Stocks Extend Their Rally and Uranium Prices Go Nuclear 11/6/23

0:00Live from the Nasdaq market site in the heart of New York City's Times Square. This is Fast money. Here's what's on tap tonight. Looking for direction. Stocks eking out a gain after a seesaw day today. The Nasdaq now up seven days in a row. It's best run since January. But can the recent momentum drive markets even higher to year end? We are breaking out the charts to find out that this is a rally we should run with. Plus, emerging opportunities. Overseas markets have been lagging the S &P so far this year. But could they be ready to play catch up? Pack your bags for globe-trotting with a Latin flair.

0:31And later, nuclear gains. Uranium prices are at 15-year highs. but one of our traders says they can still double from here. What it means for your investments in the entire energy space. I'm Melissa Lee coming to you live from Studio B at the NASDAQ. On the desk tonight, Tim Seymour, Dan Nathan, Guy Adami, and Katie Stockton, founder and managing partner at Fairleaf Strategies. We start off with stocks plowing their way back into the green to kick off the week. The Dow adding 34 points. The S &P up two-tenths of a percent. The NASDAQ leading today's gains up nearly 0.4 percent. The gains muted, though, compared to last week's super strong rally.

1:04So the S &P is now up more than 6 percent from its recent lows and close above its 50-day moving average for the second day in a row. Now, a wise woman once said, oh, the wise woman is Katie Stockton, that nothing is worse than a false breakout, but nothing is better than a false breakdown. So, Katie, which side of the coin do you land on, given the run we've seen recently? You know, last week was really pivotal for the market. We were all talking about that 4 ,200 level for the S &P 500. It came down below. We were actually watching 4 ,180, and it didn't confirm. So it needed to spend two weeks below in our work to confirm that breakdown.

1:44And it's a really important qualifier because it suggests that it's more than just this emotionally charged move. And I think we can all agree that emotions were running very high last week, the week before. So we have this sort of false breakout, which we also call a shakeout that shakes out the weak holders of the market. And it tends to be a very bullish development, at least short term. So we feel fairly convinced of the rally's strength. It did associate with some MACD buy signals. That means short term momentum has improved enough to actually manifest itself in the indicators. And I think it sets us up nicely for year end.

2:20But we still have the jury out on whether that can be lasting. So beyond year end, do we have the potential for this follow through? And that's still a question mark in our work. We have the improved short-term gauges, not the improved long-term gauges. We think that that's going to require a breakout. And I think we have a chart above resistance around 4 ,600. So that resistance level has been tested three times unsuccessfully. Above that, that's where things I think would start to really look better on the monthly charts, the monthly bar charts, which we use for that long-term analysis. What do you think, Tim?

2:55Well, if I think about the most important ingredients last week for the equity rally, at least those that were driving rates down, we had three things, right? We had the auction announcement and the size of long-term Treasury issuance. We had a Fed meeting and we had a Fed commentary, and then we had a payroll number and a weak payroll number and a weak ISM. Of those three things, I actually think that the refunding announcement and just the technical elements of what was being issued or not issued was the most important ingredient in getting hedge funds who had record shorts going into this week on treasuries in terms on rates to quickly reverse course and scramble.

3:27And of all those three things, that's the one thing that actually doesn't really change, right? We still have a lot of debt to issuance. And if anything, I think it gets worse. I think it gets worse as the deficit gets farther out of control. So do I think that rates could come cascading lower? I don't really. But I do think that last week's rally, for some of the technical reasons Katie's talking about, also just in terms of the breadth that we saw during the up days, the breadth that we saw during the up days was really impressive to me. It wasn't being led by Q's. It wasn't triple Q's. It wasn't being led by the Nasdaq 100.

3:56I think that was very significant. A lot of this is what we have seen at other times, including maybe even a year ago in October or kind of this year. You get these moments off of such oversold levels and such positioning that was so negative. I don't think anything really changed. And I know we're going to talk about elements around earnings and what's happened here, but it's not like this earnings season has been that great. Bank of America's technician was pointing out the breadth thrust that we saw last week. So the broadening of this rally, regionals were up really big. ARK Innovation, that sort of trade, the growth risk trade, that was all up very strongly.

