Short-Term Base Breakouts

We've seen some very clean 4+ week base breakouts on the Hourly charts. This appears to be a nicely correlated move with broad participation.

AKAM

ALLY

AMZN

FXI China

JPM

MA

SMH

SPX

TWTR

Amazon (some random thoughts)

Amazon is a monster, behemoth, the generational no-brainer investment for my lifetime. By every metric I trust, it says to buy, hold, buy more on dips, hold, etc.

Take a look:

This is the breakdown on FinvizElite: Its hard to see but here are some highlights-

EPS grew 335% this year and is set to grow 39% and 61% over the next year and 5-years respectively. EPS Quarter over Quarter grew 116% with Sales Q/Q up 17%. 

The EPS graph in the middle left of the screenshot is pretty amazing; EPS in 2014 was -0.52 per share, in 2015 +1.28, in 2016 +5.00, and in 2018 +20.36! It looks like they can just turn their earnings on like a spigot. 

It continues to get better...The Sales graph in the middle shows the trend there. No explanation needed. Sales are growing 

The third graph is Shares Outstanding. Notice how much discussion there has been and continues to be made regarding share buybacks by companies to artificially boost their EPS and "manipulate" the market? Well, AMZN's Shares Outstanding over the last 5-year have actually grown from 462M to a little over 490M. No buybacks here to stimulate EPS. And just imagine when they do start to repurchase...Holy mackerel  

Now read this description of the company and what they do: (again provided by FinvizElite) 

Amazon.com, Inc. engages in the retail sale of consumer products and subscriptions in North America and internationally. The company operates through three segments: North America, International, and Amazon Web Services (AWS) segments. It sells merchandise and content purchased for resale from third-party sellers through physical stores and online stores. The company also manufactures and sells electronic devices, including Kindle e-readers, Fire tablets, Fire TVs, and Echo devices; provides Kindle Direct Publishing, an online service that allows independent authors and publishers to make their books available in the Kindle Store; and develops and produces media content. In addition, it offers programs that enable sellers to sell their products on its Websites, as well as their own branded Websites; and programs that allow authors, musicians, filmmakers, skill and app developers, and others to publish and sell content. Further, the company provides compute, storage, database, and other AWS services, as well as compute, storage, database offerings, fulfillment, publishing, digital content subscriptions, advertising, and co-branded credit card agreement services. Additionally, it offers Amazon Prime, a membership program, which provides free shipping of various items; access to streaming of movies and TV episodes; and other services. It serves consumers, sellers, developers, enterprises, and content creators. Amazon.com, Inc. has a strategic partnership with Volkswagen AG. The company was founded in 1994 and is headquartered in Seattle, Washington.

If those aren't the most fingers in some really big pies, then i don't know what beats it.

They sell merchandise to consumers, publish original literature/art, make and sell electronic devices, cloud services, produce television and movie content, Amazon Prime (which has apparently taken over the United States in about 3 years time) at a $100/year for more than half of all American households...That's just going to continue being a cash cow, and its only getting started.

You will be hard pressed to find such a safe, relentless growth story, and with a massively established infrastructure.

I joke with people that Amazon is what will become the real version of "Big and Large" from Pixar's movie Wall-e. I love that movie and feel this is actually a somewhat possible path for Amazon in some weird way. Bezos has his own space program "Blue Origin" which could slide its way into this whole picture some day as well.

The way I see it, it is going to be awful tough for this one to fail. Of course anything is always possible, but if I have to pick, I'd prefer an established company (the largest in the world in fact) that has grown EPS by 400% in the last 3-years, is expected to grow by 61% over the next 5-years, and is taking over most aspects of our consumer lives.

I don't say it lightly that I would buy/hold a stock blindly. That is not my game at all. But with Amazon I feel it is worth the small chance that they fail for the potential boundless upside in the unforeseeable future.

I will continue to use my Peter Lynch glasses to watch how consumers interact with the company; as of now I see countless packages delivered daily (I generally receive 1 to 3 packages per day personally), their original television content is winning awards, they continue to diversify and streamline their offerings in all areas (including shipping technology), Warren Buffett's Berkshire Hathaway has recently made a substantial purchase in the company, etc.

They appear unstoppable and destined to grow continuously. I honestly think when we look back in 30-years we will see that AMZN was the easiest and clearest long-term investment of our lifetimes.

Disclosure: I currently hold 10% of my liquid net worth in AMZN shares and will continue to average my cost over time. We are also Long AMZN for our Managed Client Accounts 

The ZenTrends "Markets are Going to Collapse" Newsletter

Its the end of the world as we know it.....

