It was another round of selling for Whole Food Markets' (WFM) competitors as Amazon.com (AMZN) made headlines by announcing that prices would be cut at WFM stores. That spooked the likes of Costco (COST), Wal-Mart (WMT) and Target (TGT) as all three saw drops on very heavy volume. Meanwhile, AMZN's own price slump may have ended on Thursday as a bullish hammer printed at price support. Check it out:
The sector SPDRs are weighted by market-cap and this means the biggest stocks carry the most weight. The Materials SPDR (XLB), for example, is dominated by Dow Chemical (11.86%) and DuPont (12%). These two behemoths are poised to merge and the combined company will clearly dominate XLB going forward. Chartists interested in XLB had best keep an eye on these two stocks for directional clues.
Gilead (GILD) was in the Biotech spotlight for many years. The rally in Biotech's that started in 2016 has largely missed Gilead. Recently, the Gilead chart changed character and started to improve. This might just make a nice entry. The SCTR has moved above 50 after being below 25 for an entire year. Something is changing that the stock is now starting to perform similar to its peer group average. The current SCTR is 57%. Gilead is back above the 40 week moving average for the first time since early 2016. The 10 week moving average has now crossed above, suggesting an improving trend.
Newmont Mining (NEM) is one of the bigger gold players and its performance is tied to the price of gold, which is challenging resistance. Note that the Gold SPDR (GLD) has yet to break above its April-June highs, but Newmont is starting to outperform bullion with a break above these highs. On the price chart, NEM broke resistance with a sharp surge and then fell back to the breakout zone with a falling flag. This pullback to the breakout zone is known as a throwback and such moves can offer a second chance to partake in a move. Falling flags are also bullish continuation patterns and the stock is attempting another breakout today.
I'm mostly a short-term momentum trader that likes to follow the big picture trend. But it's hard to ignore stocks after they've been bludgeoned for a potential quick bounce, especially when you see a reversing candle on heavy volume. Enter AMC Entertainment Holdings (AMC). Here's a stock that's lost more than half its market capitalization in the past few months and it's had an absolutely abysmal August. But Friday should provide the bulls a little short-term hope. Check out the chart:
Those green arrows show that the declining 20 day EMA has been a significant resistance level and it likely will continue to be. Also, the latest breakdown occurred near the 15 level. While I do not - in any way, shape or form - suggest this is a healthy chart, I do believe AMC could be primed for a near-term bounce. A trip back to 15 is all I would look for with perhaps an intraday move to test that 20 day EMA. If you decide to take a chance on the long side, keep a stop in place. A trip below Friday's 12.05 low would negate the hammer and its reversing tendencies.
$GOLD topped last year in July. The Gold miners topped August 12th. After spending a year in decline, the last six months of that have been base building. This morning, the pre-market action has $GOLD above $1302.00. For Commodity investors, Copper has been performing well. It's nice to see Gold join the party.
Unless there's a reversal on Friday, the Dow Jones U.S. Internet Index ($DJUSNS) will close lower for the fourth consecutive week, equaling its longest losing streak since the DJUSNS bottomed in late 2008. There's a decent chance a new record could be set next week as the weekly negative divergence continues to play out. Here's a look at the current technical picture:
The last breakout above 1450 has not held and the next key support level is the rising 20 week EMA. Those are two key support levels when a negative divergence is present. If those levels are lost, then consider the 50 week SMA support as next support and currently that moving average is at 1277.
The long-term trend for Applied Materials (AMAT), a big semiconductor equipment manufacturer, is clearly up and the short-term trend could be turning up again with a gap three days ago. The chart below shows AMAT hitting a 52-week high in early June and then forming a large triangle. This is basically a large consolidation within an uptrend, which means it is a bullish continuation pattern. A move above 48 would break triangle resistance, but this level is still quite far away.
The discussion about market tops seems to dominate most of the news. With the exception of severe market collapses, usually the market rotates through different sectors in the business cycle, even during down times. The market top in 2015 saw Clorox rise 30% in the next year while the index pulled back. Recently, my eye was drawn to Clorox (CLX), looking for a strong, defensive stock. If the growth areas of the market are on pause, we might see some transition into more defensive names. Clorox (CLX) owns a beautiful 5-year chart that looks like it is getting ready for its next breakout. After a 4-year rocket ride, the stock paused when the financials started to pick up the pace in 2016. Clorox is back near all time highs but more importantly, it looks like it want retest the recent false breakout.
After the false breakout, the stock pulled back. It did not make a lower low and continues to press the upside. Tuesday's close was back above the 2016 high and $0.07 short of the highest close in March. While the dividend isn't huge, it is hovering around 2.4%.
Greg Schnell, CMT, MFTA