4:28Last week, yes, changed a little bit today, but all good. I mean, and I think Katie would agree with this. The downtrend in the S &P since July is still intact. I mean, the level we traded up to basically takes us to the downtrend line. Carter Worth has pointed that out as well. So I guess through 4 ,400, maybe it's a different conversation. The uptrend that yields are in is still intact. The level we traded down to on Friday was basically the third point of an uptrend in yields. So Tim brings up an excellent point. Ten-year yields moved 10 basis points higher today. So I agree. I don't think the yield story is over.

5:01I think positioning was exactly right. I misunderstood or didn't realize the scope of how short people were. But it doesn't mean they're not right. They just weren't right for that period of time. If yields continue, I still think yields are an uptrend. If yields continue to go higher, the market's going to have a difficult time. Yeah, so interestingly enough, I mean, so if you're buying equities because, you know, the 10-year went from 5 % down to 4.5 % or so, I think you want to focus on those two components that Tim just mentioned, that cool jobs data coupled with the ISM data earlier. I mean, so if the economy is doing what the Fed had kind of hoped to so they could stop raising interest rates, I just don't see that as a great spot right now where S &P expectations for earnings are in 2024.

5:40So we haven't really seen the cuts come down yet. And, yes, I definitely think we talked about it on the desk last week. You know, earnings season took a little bit of a different stance towards the end of it. You know, it didn't start out particularly great. Remember that gap that Netflix had, right? And then there was a whole host of other ones that kind of followed suit there a little bit. So to me, I just think that if you're excited why yields came in and that's why you're going to buy equities, other than from what seemed to be like very poor sentiment and the setup into it, I think the technicals, and I think this is the expression you use, Katie, the jury's still out here.

6:13Because to Guy's point, the downtrends are still intact. I look at the S &P 500 and I look at that consolidation at 4 ,400 that we broke down from on the way down to 4 ,200. That to me looks like resistance. If I look at what the Russell, you know, it's got resistance and it's still well off its highs. The equal weight S &P is not particularly great to me. So the NDX stopped today right at that downtrend that had been. So to me, I think a lot of stuff has to happen, you know, other than technical to confirm that this is something that you want to buy. It can't just be that rates came in, you know, 50 bips.

6:45What do you see for rates and what do you see for the groups that gained the most last week? Small caps, for instance, regionals, et cetera. You know, I agree with the point on breath. It was very strong. And I think that's a requirement for the market in order to sustain this advance. It needed to come off those oversold breath readings. And it did that. And now it needs to sustain that. I think the impetus for sustaining that would be yields coming off for a long time. Right. And we have our first indication this month that yields may actually do that for about nine to 12 months. It's from the DeMarc indicators looking at TLT, and TLT has the first countertrend buy signal.

7:23I'm not saying buy TLT necessarily, but it's the first countertrend buy signal per this model since a sell signal the month of April 2020. So I'm intrigued by that signal is suggesting that yields may be in store for what would be a countertrend move for something closer to 9 to 12 months as opposed to maybe 9 to 12 weeks like our other indicators are suggesting. So if that signal holds any value, then we feel like we could have something that could actually help the S &P 500 not only get through 4 ,400 as initial resistance, really just a minor level, but that 4 ,600 major level. Well, and so that's interesting.

7:58So she's saying 9 to 12 weeks versus 9 to 12 months. And if you think about last October's move, this was a 9 to 12 month move. I mean, let's be clear. It went really through the end of July at a minimum. And I guess I don't know if we have this chart, but we talk about the breadth and we talk about equal weighted versus versus market cap weighted S &P. But that's as simple as doing a ratio between the the RSP ETF divided by the SPY. And you can see if you there it is. If you look at this five year charts, actually a 10 year chart, you can see we're kind of right up at the bottom of this extreme level of support where you've absolutely you've wicked underperformed.

8:32You've underperformed by 13 percent on equal weighted S &P from kind of mid to late January of this year through to those lows. But those are the same lows that we got through and were essentially a holding point of extreme oversold and relative underperformance that we got to back in COVID. So I don't know whether that's where we are, but I do think it is a place where it's very clear. And the other side of that is what I have talked about a lot, which it's oversimplifying it. But until the Nasdaq 100 really starts to underperform the S &P or that semis start to really underperform the Nasdaq 100, I think this market's not getting too far out of its way because that's where the leadership is.

