The market continues to act choppy, weak, and risk-off for me. Focus is on tracking RS but not trading it yet. When the market is weak, the leaders of the next uptrend stand out.
Good earnings and good news continue to get sold. We saw it when MU reported first, now GOOGL & INTC last week were 2 recent ones. Positive catalysts -> negative reactions is a bad environment.
Selling picked up in growth stocks last week and QQQ had a new weekly closing low since we started trading sideways. Pressure continues to pick up and we now have a lot of resistance levels including the 4 & 10 week moving averages now above us.
QQQ weekly chart for Unclassified. Latest close $684.23; weekly move -1.6%.
A bull market needs to be led by high growth stocks, not biotech or energy. There has been rotation for weeks but we have lacked real leadership. Yesterdays RS ends up being the next days weakness. We don't see any continued strength.
Even the Cybersecurity stocks and software stocks that have been acting strongest and showing RS continue to fade their breakouts and trade wide & loose.
Because of this the goal for me is to continue to track RS but not yet trying to trade it.
3 out of 4 stocks follow the trend of the general market. When the market is really strong like April/May and everything is going up, everything looks like it deserves focus. Everything looks strong.
When the market it weak, the stocks to focus on stick out like a sore thumb.
All of the biggest winners though that produced triple digit returns had one thing in common and it was they held constructively near highs while the market corrected.
A stock staying near highs while everything else sells off 50% + isn't random it can only happen because buyers are holding it up. As Wyckoff taught us it is under accumulation.
While QQQ corrected in March, each stayed in a clean, organized base near its highs. They separated from the market before the correction was over, then made big moves once the environment improved. That is why I am paying attention to the stocks refusing to break now.
Below you can see while QQQ sold off SNDK barely budged. It was near highs, fairly tight price action, and showing clear RS. When the market followed through it led the way and rallied another 300%.
INTC had the same look. While QQQ corrected it was trading tight near highs showing insane relative strength. It then went on to lead higher when the market was ready rallying over 250%.
That is why I am paying attention to the growth stocks refusing to break now. Every year while the market is weak and corrects I make an RS list. Every time the uptrend resumes, that RS list becomes the focus list of the next cycle.
The plan is to stay patient and continue to build a list of what is showing the most RS.
I want to see a few changes:
1. The characteristics of individual stocks to improve. Bases should form and tighten up. Breakouts should follow-through and be followed up by more strength instead of reversals.
2. The market environment becomes calmer signaling liquidity is returning to the market. That means the daily avg range starts to narrow. Big overnight gaps become less frequent.
3. Good earnings and good news start to act as fresh catalysts instead of being sold into.
The only way that I see this beginning to happen and the environment improving is we have a massive breadth thrust day. Not oversold bounces like last week. Actual strong follow through action across growth groups. Stocks moving out of clean bases, not bouncing into no mans land. A 3:1 ratio or higher or stocks up 4% vs down 4%.
There is a time to trade RS and a time to track it and right now I continue to track.
These are the stocks and themes I am watching for better leadership, cleaner setups, and improved feedback.
DELL and HPE are the two stocks that stand out most. Both are AI server stocks and both have stayed more organized than the rest of the focus list. That may be an early clue about where leadership comes from next, but in a risk-off market it is only something to track for now.
AMD has also continued to show a ton of relative strength. It's still going sideways near highs, and until it cracks remains as a top RS candidate to become.
AMD weekly chart for AI Infrastructure. Latest close $521.95; weekly move +5.3%.
HPE is showing the same kind of separation as DELL and shares the same AI server role. The pairing is worth noting because it may be an early clue about where leadership forms next. For now it stays in tracking mode. This currently looks like how the leaders of the previous cycle looked when everything else fell apart.
HPE weekly chart for AI Infrastructure. Latest close $47.69; weekly move +4.1%.
DELL has had standout RS and trading in a very organized base. This may always crack under more pressure from the market, but if this looks like this when the market is ready to turn, it is top priority.
DELL weekly chart for AI Infrastructure. Latest close $437.50; weekly move +10.4%.
This is also currently tracking SMH same as AI infrastructure. I need to finalize theme categorization better, but I wanted to highlight other names showing RS, however lack the same organized basing as DELL HPE AMD types.
Still technically not broken but wide & loose. On watch for it to tighten up.
TER weekly chart for Semiconductors. Latest close $349.92; weekly move +8.5%; 1.7% above saved level.
This one has been trading fairly tight sideways in a range for the past four weeks or so and is showing RS. Another top candidate to focus on if it looks like this when the market is ready to turn.
ASML weekly chart for Semiconductors. Latest close $1757.09; weekly move +0.5%.
