Healthcare Sector Review: 6/25/24
MONTHLY Consequence: The biotech group inside healthcare has been a widowmaker for many. Each time it seems to get going it records some kind of letdown. Could the prospects be brightening? Looking at the MONTHLY chart below, next Friday becomes very important to witness if the XBI can CLOSE above the very round 90 number. Throughout 2022-23 it was above in February-April 2022, August 2022, January, June, and December 2023, and again this January but none of them CLOSED above 90. Consider this area a line in the sand. If by Friday of this coming week, the XBI can CLOSE above 90 it would make April and May a potential bear trap. The WEEKLY chart has some appeal as well with the bullish hammer candle and notice the first WEEKLY CLOSE above the middle line in the Bollinger Band since the big move last November (bullish ADX crossover from late April is still intact too). Peering at the daily chart the fund feels like it is undergoing a magnetic pullback toward the very round par number, an area where it failed miserably in late February and early March. It reset with a couple of spinning top candles at the 200-day SMA in late April and may just be rounding out the right side of a cup base.
Technology Sector Review: 6/13/24
Bearing Fruit: Certainly, I am not meaning that in a "bearish" way as I was WRONG recently looking at the name and its bearish filled-in candlestick but the damage was minimal with a tight stop just above it on its last earnings day from 5/3 (candle does not look that large and daunting as it did in our tech note that day than it does now on the daily chart below). With the last 2 day's surge (did CLOSE off intraday highs Wednesday), AAPL narrowly missed being the largest company on the planet again. Looking at it from longer time frames suggests this trend is back firmly higher whether this week's action has been accompanied by short covering, organic buying or both. The WEEKLY chart was higher 6 of the last 7 weeks before this week, and admire the break above the double bottom pivot of 195.96 from the week ending 1/26 which was a doji candle. On the MONTHLY chart playing Monday morning quarterback the doji candle in April that ended a 3-month losing streak was the canary in the coal mine. June still has a large way to go, but if the current candle stands could this be the start of a robust move, which last occurred with back-to-back long white hollowed candles in April 2020? Of course, no one knows and I am not saying to buy AAPL here. I am just saying this bodes well for overall markets with one of the largest stocks on Earth acting well.
THE WEEK AHEAD: Starting 5/28/24
"When it's over leave, don't continue watering a dead flower." - Unknown Canary in the Coal Mine? Will the big bearish reversal last Thursday have a similar effect to the last one on 5/23? Of course, no one knows and the daily chart of the S&P 500 did record a bullish harami candle and the trend is still firmly higher so chances are the damage will be limited. Add to that holiday-shortened weeks traditionally being bullish and with fresh money getting ready to flow in at the start of June. Other major benchmarks have met roadblocks as the very round numbers, with the Dow 40000 hats a bit premature with just one CLOSE above the figure on 5/17 by a measly 3 points. It has since pulled back 1000 points after the double top there from March with the bearish engulfing candle on 3/22 and the completion of a bearish evening star on 4/1. The Nasdaq came within 4 handles of 17000 Thursday before its own nasty reversal. The MONTHLY chart of the S&P 500 shows good support at the very round 5000 number and the longer term time frame speaks to more PRICE appreciation into year-end with good action POST breakout above the cup with handle which now has a target to 5700.
Far East Review: 5/20/24
Red Dragon Awakening: It is not like the Chinese markets needed another jolt higher this week, which seemed to come after some 13F filings were released which displayed Tepper seems to be all in on the country (there was underlying strength here in previous weeks). Of course, the data is stale somewhat but his portfolio was made up of nearly one-fourth Chinese stocks. We had highlighted this fund recently in our China/Japan Note back in late April and it has been off to the races ever since. My feeling is that the ETF will feel a magnetic pull toward 35, best seen here on the MONTHLY chart, an area of former influence being both support and resistance dating back a decade. The current set up if it gets there would be an ascending triangle and a break above 35 would see a measured move to 53 (notice the top being put in with the gravestone doji candle in February 2021). KWEB is now up 15% this month so far and if that holds would be its first 4-month win streak since it did so starting in April 2020 which started a melt-up advancing 10 of the next 11 months. Another 4-month win streak in the last 10 years commenced in January 2017 and led to a 12 of 13-month win streak (one other was muted the first 4 months of 2019). Look for some big follow-through if this vibrant May gain so far holds up.
JD.com Shines/ International Auto Report
Leader Basking: In last week's China/Japan Note, we discussed our affinity for JD over BABA. The latter name everyone has been hyper-focused upon and my belief is that script should be flipped. If one were to look at how many of the most popular names in the KWEB have performed since the overall market bottomed last October, one may be surprised to see how JD has been a leader, even overtaking PDD which has been an excellent actor itself (over the last 30 days JD has flexed its muscles against peers including NTES and BIDU). JD is still 28% off its most recent 52-week highs but is now on an 8-session win streak with the last 7 sessions CLOSING at or in the upper half of the daily range, a hallmark bullish trait. Last week JD jumped 19%, for its best WEEKLY return in more than 2 years, and recaptured its 50 WEEK SMA for the first time since early 2023, and notice RSI is at its best reading since the start of 2022. We liked that MONTHLY chart on JD where it enjoyed solid support at the very round 20 number, and April with 2 days left is nicely following through with March's bullish morning star pattern completion.
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.