9:09And so we haven't seen those breakdowns. There's an argument we haven't made new relative highs. We've kind of held serve for the last few months right in there. And until we don't, I think you can actually stay along the market. Katie's argument, though, is that for the next 9 to 12 months, if rates stay sort of in check, the assumption is that that's good for the markets. Carter Braxton Worth has been on the show saying he thinks rates are going to come down and stocks will go down. He doesn't necessarily think that lower rates is going to be a tailwind for stocks. Yeah, Carter talks about through four and a half.

9:35I think on the downside suggests that something is breaking and that the rates are going lower in some sort of flight to quality, which means maybe the stock market has been breaking down or will start to. I happen to agree with that. In terms of Katie's work on TLT, we talked about it last Monday. We pointed it out when you were back. We said Monday, I said, Tim, who was hosting? You said, I don't remember what yesterday. It was Courtney. And you remembered you weren't even here. By the way, it's nothing to do with Courtney. I just don't remember what I had for breakfast. I mean, that's not fair.

9:59Again, not an indictment of Courtney at all. But we had talked about it on that Monday show that when I think TLT closed at 83, we said 88 and a half is a level where it's going to bounce. So I think it got to 89.10-ish or so Thursday and Friday. That seems to be enough for me. And if rates again start to go back up, that headwind will be back for equities, I think. Just going back to earnings expectations, right, because that's the thing. If you go back to October of 2022, expectations were so high for a recession and they were just so low for everything. You know what I mean? Like it was just it was OK.

10:29I probably got it wrong down then. You know what I mean? Like but the fact that we rallied the way we did, despite the fact that we haven't seen major earnings revisions, I think for next year, we're expected, you know, 12, 13 percent earnings growth. Just go back to the data that we're seeing right now. And so even if the Fed doesn't have to cut anytime soon, you know what I mean? we're going to have a weaker economy, whether we have a recession or not. I mean, Paul Tudor Jones was saying it on CNBC's air, what, a month ago, that he expects the economy to be in a recession in Q1. It's just not a good time to actually chase stocks after a 6.5 % rally in the S &P or an 8 % rally in the X, when you know that there are earnings revisions coming.

11:08Let's move on here. We've got an earnings alert here on NXP Semiconductor. The chip stock is volatile after giving better than expected guidance. Christina Parks and Nevelis joins us with all the details. Hey, Christina. Hi. Well, NXP is giving back some of its earlier gains. The report not a blowout, but posting a little higher than estimates. Investors were pretty cautious going into this name given the weakness we saw from peers like analog chipmaker Texas Instruments or auto supplier on semiconductor. That stock dropped 22 percent post earnings. But the auto chip sector has remained pretty resilient compared to other sectors even post covid.

11:38But the rollover is starting to happen right now. Luckily, though, for NXP Semi, 50 percent of its revenues come from auto, but it's not as reliant on electric vehicles. So for the third quarter, what did we see? We saw auto sales that came in line. Industrial and IoT were weaker, were yes, weaker among peers, but for NXP, it was an actual beat. And then you can see communication infrastructure was the miss. But full year revenue guidance is expected to be flat year over year given the, quote, challenging and cyclical environment. The earnings call, though, is tomorrow morning. Two things to look out for is NXP is, if it's going to still under ship demand to control channel inventories, and how strong that auto demand actually is, given the warning signs from peers.

12:19Guys? All right, Christina, thanks. Christina Parks-Nebelis, as she mentioned, guidance pretty much within the range of what analysts have been expecting. So nothing surprising there at all. And the conference call, of course, could have tape bombs. Who knows? 100 percent. But October, so last year, this was$135 stock. Since then, a series of higher lows and higher highs. That's the good news. Valuation, I don't think, is unreasonable for this name. probably trades mid-teens or a little lower than that in terms of forward earnings. So given these levels, I mean, if technically you want to play the game, I mean, this is a stock you could probably buy against$180 or so.

12:54How does it look, Katie? Yeah, I mean, it looks like it's actually bit up a little bit in response, at least at this point. So to me, it's reacting to an intermediate term oversold condition within a gradual uptrend. And that's almost always a compelling setup from a technical perspective, at least for the next few weeks. And then when you look at the next resistance levels here, we're talking about sort of the low to mid-190s. So that's also compelling to me. And that's the case for a lot of stocks. We do, of course, tend to see the sector exhibit upside leadership in a stronger tape. So if you believe that there can be more of a relief rally, I think this is a fair way to play it.