Still technically near highs and on the 10 week. Maybe it cracks or maybe it begins to tighten up in base.
AMAT weekly chart for Semiconductors. Latest close $536.25; weekly move +1.2%.
Software group has continued to be a mess. When we see selling in the AI infrastructure stocks, we see temporary strength in software that continues to unwind. However, inside of it there are still stocks that are displaying relative strength that I still think deserve to be tracked until they do crack.
Near highs still so far. Basing another one that if it doesn't crack under pressure and begins to tighten up is worth paying attention to.
BAND weekly chart for Software. Latest close $59.80; weekly move -16.7%.
TWLO still technically I consider somewhat of RS, especially compared to the rest of the software group and many growth stocks. And it's still technically basing, but the action is very wide and loose. So this before anything else would need to tighten up.
TWLO weekly chart for Software. Latest close $191.46; weekly move -7.4%.
This stock is still currently near highs and so far above the 10 week and trading fairly organized for the past 4 weeks near highs. Something to keep an eye on.
DDOG weekly chart for Software. Latest close $246.86; weekly move -4.6%; 0.4% below saved level.
Cybersecurity has really shown the most relative strength and growth among the other groups. However, the action still remains very sloppy. We see strong breakouts across the names in here with no follow through. We continue to see the strength faded, and because of the action in this group, which was promising, is a main reason why I continue to track RS and not trade it.
This kind of acts like the rest of cybersecurity. It broke out and it's still near highs, but you can just see each week has been volatile and trading fairly wide. Which if there's no follow through and the stock is consolidating, I always want to see tighter action.
PANW weekly chart for Cybersecurity. Latest close $323.79; weekly move -9.7%.
Strong breakout and it's still showing a resistance to support flip, so it's technically at the moment just retesting. However, again the environment is pretty impossible to trade as all the strength gets faded.
CRWD weekly chart for Cybersecurity. Latest close $183.28; weekly move -9.7%; 0.5% below saved level.
More example of a strong breakout with the group that was pretty aggressively faded, and more evidence of why for now I'm just tracking RS.
RBRK weekly chart for Cybersecurity. Latest close $73.24; weekly move -7.3%.
Not bad action. Still kind of trailing, rising for a week, but just up one week, down the next. The action is still not as clean as I would like a stock to be trading if I'm considering it a leader.
OKTA weekly chart for Cybersecurity. Latest close $138.50; weekly move -7.3%.
This has had non-stop strength, kind of trailing the four week until last week it pulled back, but still near highs relative strength, just not very actionable until it actually tightens up.
FTNT weekly chart for Cybersecurity. Latest close $152.37; weekly move -5.7%.
Broke out of a clean base and has pulled back. It's still constructive, but another example of lack of follow-through.
FFIV weekly chart for Cybersecurity. Latest close $392.21; weekly move -4.1%; 1.0% below saved level.
Memory was the strongest subtheme of the previous cycle. Last week they showed signs that potentially they were just basing and not breaking down. However, by the end of the week that was invalidated. And it looks for now like they continue to break down. Regardless, this group I just continue to watch for insight into the environment and to see if they either continue to rally into declining moving averages and break down or if they actually do start to build multi-week bases and tighten up.
Pretty ugly action in SNDK. Two weeks ago had a pretty drastic down week, and last week tried to bounce but found resistance at the 4 week and closed near the lows. So now it is below key moving averages and looks vulnerable.
SNDK weekly chart for Memory & Storage. Latest close $1436.56; weekly move +6.0%.
MU is currently acting stronger than SNDK and SNDK was definitely the leader in memory. But for now, MU is acting stronger and it was looking like it was going to be added back to my focus last week until Friday. Now it looks like potentially it's being rejected by the 10 and 4 week moving averages. So continuing to watch to see if this goes sideways and tightens up or further breaks down.
MU weekly chart for Memory & Storage. Latest close $920.95; weekly move +8.5%.
WDC had a blow-off type action in June and a weekly bearish engulging that has so far marked the top and continues to look like it is deteriorating for now.
WDC weekly chart for Memory & Storage. Latest close $519.80; weekly move +8.9%.
These are really not growth stocks and the focus always remains for me on the tech stocks when they're ready. However, the action in healthcare and biotech has continued to act fairly organized and is worth paying attention to.
Moving sideways respecting the 10 week moving average looks like a clean setup. Better action than most.
LLY weekly chart for Healthcare & Biotech. Latest close $1196.03; weekly move +1.4%.
Breakout - retest - follow through. Pretty clean has been acting cleaner than cybersecurity.
MRK weekly chart for Healthcare & Biotech. Latest close $131.07; weekly move +2.8%.