Following the Fed announcement on interest rates today markets reversed lower from all-time highs. It looks like we are headed for a correction. Just how deep? Nobody knows, but it will likely be painful...bet on that.

They are pitching bearish newsletter commercials on financial networks today, so I figured I better get on board for this wave of hot opportunity!

Here is the SP500 Weekly chart, take a look at some of these Fib levels for a little perspective of the doom we could see:

Pullbacks within "normal" boundaries can retrace 50%-61.8% of the prior trend. If this is to play out the levels of note are about 2,650 and 2,580 respectively...What will that do to your 200% Margin account? Death likely.

Probably my favorite bearish chart pattern is the "rising wedge":

Unfortunately I can't make this look like its failing yet, but you get the idea. When it breaks, oh boy we are gonna get smoked.

I've noted some other classic risk-off rotation that has begun to kick in as of the last couple weeks:

TLT has rotated up on the Weekly chart from a very orderly Bull Flag pattern

It seems money is rotating into Bonds and that tends to be a sign that investors are expecting some riskier action ahead.

I also note the new 52-week highs the US Dollar posted last week

Generally movement into the Dollar is a sign of protection-seeking rotation of funds. Its seems participants were anticipating some problems ahead with this recent strength we have seen. At the very least this should be a headwind to the internationally focused Mega-Cap companies in the SP500.

Ok so I've been a bit of an alarmist above. Maybe context doesn't come through on the text like it does in my head...In all seriousness, would a pullback really surprise anyone? The market is up 25% from the December low over the last 19-weeks; its been an absolutely torrid run.

What I am expecting is for the "air" from price to the 20 Week SMA to be filled in. This should create a Bull Flag-like pattern. Currently the 20 Week SMA is about 6.5% below the market.

I would view a consolidation like this to be a very bullish development. It would allow price to reset to the rising moving average and establish a new higher low or floor of support. The current move up has not paused long enough to create any viable support, price will need to discover some demand over the next several weeks, likely near the 2,800 level is my best guess.

A pullback from current levels would not be a disaster, well it could be a disaster for those who are leveraged to the hilt and not in any way prepared for lower prices however. I have been holding some fairly significant TLT positions waiting for prices to form a higher low. Its ok to be long stocks on this pullback, but its prudent to maintain some balance to take advantage of any potential weakness that may come in the weeks ahead.

For those who are about to die, I salute you...For everyone else, I'll see you tomorrow

Major Bases Form

As the market rallied hard in Q1, surprisingly there are a plethora of lengthy horizontal bases forming in many individual stocks.

ULTA- End of Month close > $320 area is a new Long signal

LVS > 62.75

BABA  holds breakout well

Bitcoin GBTC

AKAM > 74

SQ > 83.50

LASR > 23.50

NFLX > 386

MLM > 200

How these setups play out will likely be a helpful read on the overall market

Semiconductor Quarterlies

Semis look fantastic from a trend perspective on the long-term, Quarterly charts. Pending the close of March (which will be the end of the 1st Quarter), many charts have formed large rounded base patterns and are now rotating up after multiple quarters of digestion.

This is a long-term view point so these patterns can take time to play out. But this is a great technical basis to build an investment thesis on.

I am currently Long AMD and INTC, but am looking to increase overall allocations toward this space provided these charts close with the bullish pivots confirmed.

INTC

ADI

ON

LRCX

KLAC

MRVL

AMAT

TER

Most of the Semis ran really hot in 2016-2017 and have used the last year+ to digest those rallies. The majority of these names have corrected 30-50% off the prior highs, this offers an intriguing thesis to continue accumulating positions in the space.

For the most part we can just throw a dart at this sector as most will trade together. But there are a couple standouts to me at a glance. ADI and INTC corrected the least on the recent decline which shows some relative strength. LRCX, KLAC and ADI are at or coming off of new highs. XLNX also is a stand out relative performer but is a bit more extended from support than some of these above.

This is a starting point to get us thinking about the potential in Semiconductors ahead. Further analysis into the financials would be helpful for narrowing down the stronger names and tipping more of the odds in our favor.

I Can Feel the Hate

I have been very cautious in the market over the last 2 months. I've taken plenty of new Longs in early January and have been running them, but with hedges on as the market was in a dangerous posture following the October drop according to my trend health metrics. Capital preservation has been very important to me. For the most part our positioning nailed it from late-October through Christmas Eve. It is everything since that has been much more difficult.