13:30And speaking of the fundamentals here, if you think about hearing about resilience in auto or industrial, It's really important right now because, again, Dan's talking about earnings and EPS. And I kind of agree. Like all the stuff that I'm reading from analysts that are coming through right now through their sectors where they're summing up what's going on. I was reading a leading analyst on the street who covers the transports and the rails and said he looks at the erosion not only in EBIT and EPS, but margin erosion of 460 basis points in this third quarter is the worst that they've seen in 20 years in terms of in their models.

13:59So, you know, you have this dynamic. Go back to industrials. Go back to auto. These stocks trade as if they've been in a bear market for a long time. Most of them, a lot of them. And even the ones that were doing better, like a Caterpillar, had a rough week last week. So important stuff to watch. This is one of the worst acting semiconductor stocks that were like other than like Texas Instruments, which has a lot of that industrial exposure right down in the air, Qualcomm and Auto. And so when I look at this, I think you said it. There's likely to be tape bombs on this thing. This thing acts this way for a reason, in my opinion.

14:27I think it is a value trap. And again, you know, it's expected to grow, let's say, high single digits earnings, mid single digits sales. And it's trading about 13 times. Well, there's a reason. You know, the SMH is at about 40 percent on the year or more. And so and it had this A.I. ramp, which it doesn't have a lot of exposure. And then if you think about what Apple had to say, eight, nine percent of their sales comes from Apple. So this is not one I'd be stepping in front of that conference call. I'd also be curious to see what they say about China. They have exposure to China. They're not a U.S.

14:58chip company, so they have that going for it in terms of not facing sort of the backlash there. But could this now be something that works against them? I think we'll probably get some details tomorrow. I like the fact that you said tape bomb. That's old school. No, it's old school, fast money stuff. I guess so. Tape. I mean, imagine, like, looking at a tape. Boom! Just like that guy. That's exactly what we're saying. Okay, you know what? Is that going to be on a Monday? Is that how we start the week? It's not been a great day for Mets fans. No, it has not, actually. Good hire, Tim. Is the housing trade about to heat up?

15:31Mortgage rates dropping sharply over the past week. So what's it mean for home prices? The open house trade is next, plus a potential game changer in the pharma space. Could Vertex's new pain medication be a breakthrough for the industry? How it could shake up the entire space when Fast Money returns?

15:52Welcome back to Fast Money. Mortgage rates dropped sharply last week after the Fed pause and cooler-than-expected jobs report. The 30-year fixed rate falling 50 basis points, its biggest plunge since last November. So is this giving the all clear for the housing market? CNBC's Diana Olek has more. Diana, I bet people are jumping in. Yeah, well, probably not exactly, because although, Melissa, it was an epic drop, But we gave a little back today. So, all right, where are we? Look, the 30-year fix started on Monday of last week at 7.92 percent and took three major plunges starting Wednesday with the Fed pause and ending Friday with the lower-than-expected jobs report.

16:28It totaled more than a half of a percentage point drop in just one week, and that very rarely happens. Now, of course, the builder stocks just love that. You can see the home construction ETF shot up, but then rates moved 10 basis points higher today, which the ITB did not love. Now, to put the drop in housing perspective, though, if you're buying a$400 ,000 home with 20 % down on a 30-year fixed mortgage, your monthly payment on Friday was$119 lower than it was last Monday. Five days difference, $119. So what does that mean for the fall housing market? Well, it could help on the edges maybe, but we've still got sky high home prices.

17:07The last time affordability was this bad was in the 1980s when rates were in the double digits, but the average home cost about three and a half times the median income. Today, that average home costs six times, six times the median income. And home prices, Melissa, they just continue to go up. All right. This could possibly be something good for the homebuilders who have been buying down the mortgages, though, Diana, right, at least in the very, very short term. Yeah, I mean, it could help. They've been buying, though, into the kind of five and a half percent range. So we're going to need to see it get a bit lower and then that jump up today.

