Not Everything Is Falling. Here's What's Strong.

[00:00:09]and welcome. It's Mary Ellen McGonicle here with your Friday afternoon edge show. The show where we bring you where the action is in the broader markets. As always, we are going to take a look at some of the data that drove price action last week and we did have a negative period last week despite data coming in showing that inflation has cooled and it is being attributed to that brief period where the price of oil dropped. But either way, it was certainly good earlier in the week for the markets. On Monday, we did get the June CPI data and then midweek Wednesday, we got the producer price index. Both numbers showing that inflation had in fact cooled. However, not enough to push those interest rate increase fears away entirely. So, that is still on the table. Certainly very important this week is that the conflict with the US and Iran did pick up considerably. As of today, we are into our seventh straight day of very heavy artillery attacks and this is one of the reasons that interest rates did increase a bit. We also saw volatility rise and that is not good for growth stocks which already had been under quite a bit of pressure. And then of course we had earnings season and so far we are seeing a number of banks coming in with very good numbers. However, they are not by any means surging in response but they are re reacting bullishly. We are going to take a look at other areas in the financial space that are fairing well.

[00:01:56]We'll talk about why. And then also retail sales numbers came in today for June and they were pretty healthy up 0.2%.

[00:02:06]So we do still have the underpinnings of a healthy economy. However, much by way of the backdrop as far as geopolitical conflict and not entirely reduced inflation fears with the increase in the price of oil as a backdrop. Next week we are going to see earning season continue and certainly Alphabet is going to be one of the key companies that reports.

[00:02:34]The remaining M7 stocks most of them will report the following week. And of course we have other very large names.

[00:02:42]Actually Tesla is due to report next week as well. However, let's go ahead and take a look at where we closed the markets for the week. And here we are.

[00:02:52]daily price chart of the S&P 500 and we did manage to close into Thursday above this 10day simple moving average.

[00:03:02]However, today's selling did push the S&P 500 down below its 50-day simple moving average. We now have a negative RSI and that MACD in the throws of posting a negative crossover. At this point in time, you will want to pay attention to these recent lows. They are going to be your first area of support here at that 7300 and then a bit lower beyond that as far as key areas of potential support should we continue to see deterioration. Let's go ahead and take a look at the NASDAQ down almost 3% and this index on Thursday closed back below that 50-day simple moving average and declining further again. We do have those recent lows sitting here as potential areas of possible support. We now have a negative RSI and a negative MACD. From here, let's go ahead and take a look at one of several breath indicators that are available to you.

[00:04:10]We're looking here at the NASDAQ 100 bullish percent index. And this particular metric shows us using point and figure charts for the NASDAQ 100 stocks, what percent of those stocks are exhibiting bullish characteristics. And at this point in time, we have dipped down to that 42%.

[00:04:34]So we are well below that 50%.

[00:04:38]And in using this metric certainly as a proxy for when we may see the markets reverse back into an uptrend, you are going to want to keep an eye on this index at that 30 level. So we can go back to this November period and then late March period as well and you'll see that in fact during those periods it did indicate that the markets were oversold.

[00:05:06]From there we did see a bounce. Of course it's not going to be quite that simple. There are a lot of other characteristics you will want to take in place as well but certainly something you can keep an eye on. From here, let's go ahead and take a look those 11 underlying sectors in the S&P 500. Get a better feel for what may be pushing these markets lower as well as areas that are relatively outperforming. So, we're looking at a two-month daily price chart view of the 11 sectors and they're sorted by relative strength in a descending order. First up here I talked about financials and we are seeing areas here that are fairing well certainly large money center banks among them and you can see that XLF is finding support above that 10day simple moving average positive RSI and a positive MACD. Now should we see interest rates continue to rise we may see pressure on some of those banks but for now they are holding up quite well. Energy up here at the forefront again the group was up 4 and a half%. This is all about increased geopolitical conflict pushing the price of oil up quite a bit. We'll take a look at that Frank crude oil chart, but you can see that XLE is back above that 50-day simple moving average and a number of stocks are following that lead. We have an RSI heading northward above 50 and a MACD now in positive territory on the daily chart for XLE.

[00:06:47]Reed stocks are fairing well also. There was a report out last week by Narit that is a major organization within the REITs area that talked about how these companies are coming out with good numbers. Some of it having to do with a reduced amount of properties out there for expansion purposes but in the end they are fairing quite well. So XLR is sitting here at a new high positive RSI positive MACD. Let's go ahead and take a look at some of these other areas.

[00:07:23]Healthc care up here XLV regaining that 10day simple moving average positive RSI and positive MACD. So despite the daily chart of the broader indexes, you can see that we do have some sectors that are fairing well. We are going to get into which areas within healthc care and financials that are helping support this relative outperformance. And then likewise with staples XLP, you can see that we are forming the right side of a base poised for a potential base breakout at that 89 level. And this is also going to be earnings driven as far as the moves higher particularly in some of those major tobacco stocks. Now, let's talk about some of these weaker areas in technology. Again, a sharp underperformer down 5.3%.

