Indexes Drift Lower Ahead Of Inflation Report: AMD, CAKE, URBN In Focus — Stock Market Today

[00:00:00] Speaker ?: *music* [00:00:30] Speaker 1: Good afternoon, everyone, and welcome to Stock Market Today for Tuesday, October 13th. It's Alyssa Coram along with Ken Shreve here, and stocks taking a little bit of a breather again today. The tech rotation pulling back, but some interesting reversals out there. Ken, what do you have for us today? [00:00:50] Speaker 2: Yeah, a couple of inflation reports coming up later in the week, Ali, but some more good action underneath the surface today. So let's take a look at Advanced Micro Devices. I know we're all familiar with that name, and a couple of retailers acting well today. We want to take a look at Cheesecake Factory and the Restaurant Group, and also Retailer Urban Outfitters. [00:01:15] Speaker 1: Sounds like a plan. We'll get to those stocks, but first a closer look at those major indexes. Here's the NASDAQ composite down less than two-tenths of a percent on the day. Meanwhile, the S&P 500 can close essentially flat on the day. So we have a couple of really tight closes in a row here for the S&P near highs. Meanwhile, blue chips, here's a look at the Dow, reversing lower down about four-tenths of a percent on the day. And small caps, here's the Russell 2000, IWM, down three-tenths of a percent. This is the first close below that 200-day line, that long-term level that small caps have been hovering around. But let's start with the tech-heavy index, the NASDAQ. What's your read on what's going on? [00:02:04] Speaker 2: You know, I think, Ali, after, you know, several up days in a row for the NASDAQ, I think it was, you know, one, two, three, four, five, six up days in a row. I think that the pullback has been, you know, mostly, you know, pretty orderly here. It's been just kind of sticky around the 10-day moving average. There really hasn't been a whole lot of volume behind the decline. You know, the mild distribution that we've seen in the market has mostly been in the S&P 500. So, you know, the NASDAQ holding nicely above the 21-day moving average, which is sitting right above that 27,000 level. So, you know, I think the NASDAQ is looking, you know, pretty strong here. And, you know, it was another, you know, weekday for semiconductor stocks. But, you know, SMH held at the 50-day moving average. It's been a pretty steep pullback for stocks in recent days. I mean, that's a really vertical decline there, some heavy selling, but it did hold support at the 50-day moving average. So, despite some pretty sharp selling in the chip sector, the NASDAQ index itself has been a fairly orderly decline and still looking pretty decent here. [00:03:28] Speaker 1: Yeah, and we do have a power trend, so we will be keeping a close eye on that green line, the 21-day, as you mentioned, Ken, see if that can act as a level of support. Meanwhile, we'll go to the S&P 500. What is your thought about how tight we've been closing here the last couple of days right near highs? [00:03:50] Speaker 2: Yeah, I think if the NASDAQ, if we can't really find too much wrong with the NASDAQ's pullback, this pullback looks even better. And again, you know, the distribution day count looks is heavier in the S&P 500, but you can't really look at this index and say it's an index under heavy distribution at all. It's still just holding up near highs, good supporting action at the 10-day moving average and really, really looks healthy here. So a modest pullback today, and it's pretty impressive considering that oil prices are still holding strong above $90 a barrel, you know, holding above short-term moving averages here. I wish I could find a reason why oil prices would be heading materially lower from here. But, you know, you've got the Houthis, the Iran-backed Houthis that are all of a sudden and seem to be intent on causing problems for the Saudis with the bombing of that Saudi's main airport last weekend. It just seems like a lot of geopolitical risk where oil prices could stay high for a little bit, a while here. So despite these geopolitical headlines that could keep oil prices high, the market seems to be absorbing it. Obviously, prices are still high at the pump, especially here in California. But S&P 500, you know, seems to be, you know, taking it in stride here. And we've got, you know, bond yields that are still, you know, still high here and, you know, still above 5.20% here and above the 21-day line. So I think the market is still showing a lot of strength and clearly, you know, optimism about third quarter earnings season. You know, we're going to get, you know, earnings reports, financial reports rolled in today. And I think the market was also strong today, even though the earnings reports that we saw from Goldman Sachs and Citigroup, Wells Fargo, they were not good responses by the close. And so despite some pretty negative responses to some early reports in the financial sector, pretty decent performance for the market today. [00:06:21] Speaker 1: Yeah. And let's get an update on the breadth of this rally. Ken, that's