Bounce Doesn’t Last As Nasdaq Nears 200-Day Test; REAL, QTWO, APPF In Focus — Stock Market Today

[00:00:00] Speaker ?: Let's get started. [00:00:30] Alyssa Coram: Good afternoon, everyone, and welcome to Stock Market Today for Monday, November 2nd. It's Alyssa Coram here and a bounce that didn't last, a pretty bearish outside reversal, especially for the NASDAQ composite coming down to a key long-term level. Will it be support? We'll have to see what that test looks like. Joining me now to break down all the action from today's session is my colleague, Justin Nielsen. Justin, what do you have for us today? [00:01:01] Justin Nielsen: Well, we'll take a look at, for as ugly as the indexes look, there are still some stocks that are just looking fine, and it's amazing. So we'll take a look at where some of that strength is, including Getting Real with RealReal. We'll also have Q2 Holdings, if I can get that out, and AppFolio. So the ticker symbols there are Real, QTWO and APPF. [00:01:27] Alyssa Coram: All right, we'll check out those stocks. But first, a closer look at the major indexes. Here's the NASDAQ composite, the hardest hit today, unless you're looking at the NASDAQ 100, outpacing the decline there. The NASDAQ composite down 1.1%. The NASDAQ 100 down some 1.4% on the day. Meanwhile, the S&P 500 down about a half a percent. So also reversing lower here today, Justin, the Russell 2000 down fractionally after trying to bounce once again today off of that 200-day line. The Dow did close in positive territory, up some 4 tenths of a percent, but well off of its highs. So even though we had oil down, USO, a proxy, you know, for the price of oil, down some 7% in interest rates, Justin, also coming off again here today, seems like either whether it's pessimism or caution, a mix of AI concerns, midterm concerns, seems like that's what was really the overriding factor in today's session as it progressed. [00:02:47] Justin Nielsen: Well, yeah, pick your poison in terms of concerns, because there's plenty out there to be concerned about. [00:02:51] Alyssa Coram: Yeah, to name a few, just to name a few. [00:02:54] Justin Nielsen: Just to name a few. But, you know, and again, this is where sometimes this macro level of what you would have expected, again, you give me the headline and say, oh, the 10-year treasury is down this much and oil stocks are down this much. I'm going to say every time, oh, yeah, the market must have been having a great day. But at the end of the day, you have to go with what the market is actually telling you, not what you think it should do. And this market is, you know, just telling us that especially on the tech side with the NASDAQ composite action, there's some sickness here. Now, it can all be wiped away with a few good days, right? And we always have to remember that to not disengage and just throw in the towel and say, oh, I'm not looking at the market for a month or two. Because, again, things can turn around in as little as four days. That's how long it takes for us to get a follow-through day. But it should be noted that, you know, now we are at some of these critical levels for the NASDAQ composite. An outside day closing at the bottom, that's not a good look. And that is following a really ugly gap down that we have that really kind of destroyed a lot of prior support levels. Now, the 200-day moving average line, still intact. But, man, if you had told me a few weeks ago that that's where we were headed, I would have been like, wow, that's, and again, this quickly, very, you know, very concerning. And look, for the NASDAQ composite, we're down more than 9% off the highs now. We're getting close to that 10%, you know, we're definitely past the 8% level, right? You know, but 10% is kind of what a lot of people say, okay, this is like a mid-range correction. And we did hit that on the queues. As you mentioned, the queues of the NASDAQ 100 hurt a little bit more, still above the 200-day moving average line. But again, we just took out a lot of that earlier support areas where it seemed like we were holding at 700. Well, no more. The 200-day moving average line looks like the next stop. S&P 500, you know, maybe not as, maybe not as bad, still has a lot of room above that 200-day moving average line. But 750 holding for now, but we are back below that 50-day moving average line. Again, we just can't seem to hold it. And we did undercut a lot of those higher levels of support where it just seemed like it was testing, testing, getting support, and then it, you know, dropped down to that next level. So we'll have to see if it holds here. And the Russell 2000, I mean, this is like a, I don't know, it's looking, this could be like a little ping pong back and forth between the 50 and the 200-day moving average line, hitting its head on one, hitting its, you know, jumping off the other. And as these narrow, I just, you know, think that we have to wait for it to, you know, decisively break one way or the other. Because getting up to the line or getting down to the