[00:08:17]We have very decisively closed below this 50-day simple moving average. We're looking at a daily chart and today's volume was particularly above average.

[00:08:28]We now have a negative MACD combined with a negative RSI. So we are not looking at all healthy within that technology sector. We are going to take a look at those M7 stocks that are due to report in about a week and a half.

[00:08:45]Certainly a heavy major component of technology area. Also looking individually at some of these areas consumer discretionary and this is XLY.

[00:08:57]We did see an advance before today's sharp 1 and a half% selloff. A lot of that having to do with retail stocks that started to farewell because of the lower inflation numbers. And as always, there is a sense that if inflation does recede, consumers will spend more. But of course, today's higher move in oil stocks did reverse a lot of that movement. From here, let's go ahead and take a look beneath the sectors at industry groups. And here we're using ETFs that are very good as far as narrowing down even further what is taking place within these markets. So, here we are front and center. Brent crude, it closed the week at about 87 and a half, actually 88. And you can see this sharp advance over the last two weeks. We now have a positive RSI bullish MACD crossover and as noted -4 interest rates as that price of oil continues to rise. I can tell you out here in California we still have a $6 handle in front of the price of gasoline. So I'm sure elsewhere in the country we're seeing a lot by way of increased gas prices. Let's go ahead and take a look. I talked about financials.

[00:10:24]This is KRE, the regional banking ETF.

[00:10:29]One item of note this week is that small cap stocks were down but less than 1%.

[00:10:35]So certainly relative to the NASDAQ and the S&P 500, it relatively outperformed.

[00:10:40]And a lot of that is because of these smaller banks, they're coming out reporting very good numbers. So KRE has this nice base breakout and continues to sit at a new high. So that is one area in financials very much leading that group higher. And from here also we'll take a look at XRT. I talked about that group fairing well on the heels of inflation data and then pulling back today. But in the end, XRT is still above this base breakout level from the beginning of this year. And of note, when you are looking at these ETFs and one comes of interest, it's very simple to take a look at the top 10 holdings so you can have confidence in that particular ETF. With XRT, it is primarily equally weighted. So you don't have these heavyweight names and then equally important is the fact that most of those names are smaller in market cap. I talked about the small cap space fairing well. So hence we are seeing this XRT S&P retail ETF hold up really quite nicely certainly on a relative basis. From here let's go ahead and take a look at biotech stocks. IBB I am using the NASDAQ biotech ETF and this particular group was down about a half of a percent certainly down less than the broader markets finding support at this 21day simple moving average. We are going to look at a couple of names here because this sharp advance did put IBB into an overbought RSI position. We got up above 80 and this pullback certainly is very natural but a lot of the underlying dynamics that are pushing this group higher from the June recent breakout are still in place. So we'll take a look at some of the names there that pulled back to key support and are still looking quite constructive moving through and again this is sorted these ETFs strength to weakness. Let's go ahead and take a look at semiconductors.

[00:13:00]The group down another large percent and super heavy volume particularly today.

[00:13:08]We do still have that negative RSI on the semiconductor group. Negative MACD did develop this week. So overall we are in a rather negative period here primarily because just today we broke below this early June low which is and was near-term potential support. Next area down here at that 475 level which is about 10% away. So, uh, semiconductors certainly in a bare market, not looking healthy in any way.

[00:13:48]And from here, let's go ahead and take a look at volatility. I talked about it spiking certainly today. And we are now back above that 18, almost at about 19 level for that volatility index. And anything above 18 is going to begin to show signs of uncertainty and potential fear. Of course, as we potentially advance with the volatility if we overlay an S&P 500 chart on this, we will see the markets declining further.

[00:14:22]So, you will want to keep an eye on that fear or volatility index so that you can have a good sense of investor sentiment.

[00:14:31]Certainly, as we go into those M7 earnings reports from here, we're going to take a look at the NASDAQ 100. I talked about the NASDAQ being down almost 3%.

[00:14:46]And what I did want to highlight for you is the fact, as usual in these markets, not every name is in a severe downtrend.

[00:14:55]So, when looking at these NASDAQ 100 members, we have a twomonth daily price chart view, and it's sorted by that RSI.