been an issue in recent weeks for a number of investors out there, trend followers commenting on, hey, you know, we're not seeing the broad participation that you would like to see. In a rally, but it looks like maybe we're starting to see some signs of life. There can not an overwhelming breadth improvement here, but little by little, perhaps little by little. [00:06:55] Speaker 2: Yeah, I think what is you can see some green, green shoots. Maybe I think we can we can say that, but it has been definitely has been, you know, has been problematic. But I think just by looking at the chart of RS RSP here and including including today, I think that, you know, the breadth was was was was pretty, pretty decent. You know, we ended mildly lower and, you know, RSP was actually, you know, higher or RSP actually had an update today. So the breadth today was was was pretty decent. We had, you know, nice outperformance today for some from some restaurant stocks, for example, technology names outperform. So underneath the surface today, I saw some some some some pretty good action. We actually increased exposure a little bit on on leaderboard. You know, today was some with some long ideas. So, you know, feel feel like we're starting to see a little bit improve a little bit of improvement on the on the side. Oh, after some is not so so good. So hopefully we'll continue to see some improvement there. And I think that the semiconductor sector, as I've been saying in recent weeks, that is still, you know, I think I think a challenge. But we, you know, we did add a chip name to the to the leaders list today. So as to seeing some isolated strength there. But and with that support today for SMH, again, doesn't mean that it's automatically going to bounce from here and move into new high ground after, you know, several down days in a row. But it was good to see some early support, at least for SMH today. [00:08:40] Speaker 1: Exactly. Yeah. A nice close there. So support still intact for now. Maybe maybe still a test still happening. We'll see where we end off the week. And I think also, you know, the number of down days in a row, perhaps a little bit of a concern on the sector level. But there are some individual standouts. So I think that brings us to AMD. Look at this upside reversal today, Ken. Shares closing up nearly 2% intraday, undercutting the 21 day moving average, also going below the breakout area. But with some of the strongest stocks in the market out there, this is exactly the kind of action that you'd like to see. [00:09:22] Speaker 2: Yeah, and we felt just for the for the leaderboard model portfolio, we have been eyeing this stock and we just felt like if we wanted to take a shot today was the day to do it on this upside reversal after, you know, four down days and really not a lot of volume. I mean, we really didn't get the sense that institutions were, you know, were dumping shares on mass during this recent decline. It kind of came down and felt like it was a gentle undercut of the 21 day moving average. And then there was a good shakeout at the open today where it had a nice, nice undercut of Monday's low. And then, you know, there was a nice some nice decisive buying when it reversed higher today and then it actually reclaimed that that prior that prior buy point in the 5584 and change area. So we took that opportunity to put it put it on the leaders list and AMD eventually had a nice close today up near its session high. It didn't have a big, huge Russian in trading volume today, but it did have a nice a nice close today. So we'll see how it goes, but definitely thought it was worth worth a shot today. And there were some other some other good movement in the in the chip space today. I know the guys on Swing Trader found another chip stock that they added as well. So were some isolated instances, some some strong some strong performers. So we'll see. But AMD we look at as definitely one of the top top performers in this space and good bullish bullish day for AMD stock today. [00:11:07] Speaker 1: Absolutely. And I think underscoring its position within the sector. This is something that I've done before, but I like changing the relative strength line here to SMH. So just to show how strong it is versus the the chip sector. I you know, I think you have the RS line near highs on that breakout. That was definitely the sign of strength and it's been holding near highs ever since. Whereas you've seen the broader sector right coming down to its 50 day, this all the way up at the 21 day line, much closer to highs. So definitely one of the standouts in this sector. And before I forget, I'm going to change this back to the S&P 500 there. [00:11:53] Speaker 2: You really don't have to look also with with advanced micro devices. I mean, the reason why it is still showing a lot of strength and you don't have to look any further than just the growth trajectory that this company is on. Just look at the annual earnings estimates for for AMD and just how how quickly their growth is is ramping up. It is so so impressive. So this company under Lisa Sue is