line isn't enough. That's just not giving us the information. This is kind of, to me, in a no-man's land. Let's take a look at MDY real quick, which is the mid caps. This one looked a little bit better in terms of getting above that 50-day moving average line. But it just hasn't been holding. Still, a decent gain today at, you know, about a three-quarter percent gain. And then also, let's take a look at RSP. Because, you know, as much as there's been so much destruction out there, you look at RSP, which is the equal weighted of the S&P 500. And you're like, what's the problem? You know, nothing to see here. Yeah, this looks just fine. So it's really, again, a very, very strange market. If you're in certain areas, you're probably not feeling it. And you're like, what's everyone all concerned about? But if you're in tech, if you're in some of these areas that looked good just last week, like cybersecurity, let's pull up bug or hack, either one. I mean, this just came down so sharply. Hack is probably actually a little bit better in terms of the look right down there to the 50-day moving average line. You know, they're just things that are looking fine are losing ground very quickly. And it's really hard when just as you start making progress, it feels like they pulled a rug out from under you. And that makes it very difficult. But again, there are these areas that are holding up well. One of the areas that we talked about on IBD Live today, PEJ. You would think that with all the worries about the economy and everything like that, why would leisure and entertainment be so well? I mean, maybe we need to dull our senses with, you know, more leisure and more entertainment to make ourselves happy. But this looks just fine. And you look at, of course, one of the biggest components here is DAL, Delta Airlines. And, you know, with oil coming down, you know, no big surprise. This is, you know, showing some power, at least in the short term. And Jets actually had a very good day. That's the ETF that Delta Airlines, American Airlines, and a number, you know, that got up to its 200-day moving average line with a 4% gain today. But it got turned away, you know, and even getting turned away, it was still up 4%. So there are some of these areas that are of interest. I also wanted to bring up with the 10-year Treasury yield coming in like it did. Again, this is a pretty solid move down from those highs that we were seeing. And ITB, our home construction area, you know, notable that that got above its 200-day moving average line today with a big gain as the 10-year Treasury yield came down. So, again, there are these pockets of strength, but there's a lot of areas that are more defensive in nature. Utilities have been doing a little bit better. Food and beverage. You look at something like the Staples or PBJ, which, again, I love the symbol. You know, that's looking a little bit better. So there is definitely a defensive bent here. But, again, just kind of closing out with RSP again, that average S&P 500 stock is holding up relatively well still. What we're really seeing is a lot of destruction in the Magnificent 7, the hyperscalers, the AI. So you pull up mags, and you can kind of see, oh, this is what's really kind of dragging these indexes down with the Magnificent 7, the heaviest market cap-weighted stocks, really, you know, kind of taking it on the chin here lately. And it's hard for the indexes to move higher if the Magnificent 7 are dragging them down. [00:09:37] Alyssa Coram: Yeah. And so it seems like, Justin, there are reasons for traders to be in cash right now, unless they are in some of these stocks that have been performing well. Hinge, which earnings today after the close, it looks like about 1.3% right now. If you're in something like this, then, yeah, you can ride that wave higher. But if stocks have been triggering your sell rules or even just if you want to raise more cash, given the overall market uncertainty, given some big unknowns, catalysts that are happening this week, including the midterm elections, you know, could be a big move up or down or a nothing burger. We don't know yet. But there are reasons to be a little bit more defensive in this market, again, unless you are in some of these, seems like medical. For us growth traders, seems like medical. Is this kind of the last area standing, it seems like, for growth now that some of the software stocks are coming back in? [00:10:41] Justin Nielsen: Well, even there, it's been tough. Let's be honest, because Hinge Health, and again, if you got in on this, like Leaderboard did. I mean, Leaderboard has a 100% gain on this, but they also had Natera, NTRA. I had this last week and I ditched it because, you know, it was just, I wasn't feeling great about things on Friday. It was a recent ad, so I didn't have a lot of cushion. And this just kind of really, you know, fell out of bed, along with a lot of our medical research names, like Grail, G-R-A-L, you know, G-H, you know, kind of in this medical services area too, a lot of