[00:15:03]So, up here at the forefront, PayPal, this is all about a buyout possibility, gapping up. And the other names that are sitting up here are it's going to be primarily because of earnings. This is Cintas. They are the linen, the provider of uniforms and for the service industry came out with good earnings. And what we can do with CTS, you can set your chart up so that it will tell you when the company reported earnings. So July 15th, which is 2 days ago, here's that gap up on earnings and a continued advance into a base breakout. Nice high volume. Let's take a look at some of these other outperformers sitting up here at the top of this NASDAQ 100. And you will see Apple, this name was one of only two of the M7 stocks that were up last week. It was up 5 a.5%. We're seeing quite a bit by way of analyst upgrades going into their numbers on Wednesday. We did have this advance to a new near-term high and a continuation rally. We have a positive RSI that is a little bit overbought, but lots of bullish sentiment surrounding that particular stock. Again, among those M7 names, let's take a look at a couple of other areas that did fare relatively well. I failed to show you the software ETF and we can just take a quick look at it. It was up about 0.3% while not fully positive relative to the broader markets. It fared relatively well. So from here we're going to take a look at Palo Alto PNW.

[00:16:48]One of the stronger names in this software space and it is all about the cyber security software names. That's where a lot of corporate funding is going toward. And this is one of the few beneficiaries within software that are fairing well because of AI. There's more of a need for cyber security names and I certainly have two of the other best performers on my MEM edge list suggested holdings and you can access that at no charge for the next two weeks using the link below. So you will want to certainly stay on top of these markets and then also be aware of those relative outperformers.

[00:17:34]Let's go ahead and take a look at CSX and this is in line with another group that is outperforming. This is of course a rail stock. We'll go ahead and pull up that daily view and you'll note that they did report their earnings at the end of April, but they are reporting next week their current quarter and we have seen this is another area in the markets where there has been quite a bit of strength in these rail stocks as well as other transports. So a quick view such as what we are looking at with the candle glance on the in this case NASDAQ 100 can really provide a lot of clues as to areas of the market again that are fairing well. Uh we did see auto stocks uh Lucid was up LCID and that was a kind of a one-off newsriven type of an advance rather than a groupwide advance.

[00:18:29]Next week, General Motors will be reporting their earnings. But let's go ahead down and take a look at some of these other names that really reversed their downtrends last week. This is Ross RT.

[00:18:42]The company did report earnings back here. Let's go ahead and pull up that daily confirm that. Yep, May 21st.

[00:18:50]Here's that gap up on earnings and then a new high before deteriorating back in an uptrend. We can take a look at other names here up here at the forefront and from there I will share with you the weakest names and I'm sure you are well aware of what group in that NASDAQ 100 are going to be part of that particular list. Let's take a look at DXCM. This is a diabetic company in the healthc care space. I talked about biotech names but we are also seeing select medical products stocks fairing well. Let's go ahead and pull up that daily chart. Take a look that they are also due to report earnings at about a week and a half. And when you see this advance going into earnings, oftentimes it will be analyst upgrades. And that is quite bullish going into any given report.

[00:19:46]From here, let's go ahead and take a look at another area within financials that is fairing well. We talked about those regional banks that are doing well. There is another area within financials that are doing quite well and a lot of it is earnings driven. Take a look here at Travelers. This is in the reinsurance space. TRV is the ticker symbol and boy, I didn't realize it was up 9% today on the heels of an already sharp advance. The company did come out with very strong numbers all about increasing their premiums and other underlying factors that are pushing TRV as well as other names up. Let's take a look at a smaller insurance company in this space also came out with numbers.

[00:20:36]This is Inact Holdings ACC. I'm going to pull up this daily so that you can see that they are due to report earnings in two weeks. This was not earnings driven, rather it was news driven. But either way, we did get a nice base breakout, nice bullish MACD crossover, and the company is all about mortgage insurance.

[00:21:00]And we are seeing vibrancy in mortgage related stocks as well. And when looking at financials, we do want to also take a look at Mastercard. A number of these credit card companies are fairing well.

[00:21:14]This is MA due to report in about a week and a half. But we are seeing a nice move back above this 200 day simple moving average. We have that bullish 10day moving average crossing above the 200. That is a golden cross and it is also receiving a lot of upgrades going into their numbers. A lot of that due to this lower valuation as well as growth prospects. Let's go ahead and move over take a look at some of these biotech names. I talked about the group pulling back very orderly and the underlying dynamics still being in place. Here we are looking at Gilead Gild. Certainly a bellweather name among biotechs. And you can see that the stock did have this downtrend reversal. found support at that 50-day on this pullback and more recently advanced well above that 10day simple moving average. So this today's pullback of 1 and a half% viewed really quite orderly and the company does have several dynamics that are building the stock higher. among them is phase BHIV testing is coming out really quite constructively and then also they have a cancer drug that is also going through very positive clinical trials. HSBC did upgrade kilad this week. So hence we are continuing to see that downtrend reversal. Let's take a look at another bellweather name within biotech and this is Biogen B I B. And you can see that we had this sharp advance to a new high, a pullback and then this week we are now back above each of these shorterterm moving averages. We have that RSI back in positive territory. If we could get that MAC D black line up through the red, that would confirm a new uptrend.

