AI Plays Mask Market Weakness; Twilio, Sea, Tencent In Focus

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0:25Ed Carson:Good afternoon, everyone, and welcome to Stock Market Today for Tuesday, July 15th. It's Alyssa Coram here. And we saw the Nasdaq fade off of highs. A lot of excitement around some new AI headlines and NVIDIA driving some outperformance there. But some weakness underneath the surface, perhaps. We'll take a look with Ed Carson, our news editor, who joins me now. Yeah, definitely some weakness underneath the AI stocks. The three stocks that did stand out were Twilio, C, and Tencent. OK, well, we'll take a closer look at those names. But first, let's analyze the major indexes like we usually do. Here's the Nasdaq.

1:05Ed Carson:It did finish in the green today, up two tenths of a percent, but faded off highs. Meanwhile, the S &P 500 in the red today, down about four tenths of a percent, reversing lower after hitting a high. The Dow down one percent on the day, pulling back still above that 44 ,000 level. And small cap said the hardest hit here with the Russell 2000 down 1.8%. So what do you make of the action in today's session? Yeah, I mean, really, aside from AI names and some of the big names, it was not a really good day and closed at the lows, really. So, you know, while it was mixed, it felt a lot worse. Decliners led advances, even when the market looked better in the morning and it just kept on getting worse, especially late morning, late afternoon.

1:53there was an inflation report while it was basically in line. It did show some underlying some signs of tariff pressures on core goods. I don't want to make too much of it. But whatever the reason is, the market had sort of a reversal. And it was just something that if you weren't in the right stocks, you might have seen some significant losses today.

2:16Ed Carson:And it does seem like, Ed, we've had a market rally that's been very strong. A lot of new highs in recent days. So in terms of timing new buys, this is where traders sort of run the risk at this point. It doesn't mean that the stock market rally can't keep plugging away and making new highs. But we are, it seems like each day, at a greater risk of some sort of short-term pause or pullback. So how do you think about market timing with potential buying opportunities given that? Yeah, it's not just market timing. It's also that there's been a lot of these individual names. Today was broader. I mean, whereas like, but we've had these days where individual names or individual groups have these big sell-offs and there's not always necessarily news on it.

3:07So that's been tricky. I'd like to say it's like at this point, investors should be fairly invested or almost fully invested. So you can be pretty choosy. I mean, now it's like if you want to add exposure or replace some other stock, it's like, well, it's a higher bar, especially since, honestly, as you say, it's like with the market being a little bit sideways and a little choppy, there's less of a sense like it was a couple months ago that stocks were probably going to go up and you really wanted to load up on things. So I just think just being choosy, you don't have to do anything. And if you do, be incremental, because there is some of this volatility, especially underneath the surface.

3:47Ed Carson:Yeah. Some great thoughts there about portfolio management, Ed. Thanks for that. Let's now go to the S &P 500 and get your thoughts here. You know, a little less techie, so it didn't rise as much to start. It fell unlike the NASDAQ. But, I mean, look, it's right at all-time highs. I mean, I don't want to make too much. It's disappointing to see that, but let's not make up too much of this. Right. I think it'll be interesting to see what happens tomorrow because when you do get a downside reversal off highs, it seems like your expectation would be for a little weakness, at least in the short term.

4:26Ed Carson:So we'll have to see if that does unfold. If we do get a trip down to the 21-day line for the S &P 500, we're about 1.3 % above that level. But I think the big factor, Ed, is going to be, I mean, you never know when we're going to get more trade headlines or economic data. Of course, that's going to fuel the market action. But we have earnings season, right, really getting underway this week. So it seems like that could potentially shape the market's direction in the coming days and weeks. Yeah, I think that's, yeah, it's really, today was like the first day. It really felt heavy earnings, a lot of banks.

5:05We're going to have a lot more earnings. Yeah, that could really be. And the market may, again, chug along, may just overall, or some up and down days, but there might be individual stocks or groups that spike or tumble. So, yeah, I think earnings definitely going to take front and center.

5:24Ed Carson:Yeah, we've got to be prepared for those industry group and sector rotations, no doubt. OK, the Dow with this underperformance here, anything notable driving the down day today here? Some financials were weak, but there seemed to be a lot of weakness. I mean, and remember, NVIDIA is a Dow stock now and it still didn't lift the Dow here today. Okay. And small caps, particularly weak on the day, Ed. Still above the 21-day line, above 22 ,000, but your assessment of small caps? Yeah. I mean, laggards just keep on lagging. I mean, it's just sort of like, and small caps are basically the opposite of AI tech giants.

6:05So there's not a whole lot of them in this space.