very well positioned and it really wasn't that long ago. I remember when when in video was was thought to be eating AMD's lunch when I went in the early stages of the AI chip development and then AMD just just kept kept innovating. And they're right there, right, right with AMD in terms of their their their their CPUs and all of a sudden a major a major player and in major growth mode. So definitely room for more than one one player in this field of AI chip. So looking nice for AMD today. Yeah. [00:13:06] Speaker 1: And just a quick mention since we do disclose our trades on this show, I was buying the stock when it was retaking the 50 day moving average on the 9th of September. I decided to go ahead and take profits yesterday. Ken wasn't a terribly large position of mine and I normally impatient around the 21 day line, but I was like, you know what? I'm going to do something I don't normally do. You know, I'm just going to take the money and run here, but not surprised to say the least to see the powerful reversal today and one that I'm definitely going to keep tabs on. But let's move on and take a look at cake up 3% today and I think arguably actionable for some traders here, Ken. [00:13:56] Speaker 2: Yeah, we we looked at it as is, you know, pattern recognition didn't didn't quite, you know, recognize this little handle that the stock formed just above the 50 day moving average. But it did look like it, you know, it formed above the 50 day line here and I think it passed the midpoint test. So either way, we looked at the buy point here at as 111, which would would have been the high point high point in the in the handle here. So based on a 111 entry, you know, the stock closed at 112 37. So we felt like we got a great, great entry point here. Well, within the 5% buy zone. See the relative strength line is starting to point into into new high ground. It's just a little bit a little bit off highs, but we definitely look at Cheesecake Factory as one of the leaders in the group. Restaurants outperformed today was one of the one of the best performing industry groups. I'm not sure if it was in the top 10, but it was definitely, you know, one of the one of the top performing groups. Restaurants had a good day overall. So if we look at a weekly chart for Cheesecake Factory, you can see it's been trending very, very well in the group of kind of a broke up broke out of a long consolidation several several months ago. And then the latest base was just a nice pullback to the 10 week moving average. You can see that relative strength line just a little bit off highs, but on the weekly chart just very, very close to new high ground here hasn't quite hit an all time high. But again, this is just an early breakout from a cup with handle base. And again, longtime leader in the restaurant group with pretty, pretty strong fundamental fundamental metrics, you know, throughout and just in terms of, you know, return on equity and, you know, the accumulation distribution rating of C minus is kind of lukewarm, but you have an up done volume ratio of 1.4. So that does indicate some decent, decent demand for shares in recent weeks. So again, I think it's one of the one of the clear leaders in the group at this point. So I think it has a chance of working here. So we also added Cheesecake Factory to the leaders list as well today. Great. [00:16:20] Speaker 1: Great. And yeah, it's trading. Let's see how far above the 10 week line, 4% above the 10 week line. So really great risk profile. Yeah. That entry point can. All right. Next on our list. Let's check out elsewhere in retail. We're also going from restaurants to apparel. Here's Urban Outfitters up 2.6% on the day. And I want to go ahead and zoom out to the weekly chart on this one. It's formed a series of bases next to bases here, Ken. So it looks like it's finally breaking out or at least could be in the early stages of breaking out of a sideways move, you know, going back the last, you know, definitely well over a year here. So what do you think about the progress? [00:17:10] Speaker 2: Well, I want to say, I just wanted to bring this one up because this is another one I talked about with my colleague, Dave, Dave Chung. And, you know, we talked about it for, for, for leaderboard because this is also been kind of a long time, you know, performer in the, in the retail sector. However, you know, and we talked about it for, for leaderboard, but this is just an example where you can, the, the, the weekly chart can, can give you a longer term story. And, you know, the, the one thing we just started talking about was, well, you know, maybe this one obviously made a bullish technical move today. It, it, it, it tried to, it tried to break out to new highs today. In fact, you go back to the week, the daily chart quickly, it tried to, it tried to break out of this little cup base and ended up having a decent day, but it did close just a little below that 85 four points. So, not the, not the end of the world. The, the, the, the technicals are still very much intact. I liked a lot on the relative strength line, you