these just really, you know, didn't do so well. Lilly, I do have a position in Lilly. This is one of the few stocks I'm still holding because it's not doing anything wrong. So, yeah, you can certainly hold some of these things that aren't doing anything wrong, but you have to look at your stocks like a Natera. Just because it's in medical doesn't mean it's safe. We're seeing a lot of rugs getting pulled out from under you on a lot of different stocks. So you just have to really be careful out there. And if that means you go more defensive, wait for the midterms to be a little bit over, wait for some of these earnings to be out. And that's okay, especially if, like me, you've been getting hurt a little bit, your drawdown is a little bit larger than you want. That's when my little turtle head goes right back in its shell. And I'm not willing to stick my neck out until I get a little bit more traction on the stocks that I have. So that's where I'm at. And look, the midterms, whichever way it goes, the good news is it'll be over, right? So a lot of times, this is something we were talking about with Jeffrey Hirsch of the Stock Traders Almanac, sometimes just being done, having it out of the way, and the market hates uncertainty. So just having a decision sometimes helps quite a bit. So we only have a couple days to wait for that. [00:12:39] Alyssa Coram: Yeah, and we'll see. I think the concern is potential for the AI ecosystem for more regulation on top of the spending concerns that we're seeing. So it'll be interesting to see how all of that plays out. But let's take a look at some stocks, Justin. Here's real, real. So we talked about eBay last week a couple of times. That's been trending 90. Positive earnings reaction, real, real, kind of in a similar space, but really specializing in luxury goods, that luxury apparel. I've checked out the site myself. I think I even have one handbag from there. But anyway, they also had earnings out recently and a big pickup in bottom line growth, 150% earnings growth, Justin. So forming the right side of a bottoming base here. What are you seeing in the chart? [00:13:38] Justin Nielsen: Yeah, that earnings really sticks out. Now, keep in mind, I'm always looking at those raw numbers. And we have some very small numbers here that we're dealing with. And some of these comparisons to negatives. So just put that in perspective so you can't just go off of the growth numbers and say, oh, triple digit growth, everything's great. Okay, well, it's going from negative numbers to positive numbers and all of that. But it's a decent look. And again, with all of the sector rotation that we are seeing, that means that sometimes you're going to have to be looking at stocks that have lower relative strength ratings. Because those are the things that are kind of coming up and taking the leadership positions. So they might, you know, they might start out with some lower relative strength ratings like RealReal here at 52 for the RS rating. But one of the things that I'll often do is I'll take a look at the three-month RS rating, which if you go over to the left-hand side of your market surge screen, you can see that that's at a 92. And the six-month RS is at an 85. Okay, well, now that gives me a little bit more conviction that, hey, there is something going on here. This is, you know, showing more short-term relative strength. And you can also see that confirmed with the relative strength line versus the S&P 500, breaking a downtrend recently. So this has some things going for it. Retail, you know, it keeps on coming up, right? As you go through your screens, which even if you're in cash, you should still be screening and building your watch list. And retail just keeps on coming up. So, again, for as much as there's a lot of this concern over the economy and the consumer, there's a lot of stocks that keep on showing up in the retail space that are looking just fine. So this is one among them. And again, because it has those strong fundamentals to kind of, you know, or at least the turnaround to a degree here. That's something that is, I think, worth watching as it goes from profitability to looks like this year is going to be its first unprofitability to the first year of profitability, according to the estimates for this year. So something definitely worth watching. [00:15:44] Alyssa Coram: Mm-hmm. And let's now take a look at Q2. Shares up 5% earnings out of the way and a new CEO for the company's software, financial software company. [00:16:00] Justin Nielsen: Yeah, we're always interested in, you know, things that are changing with a company that could act as catalysts. And certainly a new CEO is one of them. So whenever I see that flag, I start, like, thinking, okay, let's find out a little bit about the CEO. Can I do a little profile on them? What have they done before? Have they turned companies around? You know, what's their experience in the space? And sometimes you can get a good sense of, you certainly know that it looks like the market is applauding