6:08Ed Carson:All right, let's take a look at some ETFs to add a bit more color on the day. I think this speaks volumes here at RSP, the equal weighted S &P 500 ETF, down 1.4 % on the day versus the S &P's 0.4 % decline. We're right at that 21 day line. So if you're talking about weakness underneath the surface, like you said, we're sort of hammering this point today. But outside of AI, the NVIDIA type names, a lot of weakness on the day. Yeah, a lot of weakness. Again, this could all work out fine. It's shake out to the 21 day line. But yeah, this is a key point. You don't want it to be falling below here, falling back to the 180, under that 180 level.

6:52And then more. There's a lot of potential places you could find support. But this is an area where you definitely like it to find support here.

7:01Ed Carson:OK, tomorrow could be key from a technical standpoint there. And we want to take a look at QQEW. This is the equal weighted NASDAQ 100. So whereas the Q's up about one tenth of a percent on the day, QQEW down eight tenths of a percent here. Still holding the 21 day line. Also a support level potentially in play. Let's take a look at chips. This was the standout sector today. Did fade a little off highs, but SMH, one of the top chip sector ETFs, up 1.9 % today. So definitely the standout group here, Ed, on some news. Yeah. I mean, NVIDIA announced last night that, yeah, we're going to be able to sell H20 AI chips to China again.

7:47Sort of Reese being able to do that, and that opens up a huge market. That's probably good news for AMD. which sort of cleared a buy point today as well, sort of got to the edge of maybe the buy zone there. Broadcom, Taiwan Semi, lots of names. And those four are the biggest names, or at least four of the five. I'm not sure if AMD is number four or five. SMH. I mean, so when you get these kind of moves, and that's what was driving the thing. And just NVIDIA alone, it's a$4 trillion company. So that goes up 4%. You can understand why that would sort of prop up the NASDAQ. But yeah, that's why this was definitely the standout.

8:23Ed Carson:Right. And something that we've commented on, as well as Jim Ropel, hedge fund manager and founder of the Ropel Report, has said is that so goes NVIDIA, as goes the market. That's his take. It's just such an important stock at this point to the index weightings, the chip sector, very important to the overall market rally. Of course, NVIDIA perceived as one of the big AI leaders. So this can provide clues about the overall market. But again, it's not the end-all be-all because we can look underneath the surface and there are some pockets of weakness. But in terms of where we're seeing the strength and the momentum, something like this definitely has that right now.

9:10Keep in mind, NVIDIA sort of sat out almost a year and the market had some good time, so it doesn't have to. The other thing, just talking about earnings, well, we have ASML tomorrow morning. That's fine. But really, Taiwan Semiconductor, their earnings on Thursday morning, they make chips for NVIDIA and AMD and Broadcom and others. So we already knew that their sales were pretty good. Well, what do they say about guidance? What about their capital spending? So that is a really big earnings report.

9:38Ed Carson:Potential ripple effect that we can see on the sector there. Thanks for pointing that out. Let's quickly check in on China. Here's the KWeb ETF. So it seems like this NVIDIA news opening the door to improved trade relations between the U.S. and China. Yeah. And for a lot of the big Internet companies, and we're going to look at one of the two biggest components of KWeb, you know, they're going to get chips. And I'm like, that is, you know, that's going to be helpful for them. And I'd say that. So there's more openness on that, maybe detente on that. But honestly, when you say the other backdrop is that if every other country is getting tariff hikes a lot, all of a sudden Chinese goods look fairly competitive.

10:20I mean, or at least they're not going to be nearly at the disadvantages you might have thought a month or so ago. So it just there was, you know, seemed to be some positive vibes for China stocks. Again, those we always think that. And then two weeks later, they roll over again. But a big day for K-Web for sure. Yes.

10:38Ed Carson:So potentially actionable here. But as you said, Ed, can be a volatile space to play in. So we'll keep that in mind. And let's round this section out with a look at the iBit Bitcoin ETF. I do have a position in this. And after getting extended over the last couple of days, no surprise, honestly, to see a little bit of underperformance here today, Ed, down 3%. This is exactly why we say you want to avoid chasing a stock or chasing an ETF when it does get extended because you can get these normal pullbacks and the uptrend could still hold. Yeah. I mean, look, aside from AI and there like there was a lot of weakness, even some tech, the dollar has been strengthening.

11:26And if, you know, many reasons why the Bitcoin has been up a lot this year is if you if you really just sort of treat it as the dollar tumbling, you know, Bitcoin going, you know, if you think of it from that perspective, rather than the Bitcoin rising versus the dollar, the dollar has been plunging versus Bitcoin in many ways. So there's some of that. I mean, it's like having maybe that impact. And there was a headline that was negative, that the House voted down a crypto, like a key vote. But it seems like that's more a procedural thing. And it's really just about how they're going to be packaged rather than it's going to be defeated.