17:40We're still in the sevens solidly. If we could get into the sixes, that might help a bit. But I think you need to see another big leg lower for that to help the builders. All right, Diana, thank you. Diana Olick for the latest on housing. What do you think of this? I mean, I was joking when I said they're because it's not it's not a real big dent immediately for the free to say, OK, now rates are lower. I'm going to go buy a house. So the supply demand imbalances that we've talked about for they haven't gone away number one what changed i think over the summer into september was there was this line of demarcation in terms of tenure yields i think four and a half percent is when everything sort of changed and if you look the xhb which i don't think it's the greatest etf but it's also four percent ddr horton lennar toll brothers a number of stocks that rolled over in a major way we traded down to 69 or so late october then you had this 10 bounce on the back of yields 77.5-ish was the level that we topped out at in early October.

18:37We stopped exactly where we should have. Rates stopped where they should have on the downside. XHB on the upside, I think they were all over from here. Katie, what do you see in the charts? You know, same thing. It's an oversold upturn for the homebuilders and their ETFs in long-term uptrends. So the corrective phases were very severe and sort of persistent. And they just reversed very quickly. And I think for now we can trust that there's room for upside follow-through near term. and you can actually look at the mortgage rates from a technical perspective and see that they've lost some upside momentum.

19:09Anybody can see it, but not enough to suggest it's meaningful. So we can throw something like a 20-day moving average on a chart and use that as a gauge of short-term momentum. The 20-day hasn't even rolled over with what we saw in the past week or so in the 30-year mortgage rate. So I think we need to see more in terms of loss of momentum to be something that would be sustainable. Could you cue those two opening phrases of a false breakdown versus because I mean, this I mean, this is the whole story to me. That move in housing to me is the one where that's a false breakup. I mean, you know, just because we've gone by the way, we've gone back to levels that we were kind of at the peak of this market.

19:44If you look at that, either ETF you want. And that is this is not a moment to be buying housing. I mean, this is clearly my view, but it feels like it's the right time for what you were saying about false breakouts, because I think you are selling this move in housing so fast. I don't care that there's no supply. Again, I'm going to get back to you can't tell me housing prices are going higher when credit is getting higher. We haven't even gotten there. People haven't even lost their jobs yet. And there's no velocity in the housing market to have these sales coming off of the period where houses had their greatest period of pricing because of COVID.

20:17Housing markets aren't going higher. Yeah, the only thing I was going to say, and you alluded to it, if you think unemployment is going above 4%, then housing demand is not going up. I mean, just not, especially with affordability and rates that are not going to plunge, you know, to any of these points. So to me, that's what you've got to track here. And it doesn't look like something you want to chase right here. I mean, the average house is six times the median income. Good luck. That's nuts, right? I'm not laughing. I am laughing. I'm not laughing. It's not funny. No. And rents are through the roof.

20:43By the way, we were kids, Tim and I, but Clearasil was a big, remember the whole Clear? Sure. No, but I'm just saying. Why are we talking about people that had complexion issues? No, no, no, because Katie's the way we start. Nothing is worse than a false breakout. But at Clearasil, we can help you if it's a real one. That would be fantastic. I mean, Katie could be the spokesperson. It would be fantastic. They're watching right now, the Clearasil people. Were you a regular consumer growing up? No, Tim. Actually, I'm not. My skin is pristine. I can tell you do scrubs. There's a lot more fast money to come.

21:13Here's what's coming up next. A potential game changer in the drug space. One stock jumping as its new pain medication nears a breakthrough. Could this be the next big catalyst for the healthcare space? Plus, heavy metal trading, uranium near 15-year highs. But can the power source keep rocking? Why Wall Street is going nuclear on this one ahead. You're watching Fast Money, live from the NASDAQ market side in Times Square. We're back right after this.

21:52Welcome back to Fast Money. Vertex Pharmaceutical shares topping the tape. En route to a record high today, the company releasing updates on a program aimed at developing a non-habit-forming pain drug that could replace opioids. If successful, the drug could generate more than$5 billion per year by 2030, according to Lyrinc Estimates. Shares, though, are giving back some of the gains after posting lower-than-expected revenues after the bell. Our Angelica Peebles joins us now for a closer look at the details of the new drug. Angelica, this seems like the holy grail. I mean, one analyst I was reading is sort of making the comparison to GLP-1s in that it's in an area that people sort of wrote off because there were so many just misfires in terms of drugs that had terrible side effects, but it could really be a huge market if there was a breakthrough here.