it, but it can give you a little bit more conviction if you kind of get to know what is their management style, what has their success has been in the past, and have there been any challenges? And this is where, again, AI can kind of sometimes help you do some of these deep dives. You know, you always have to be careful of the hallucinations and inaccurate data, but it can certainly point you in the right direction to do some of that research. But more than anything, what I like here is you've got a strong move, a strong relative strength. You know, this has gotten all the way up to an RS rating, a relative strength rating of 80. And here again, the three-month and the six-month is even stronger at 87 and 92. So those are some positive things. Now, if you look at the weekly chart, you have to be aware that this does, like a lot of stocks that are in this sector rotation phase, this has a lot of overhead supply. So you've got to just be aware, where are some of these areas where this might end up hitting its head? So a lot of times what I'll do is I'll, you know, start looking at, okay, it seems like there was a little bit of congestion around 75 area. So, you know, that's an area that I'm going to draw a line just like you did there, Allie. And the next spot is exactly where you drew it, right above 80. And so those are areas I'm going to be watching as it gets up to those levels. Does it, is it able to punch through there or does that act as a level of resistance? The folks that bought in that area, they're just looking for the opportunity to unload shares after so long being underwater on them. So definitely something to be watching there. Now, computer software, we talked about how computer software has been one of those standouts for the last few weeks until, of course, last week, kind of fell out of bed. But the financial space, that's, that's an area of interest to me because I was, as I was looking at a lot of the stocks that were kind of catching my eye today, banks and finance were two areas that really stuck out, two sectors that really stuck out. So you look at XLF and you start wondering, okay, is, is there maybe a little bit more power in the financial? You know, this looks, this looks a little bit stronger than the market indexes themselves. So this seems to be an area of strength. And I mean, today XLF was up 1.9%. So a very different look here. KBWB is one of the bank ETFs that I look at. This is, you know, getting above its 200 day moving average line kind of after hanging out there. You know, so just, just an area that I'm watching and computer software financial where Q2 is located might be a beneficiary if some of these finance stocks are doing well. So again, it's nice when you have a lot of things kind of going your way with something. And certainly, again, that new CEO tag that we have there is worth noting as well. [00:19:24] Alyssa Coram: Mm-hmm, it is. Okay, Justin, let's round things out with a look at Appfolio. Another software stock. This one had a big day today at 5.4%. Rounding out the right side of a base. Maybe some traders taking action on this one. What's your take on this stock? [00:19:45] Justin Nielsen: Another one that's more on the kind of sector rotation side, right? It's got a lot of weakness here. But the fact that you got above the 200 day moving average line, a lot of times that's not enough for me. I want to see, can you get above that line and can you stay above that line? So what we see now here is a little bit of a flattening out from that 200 day moving average line being in a downtrend to now flattening out. And you've got an entire base that was created above that line. So that gives me a little bit more of a good feeling. And look, the correction here in this base was only 20%. So pretty mild. So this is something that I think is worth keeping an eye on. It looks like you've got some stronger earnings growth lately. I mean, this was a year ago at 2% earnings growth. And you've seen that go up to 51%, 33%, 24%, and 39%. Very solid there. Looks like the revenue growth is also solid double digits. Not up to like the 25% or higher that we like to see, but 20% to 25%. But it's close. And again, more than anything, that relative strength seems to be improving a bit. So I think that's worth watching. Three-month RS at 82% and the six-month RS at 87%. So here again, you're going to have some overhead supply, some areas of congestion that you're going to want to look at. And it looks like we're coming up to one of those areas right now. So again, just draw your lines all the way to the left and go forward and see, okay, what can it do here? Can it go through that level, break through? Because once it does, and especially if it can stay above there, like it did with its 200-day moving average line, that gives you a little bit more of a sense of good stuff happening. Two more stocks that I also wanted to just mention, we talked about PEJ and the leisure and entertainment. Worth taking a look at Airbnb that has earnings coming up. So I