[00:23:15]And this particular move this week is all about positive testing on their Alzheimer's drug. So that is the kind of chart that you can be on the lookout for. We can take a look at a biioarma stock that is also being quite well.

[00:23:31]This is Jazz Pharmaceuticals. And you can see that the stock did have this pullback very orderly to its 50-day simple moving average has regained its short-term moving averages positive RSI and a positive MACD. Another name that we can look at larger market cap is Regeneron. And we're not quite in totally bullish territory simply because this 200 day simple moving average could act as resistance. But we do have a positive RSI and a positive MACD. So we are sitting here relatively quite nicely. If we can get back above that 200 day, certainly with earnings later this month, that would be even more constructive. And then last up, we'll take a look at GH. This is Guardian Health. And this is what I was mentioning as far as pulling back very orderly, finding support at that 21-day simple moving average. in essence letting some of the air out of that overbought RSI position and another company due to report at the end of this month. Let's take a look at one other area that I wanted to make sure that I reviewed with you in the financial space and it's going to be asset management firms. And first up, we're looking at Black Rockck. And they came out with numbers earlier this week. Gapped up and since then have pulled back, but it certainly when you see a company of this size come out with good numbers for me.

[00:25:08]I'm going to dig in, uncover why. And it has everything to do with AUM, that's assets under management, hitting a new high. And it's all about the markets strength and continued inflows from investors. Now whether that stays through next quarter, we are not sure, but it's certainly notable as far as these companies that are reporting their earnings. Now, let's take a look at SCHW and that is Schwab, Charles Schwab.

[00:25:40]We'll go ahead and pull up this daily so that you can see that they are due to report their earnings next week. And we did have this gap up taking place the prior week and this back and fill formation. The company did see analyst upgrades going into their earnings on Tuesday. So you can certainly keep an eye on that one. Another name in that asset management space is SIC SEI Investments. And here we are with this gap up into a base breakout here and a nice continuing uptrend taking place. They're also due to report their earnings next week. This is all about analyst upgrades going into earnings.

[00:26:26]And with that in mind, that is a screen certainly one that I look at very regularly, particularly as we are entering earning season, so that you can get a sense of where the street is looking for that outsized performance.

[00:26:42]Last up, let's take a look at K YN. This is Kain Anderson, an LA based investment management firm. And you can see this week we did experience a nice base breakout. Nice high volume on that breakout and it is a smaller company about 2.5 billion but a nice high yield offering and we are now in a confirmed uptrend with this particular stock RSI MACD up here in positive territory.

[00:27:16]From here, let's go ahead and take a look at those M7 stocks. We're going to do a two-month daily price chart, candle glance view, sorting it by relative outperformance. And we did already review Apple. It was one of only two names that were positive and it was up quite a bit, 5.5% last week. Let's take a look at Meta. It did tumble a bit today. Certainly down almost 3%. This gap up that took shape the prior week was all about Meta monetizing their excess cloud computing offerings and that was viewed quite bullishly. We did at one point today trade below these simple moving average your 10 and 200 day. However, the stock bullishly closed in the upper reaches of its trading range for the day. So generally a constructive end because in the end ideally if we could retrace and regain this recent base breakout that would be quite constructive and they are due to report the week after next. Let's go ahead and take a look at the next name in this listing as far as relative outperformers among the M7 names.

[00:28:34]Microsoft a much anticipated earnings report primarily because the stock has sold off so deeply since this October high. It is being viewed as relatively inexpensive. However, they are going to have to show numbers in order to advance out of this current downtrend that is taking place here. And then also we can take a look at Nvidia. Now this particular stock was down almost 4% and I talked about semiconductors down 10%.

[00:29:07]So a relative outperformer and then also we did have that bullish close where the stock closed in the upper portion of its trading range for the day and back above that 21day simple moving average.

[00:29:21]However, we do have a negative RSI and a negative MACD. So, I would by no means pile in at this time. Despite its super low valuation, it is still seeing weakness and that is not what you want to see in a stock that you are interested in potentially overweing.

[00:29:42]And last up, we'll take a look at Alphabet. I'd mention that they are due to release their earnings next week on the 22nd. And certainly most notable among these M7 names as they report the outlook regarding their capital expenditures will be very closely watched and then also their funds from operations. Are they seeing any monetization of their AI spends? So Alphabet is going to be that first bellweather M7 name that's due to report at this point. negative RSI below that 50-day and a negative MACD.

[00:30:23]And again, for those of you that have not already, be sure and use that link below. The twoe trial of my twice weekly MEM Edge report will be at no cost for the next two weeks. you can then stay on top of these markets, stay on top of this major rotation that is taking place within the markets and a lot more. As always, have a fantastic weekend. I'll look for you here again next Friday.