However, January put a stall to the decline, posting many Inside Months. February is looking like strong follow-through higher from that consolidation. Many individual growth stocks are doing very well and the indices are moving right back above longer-term trend averages.

I am a hybrid Swing/Trend trader, with a bit of William O'Neil CANSLIM in there as well and I invest a significant amount of my assets in growth stocks on a much longer timeframe. Based on the longer-term models (which have held up great overall during the correction), Bull signals are triggering all over the place.

I get it: overbought, resistance, macro, Trump, China, The Fed, whatever...

And I agree with all of that 100%. I see it too. Based on timeframe, I am adjusting to the current position we find ourselves in. The market should pullback, yes it should. But it might not...that is a possible outcome as well.

My longer-term models do not recognize most of the above mentioned biases as inputs for buying and selling. There are signals based on Price or there aren't, its as simple as that.

Thursday is the close of February and therefore the close of the monthly bar. Despite all the reasons above to ignore my models, I will push forward and take 4 new positions for our longer-term accounts, bringing that exposure up to about 85% Long: SPSC, MKTX, BOOT, INTC

SPSC Long above this breakout

  MKTX Excellent Trend Following entry, Long above the new pivot low

BOOT multi-year post-IPO base, Cup/Handle, Bull Flag, whatever you want to call it

INTC Bull Flag and 6-month highs breakout

SPX While the short-term is very overbought, the larger view is just rotating out of a fresh pattern now. A lot like March 2016

I also like SMH, XBI, XLY, and XLV for ETF accounts.

I admit when I am wrong and turn with my models. Sometimes my models are wrong, maybe they are wrong this time. They weren't wrong in 2016, they weren't wrong in October. I'll stick with it...But I can feel the hate.

ZT

Sector Groups in a Tight Spot

I have always deferred the majority of my market analysis to the Weekly timeframe. I feel that making too many decisions based on one day's worth of news or price movement tends to be reactionary and also leads to many false signals. When you wait for the Weekly chart to close there is a lot more information that has been uncovered, analyzed, and absorbed. The signals that tend to follow this larger interpretation of data and sentiment I find more reliable.

There is a lot of talk daily about this market recovery; there is talk about the 200 Day SMA, each day's movement, individual earnings reactions, etc. There is a hyper-awareness by the majority of market participants and Financial Media to the "hot story" of the day. But rather than taking this tunnel-vision approach, I find it much more telling to step back and observe the larger context of this rally to assess the overall trend health.

Financials XLF- Rally back to prior failed support and into falling 20/50 Week SMA's. Usually this is a poor risk/reward setup for a bullish bias.

 

Consumer Discretionary XLY- Pushing through falling weekly SMA's, still lower low/lower highs

Technology XLK- Into weekly SMA resistance, still lower low/lower high for now

Semiconductors SMH- Pushing right through prior failed support and weekly SMA resistance. Enough space is being created above the 20 Week SMA to setup a possible Bull Flag on a digestion of this rally, while the moving average should turn up under price and could become supportive. Above December high is notable strength. Next we look for a higher low to form.

 

Industrials XLI- Powering right through prior failed support and clearing weekly SMA resistance. Moving above the December high is notable strength. In position now, due to significant strength, to form a higher low and possible "right shoulder" for new Inverse Head Shoulder pattern on a pullback.

Materials XLB- Soft recovery and still decently below prior broken support level.

Energy XLE- Rally back to falling 20 Week SMA and lower boundary of prior trading range

Health Care XLV- Trading above weekly SMA's while 50 Week SMA still rising (uptrend). One of the better looking groups overall during this corrective period.

Consumer Staples XLP- Long-term trading range, price has recovered back above weekly SMA's.

Utilities XLU- Pressing near all-time highs, weekly SMA's are rising suggesting uptrend behavior

Stepping back and observing the bigger picture this looks like a very mixed structure. Prices have rallied a ton over the past month and a half. Many trends remain pointed lower and those that are looking strongest tend to be more Defensive in nature (XLV, XLP, XLU).

Financials lagging is a bit of an issue for the Bull case, but the potential for Semiconductors and Industrials to reclaim broken support and form higher lows could be enough stabilization for the market to gain some structural footing.

We won't know what we really have in terms of a healthy recovery until we see a multi-week pullback/digestion. How participants respond to some bad news and poorer price action will be very important to watch. Do they just dump everything and assume this was simply a trade-able bounce, or do they come in with sidelined cash to support the market and set a higher low?

Keep an eye out for those higher lows to form. That will be the best indicator we have and requires zero outside "noise" to decipher.