like the look of this chart, but with earnings coming up, nothing I'm going to do with it. But I like those downtrend handles and the breaks above that. And you also have Marriott with earnings today that, you know, didn't close so well, but it was still a breakout, you know, despite, you know, finishing at the lows of the day. Still a solid move, over 4% and breaking out. So the hotel area, leisure lodging, certainly an area to watch. And those are a few extra names for you, the bonus round. [00:22:26] Alyssa Coram: Well, got a bonus round because we do have some stocks, important companies with earnings out after the close, Justin, Palantir. I'm seeing shares hovering around the flatline right now, but it does look like the results are out. Our sister brand, Barron's reporting. Commercial sales are booming. We'll have to see how, if at all, that impacts the stock price. I don't have the numbers yet. And then we did briefly look at Hinge, still seeing that up about, well, I was seeing that up 1.3%. It looks like the gain has faded a bit. And Apple notoriously comes out with results a little bit later in the day, not right after the closing bell. So I'm not seeing a whole lot of movement here either. Justin shares down less than a percent of the time. It looks like maybe the numbers have just come out. I feel like they typically report at 4.30 Eastern. But any thoughts from you on any of these earnings movers or earnings season in general? [00:23:36] Justin Nielsen: Yeah. I mean, there certainly have been the winners out there, but there have been a lot of losers. And that's, again, just kind of the environment that we're in. A lot of times where things are looking just fine and the earnings report comes out. And look, we're still right in the throes of earnings season. Plus, you've got the midterms, you know, as we said at the outset, plenty of reason for concern. And that never makes me get so bearish that I'm not willing to look at the market anymore. I'm still, despite being on the lighter side right now, I still have some stocks that are working just fine. And I'm still engaged, you know, building my watch list because I know, been there, done that, I know how quickly the market can turn. And, you know, a market that looked so, so many reasons for it to not go up, sometimes it just does anyway. And I don't think there was any, you know, more stark example of that than COVID, when the headlines were pretty much as bad as they could get. And yet you had a follow-through day on April 6th on the NASDAQ. And that was the start of one of the best, best uptrends of my lifetime. And so if I had just gone by the headlines and the concerns and all of the reasons to be bearish, there's no way I would have ever, you know, played that. But when you start looking at what's happening in the index themselves, the individual stocks, that's what can, you know, as long as you stay engaged, you're going to catch that. And if there is a turn, you're going to, you're going to see it as it happens and unfolds. And that's what it's about is not necessarily getting at the bottom, but getting close enough to the bottom where you can have a lot of participation. You don't have to get the whole move, but if you get 60, 75% of it on some of these big winners, you'll do just fine. So that's the goal, staying engaged and being ready for a turn when it happens. [00:25:32] Alyssa Coram: Well said, Justin. And we will keep everyone up to date every step of the way, whether it's on this show, IEBD Live, you have the weekly podcast, so much going on between a swing trader, leaderboard, articles on investors.com, and so much more. And we also have our monthly market report with Jim Ropal coming up next week. And you mentioned Jeff Hirsch. He's going to be on IEBD Live on Wednesday. So a lot of fun things right around the corner. [00:26:04] Justin Nielsen: Absolutely. And again, I think every little bit of data that you can get can help, and especially when it's more relevant data. That's the trick, is there's a lot of noise out there. So hopefully we can provide you with what's most relevant. [00:26:17] Alyssa Coram: Yeah. Give those active traders out there an edge. That's what we're looking for, right? Our edge and managing risk. Thanks, Justin. Thank you. Thanks, everyone, for tuning in. That's it from us for today. Like I said, we will be back with more tomorrow morning on IEBD Live. David Ryan, three-time U.S. investing champion and protege of IEBD founder Bill O'Neill, will be joining the panel. You can also check out David and IEBD Chief Content Officer Chris Gessel on this week's Investing with IEBD podcast with Justin, live at 5 p.m. Eastern on Wednesday, talking about the new IEBD 50 ETF FFTY. Well, it's not a new ETF, but it is a new approach and new management under David Ryan and his Cap Force team. So if you want the lowdown on that, make sure to tune into the podcast, and we'll see you in the morning on IEBD Live, investors.com slash IEBD Live. And we'll see you back here tomorrow after the close.