know, popped into popped into new high ground today, which is a, which is a good sign. But, you know, when you go back to the weekly chart here, this is a stock that, you know, is really just kind of a, it's just a kind of a long sideways mover. So in a sense it, you know, it, it, it, it's struck, it's kind of struck us as we're not really convinced that it is, is going to be able to, to move from here. So even though we like the look of the breakout on a daily chart, we just asked ourselves the question is this, does this really have the potential to truly lead? So even though we liked the company and the, you can look in the fundamentals, you know, pretty good track record, you know, in terms of, of earnings and, and revenue, but we, we, we opted to, to pass on this one only because of just that, that long sideways period. It, it, it just tried several, several times to, to, to, you know, to, to move and wasn't able to. Maybe this time it, it will be able to just because the market is, is still acting well. But we just asked the question, is this really, you know, the, the, the big leader in the group? And we decided that probably not, it's probably like, you know, maybe the B or C stock at this point. So even though we applauded the, the breakout on the, on the daily chart, we're probably going to look at some other, other names in the group that we, that we think have better leadership potential. So for those that gave urban outfitters a shot today, you know, good luck with it. It could, it could work. And, you know, we think it's a, we think it's a perfectly fine stock, but that, that relative strength line you can see is just, it's just been kind of moving sideways for a period of time and starting to trend higher, but just not convinced that this is the outright, the outright leader. So we'll see. It could, it could work. Nice, nice breakout on the daily, but we're going to look at some other names here. [00:20:17] Speaker 1: All right. Well, Ken, any thoughts as we wrap, you did mention earnings season is ramping up. So things for traders to keep in mind with that. [00:20:33] Speaker 2: Yeah. Well, I think, you know, I think the, the main reason the market is, is holding as well as it is, is because there's a lot of optimism that we're going to see another round of really good reports in the, in the technology sector. And I think we're going to see a lot of good reports in, in retail and a lot of these consumer facing sectors as well. You know, we were talking with David Ryan, you know, yesterday and, and talking a lot about the strength in these retail stocks and some of these consumer facing stocks. So, you know, seeing some strength in other areas of the market be besides that technology. So I think earnings season is going to be a pretty darn good. And some of the financial reports that we saw this morning. Yeah. The, the, the, the, the responses from a city group, Goldman, JP Morgan were, were disappointing, but I think we have a, a, a good third quarter earning season to, to look forward to. And, um, so we'll, we'll, we'll, we'll, we'll see, um, tomorrow we've got a pretty important earnings report from ASML in the chip equipment group. Um, that they're a, they're a big chip equipment, uh, uh, uh, giant, uh, based in, uh, the Netherlands, I believe, but, uh, just a, a huge, huge chip company. That's probably going to move, uh, move the, the semiconductor, uh, sector. Uh, interestingly, the chip equipment group was not a very good, uh, performer, uh, today. The, the, some of the worst performing, uh, stocks on the NASDAQ were in the chip equipment group. So we'll listen to what ASML has to say in the morning, uh, limited financial reports, Bank of America, Morgan Stanley, uh, report in the morning. So a few more, uh, financials, uh, that we'll, we'll hear from, uh, in the morning, but, um, I think ASML will be, uh, will be a big one, uh, in the tech sector. So, yeah, but, um, it will be busy very soon in terms of, uh, corporate earnings, but, uh, I think we have a lot to, a lot to look forward to. Should, should be a overall a good, good earnings season. [00:22:37] Speaker 1: Okay. Well, we will be monitoring for the biggest winners, the most actionable names over the next couple of weeks as those reports roll in. Good stuff. [00:22:48] Speaker 2: CPI and CPI data tomorrow. [00:22:50] Speaker 1: Yeah. All right. We'll be watching for the market reaction and we know you're, you'll be all over it along with the rest of the markets team. We appreciate it. [00:22:59] Speaker 2: Yeah. See you on IBD live. See you there on IBD live. [00:23:03] Speaker 1: Thanks Ken. Speaking of, we'll see you in the morning on IBD live investors.com/IBD live for all the details. If you want to join our daily morning live stream, we start 10 minutes before the opening bell and then run through the first hour and a half of trade. It's always a lot of fun to connect with our viewers. Talk about market conditions and actionable stocks in real time. So we'll see you on the show in the morning. And then we'll also see you right back here tomorrow after the close.