11:59Ed Carson:Okay. Well, we'll have to see how that crypto week in DC continues to unfold and the impact. This podcast is brought to you by MassMutual. For 175 years, MassMutual has been there for policy owners, financial professionals, and communities through economic shifts and societal change. In a world that changes fast, strength and stability still matter, especially when it comes to helping people secure their future and protect the ones they love. Learn more at MassMutual.com. That's MassMutual.com. On the cryptocurrency landscape. Thanks for that, Ed. Let's take a look at three stocks of note from today's session.

12:42Ed Carson:Some really compelling outperformance here today from enterprise software named Twilio up 6.5%. What's going on here, Ed? Yeah, really strong move. Look, a lot of software names struggled last week. And you saw this one fell through the 50-day line and basically broke, I think, the buy point that was 123.46. So I sort of feel like 125.52 is the new buy point. You could have used a downtrend of a handle. You could have used basically any number of buy points, but it was actionable, however you looked at it. Really strong volume today. I'm not sure of the news, but we did see some software names coming up, this communication software play.

13:23And, yeah, really, this was definitely – this was nice. Now, I didn't take advantage of it, but – and there is some acceleration on the revenue side. The earnings are strong. But this one actually gave opportunities. This one didn't surge at the open. It wasn't like you had that one moment. You know, there really was gradually there. And it has stayed there. I mean, and it wasn't, like, extreme there. It's like it's still in range, you know. So sometimes you don't get – sometimes you have, you know, not a very – a lot of opportunity. This one, there was a positive move and really did have opportunities during the day.

13:58Ed Carson:So interesting action there. And now I think from here, we want to see it follow up on the strength or at least not have a breakout failure like it did the last time. But it seems like the difference here is the volume behind the move and the strength of the move that we saw today. So maybe there's an increased chance that this will work out. So let's go to SE in the retail internet group, triggering an entry point as it cleared a trend line and got back above the 50-day with a 4.7 % gain today. Yeah, that pretty clear classic early entry from my perspective over the 50-day line, over a trend line.

14:41End of this week, it found support right at the top of the old base. You would have liked to have found support at the 50-day line, but this will do. so there was some you know above average volume wasn't overwhelming but it was nice to see so it should have a new base after after this week so this was this presented in early entry if you think that maybe there's going to be more trade and that china is going to do a little better this is singapore it's not china but just still that whole region uh a positive there so look like an opportunity this has been a strong performance you go to a weekly you can see you know it and one you can see this huge run it's been on if you go to a monthly you'll see it goes on huge runs and huge declines so there is that but i think this one's been trading very well the earnings are really growing very strongly so uh you know it's turning you know turning profitable the revenue growth has still been pretty solid here uh so again it's like it's also probably a good idea to diversify your leadership and i'd say all these stocks that we're looking at has a little bit of that as opposed to just the AI chip names.

15:45So we want to find leading stocks, but if you can find some diversity, that can protect you as well.

15:51Ed Carson:Absolutely, no doubt. Okay, and let's round things out with that aforementioned China tech name, Ed Tencent. The ticker here, TCEHY, up 3.7 % on the day, similar to KWeb in that it cleared a trend line within a handle. Ed, volume behind the move today. Yeah. So more AI access. This one has pretty strong growth. You know, it had a long stretch of accelerating growth. Finally, that's slowing down a little bit here. Volume really dried up in this long handle. There has been somewhat of a relative strength improvement, you know, over the last, you know, several, over a year plus. It hasn't been the most powerful.

16:37There's, you know, you could argue, well, I want to go K-Web Though I think Tencent is a 10 % position in K-Web. It's definitely not. Well, this, again, this is the method. It's not going to be affected directly by tariffs. But obviously, if the economy, you know, goes under because of tariffs or other issues, that's going to be, you know, that's going to affect it. You know, if China comes revival, this is really a monster. It is a huge company. We don't talk about it because it isn't technically listed here. It's an over-the-counter stock, but it is a huge market cap company. So definitely one that investors should be aware of, even if they say, you know what, I'm going to stand back on this one.

17:16Ed Carson:Right. I think the interesting thing here, and it doesn't necessarily need to just apply to China stocks. It can be with any theme. You have to think about, is this a group move you want to take advantage of? then maybe you go with more of a thematic or a sector ETF. Or is it really that individual company that is a leader, that is a standout, that checks off all the boxes from the earnings and sales growth to on the technical side, institutional sponsorship, all of those other factors that we like looking at for individual leaders that can sometimes help with the decision-making process. I think that's an excellent point.

17:52All right.

17:54Ed Carson:Well, I think that wraps it up for today, Ed. Thank you so much, as always, for your perspective. We appreciate it. Thank you, Allie. And thanks, everyone, for tuning in. That is it from us for today. But we will be back with more tomorrow morning on IBD Live, investors.com slash IBD Live for all the details on our daily morning live stream starting 10 minutes before the opening bell. We'll see you there. And then we'll also see you right back here tomorrow after the close.

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