Bullish P&F breakouts overwhelmed sells over the past week as the market works higher. With Wednesday’s half session record highs were notched by the Dow Industrials, S&P 500 and NASDAQ 100. Small and mid-cap indexes remain shy of record levels, as does the broad NYSE Composite. Lagging areas could be construed as a negative divergence but equally could indicate the market has further to run with gas in the tank. The catch-up scenario would be evident should P&F bullish breakouts explode in the secondary indexes. Indicators do have room to climb; we shall explore our Contragauge in next week’s research.
The NYSE Composite managed a fresh box fill on Wednesday, at 13200, a Double Top, plus a test of September 2018 resistance. The bullish breakout yesterday reinforces the breakout from March, as well as the Low Pole from the start of the year. Trajectory is up.
The S&P 500 shows similar action to the NYSE Composite in terms of a Low Pole in January, followed by a bullish breakout in March (Triple Top). That buy signal is soon to be reinforced by a Double Top – less than 5 points away. The 2017 through 2019 range appears to be near an end.
Short-term breadth, the NYSE % 10-week moving average, printed a Double Top on June 28th, adding to the buy signal from earlier that month. Strength here confirms that the present market rally is real and could continue for a few more weeks yet. Resistance is some 10% points away and even then, backing and filling would occur as opposed to an abrupt reversal.
Medium-term breadth, the NYSE Bullish %, has consolidated since April and remains at a fairly low level. The indicator has shown improvement this month, printing a 3 box reversal back to the upside. A box fill at 52% would signal broader, healthier, rally participation.
The start of this month saw the SPDR Consumer Discretionary sector hit a new all-time high, with important follow-through since. A Double Top looks likely over the near-term, a move that would bolster the buy signal from March. Consolidation between April and June was welcome, and needed, following the sharp recovery off the December low.
The P&F relative chart for the XLY holds a decade long-term uptrend, presently sitting at a record high.
KO [PRICE DOUBLE TOP | INDEX RELATIVE 3SR] | Target = $66, Stop = $44
Coca-Cola edged to a record price high on Wednesday. The P&F chart is in good shape, maintaining a long-term uptrend, but not overextended. Should it retreat, expect $50 to provide a cushion.
The P&F relative chart, versus the S&P 500, shows a 3 Stage Reversal under development with the failed break beneath the 2006/7 nadir.
ULTA [PRICE TRIPLE TOP | INDEX RELATIVE DOUBLE TOP] | Target = $400, Stop = $300
Ulta Beauty has eased back from its P&F buy signal in June, presenting a more favorable entry point. The retreat has likely found support from the 10-week moving average.
The P&F relative chart, versus the S&P 500, consolidates just beneath its record high, on a buy signal, with a healthy step back over recent sessions.
AZO [PRICE DOUBLE TOP | INDEX RELATIVE DOUBLE TOP] | Target = $1200, Stop = $1000
AutoZone traded sideways over the past month, across round-number $1100, but that should be over soon. The general trend is up and fresh highs likely next week. Extended semi-log scale is used here given the price level. Chart shows 5 bullish breakouts in-a-row since January.
The P&F relative chart, versus the S&P 500, also displays a string of buy signals. Trend is steady, targeting new all-time highs.
COST [PRICE DOUBLE TOP | INDEX RELATIVE TRIPLE TOP] | Target = $300, Stop = $230
Costco pushed to a record price high on Wednesday. Two buy signals since the uptrend support test in December 2018. Providing the general market remains firm, the discount retailer should continue northwards.
The P&F relative chart, versus the S&P 500, displays a confident Triple Top breakout in May. Decade long outperformance.
EOG [PRICE DOUBLE BOTTOM | SECTOR RELATIVE DOUBLE BOTTOM] | Target = $79, Stop = $96
EOG Resources has been a poor investment over the past two years, gently drifting lower. A P&F sell signal on Tuesday suggests another return to the $80 region.
The P&F relative chart, versus the S&P 500 Energy sector, depicts underperformance over the past year, holding downward direction.
REMINDER – P&F charts should be seen as a tool in the analyst’s toolbox and nothing more. Do not rely solely on charts! Always conduct further research of your own. If you are not an investment professional, seek advice from your broker.