by just computer hardware inside technology with strong showings from AAPL ROKU and DELL, yes that last symbol is not a typo). Below is the chart of a prior best in breed name, trying to recapture that status in DDOG. It has been struggling since it reacted in poor fashion after its latest earnings report. It trades 17% off most recent 52 week highs, and I am a buyer of strength, but if this name can gather some steam and CLOSE above the 50 day SMA a nice double bottom pattern comes into focus. The last 4 days have CLOSED in the upper half of its daily range, and Monday recorded a bullish engulfing candle that traded into the bullish harami from 8/10. This name warrants a long look.
November Implications? Market participants tend to look for certain sectors for clues as to the outcome of the election coming up, and now that we are inside 100 days to the event, rhetoric will start to heat up on the topic. Some will point to the nascent weakness in biotech, other to the importance of the banking sector. Below we take a look at the current WEEKLY chart of the defense ETF, the ITA. Not helping the cause within is the performance of the top 2 holdings in BA and RTX, off by 59 and 39% from most recent 52 week highs respectively. Boeing is lower 7 of the last 8 weeks, with all 8 weeks CLOSING at or near lows for the WEEKLY range, a poor sign. On its daily chart the decline seems somewhat orderly, with the decline coming in fairly taut trade. KTOS looks to be the best actor in a wobbly group, although it has encountered resistance at the very round 20 number, all throughout 2020. Overall however when a specific group does not participate in a broad market advance, one should take notice (ITA now 34% off most recent 52 week highs, while the S&P 500 is off by 3%). Stocks are both cheap and expensive for a reason.