Dow Leads As AI Dive Continues; Enova, Fortinet, AMD In Focus

0:00Ed Carson:Fusion powers the sun and stars. General Fusion is working to bring the zero-carbon abundant energy source to Earth. As global electricity demand surges, Fusion has the potential to deliver clean, scalable power for a growing world. Proudly NASDAQ listed, General Fusion is the first publicly traded pure-play fusion energy company in the world. With its magnetized target fusion technology and operational demonstration machine, General Fusion is advancing toward commercialization, targeting a first-of-a-kind fusion plant around 2035. Learn more at GeneralFusion.com.

0:39Ed Carson:Good afternoon, everyone, and welcome to Stock Market Today for Tuesday, July 28th. It's Alyssa Coram here and a very interesting market, mixed market day. Blue chips leading and the AI trade continuing to crumble. Joining me now to break down the action is my colleague, Ed Carson. Ed, what do you have for us today? Some interesting stocks and a learning lesson, right? A lot. I feel like we've gotten enough learning lessons, but one more, why not? Inova, Fortinet, and AMD is what I'd like to take a look at. Okay, we'll take a look at those stocks and get your take. First, a look at the major indexes.

1:19Ed Carson:Here's the S &P 500, the VOO ETF representing that. The S &P up two-tenths of a percent on the day, but it was the Dow that led blue chips up over one percent. Meanwhile, small caps in the green up about one-tenth of a percent or so. The Nasdaq down on the day, closing off lows, but still down some two-tenths of a percent. We have quite a few down days in a row here. The NASDAQ 100 took it on the chin again, even though it closed off lows, still down 1 % on the day. Also, Ed, I know RSP has caught your eye as well. A strong day there for the equal weighted S &P 500, up 1.2%. So a very interesting rotation that continues to unfold.

2:15Yeah, a shift away from tech, really a shift away from AI. most of the market was holding up fine or looking very strong today. I mean, it's like remarkable how weak the chips are and how everything else looks good. It's like there's your, it feels like you're in one place. The whole place is baking inside. It's hot, but there's the freezer and that's where all the AI stocks are right now. And, uh, RSP looks good. The Dow is near highs. Uh, you know, the S and P is a mix of half, like a lot of, there's a lot of names in there that are not. So that's still below the 21 and 50 day line, but it's that one sort of reflects the division of the market.

2:53And the NASDAQ, yeah, that recovered a little bit because mega caps and software did pretty well. But again, chips and AI are just abysmal. I mean, yeah, just really dramatic changes. So it is interesting. There's definitely things that people can be buying in some of these other fields, a lot of sectors where things are acting well. And especially for those who held positions, it's easier to hold some of those things. New buys, it's always tricky because you never know when there's going to be a sector rotation or when broad weakness might develop. I mean, because it's stark how much. I mean, it's the chips keep weakening, but it's just something out there.

3:33So AI is really dead. And I think on SMH, there's a real thing. It's the RS line. You can see that blue line. if you go back to, okay, well, we've done this before. Back in February, March, chips sold off, but it didn't sell off that much RRS line. The whole market was down. I mean, this is when we were the run-up to the Iran war, oil prices are soaring. But then the moment there was sort of peace on the table or it seemed to be there, AI stocks and chips ran up and led and almost immediately were at new highs for relative strength. And this time, they've been leading the declines and even with oil really selling off in the last three days.

4:15Yeah. I mean, it's one thing for chips to be a laggard, but to be so weak. And for some, there's still a number of AI stocks, even those that didn't have news that were down 8%, 10%, 12 % today. So you have to protect yourself. 14%. 14%. I mean, that's like, that was, I mean, look at that enormous drop in three days. That's almost crazy, but it's like we could get a bounce in SanDisk. We're having a bounce in any of these names, but one or two or three days, honestly, the charts will look damaged and they could easily roll over if they come up to the falling 21-day line or a falling 50-day line.

4:55So there's places where you can play. I still think people should be cautious. AI seems like just a no-go for quite a while right now.

5:05Ed Carson:It does. I mean, and if you look at software, let's rewind the clock here a little bit, right? It topped a little differently. And who knows if we've seen a top actual top in the chips. But to your point, once you got that massive haircut off the highs, it took a long time for this to digest to turn around still recovering even but all that to say is, you know, to work through all of that and have a bottom and start coming off lows could take some time for the chips. Okay, I want to go back to the S &P 500 and NASDAQ and just briefly talk about some levels to watch. I do think it's interesting to see the tight closes here on the S &P 500.

6:00Ed Carson:So it seems like now that we have this little range, if we break out to the upside or downside, that could be quite notable, especially if we break out to the upside and then see a couple of days with the low back above that 21 day. in terms of our trend change checklist from IABD senior market strategist, Mike Webster. I think that would be something to look for there. It would take more time for the NASDAQ to do something like that. We do have this round number at 2 ,500 that we are still below, even though we closed off the lows today. And it seems like, Ed, to the downside, a potential magnet that we've been talking about That could be this 24 ,000 level that coincides with the 200-day and that prior breakout area.

6:53Ed Carson:So, will we just see this as a shakeout during earnings season and move back to 26 ,000? Or will we see more pain? Those are sort of some of the levels that we're keeping an eye on to the upside and downside there. Your thoughts? Yeah, those are really good pointing those out. And you can see how much the NASDAQ needs to get above to really, you know, there's a lot of work that needs to happen. And the thing is, if we get up there, especially if it's weak, that could be an opportunity to sell if you still have some things. Or even if it's, especially if it rolls over to sell short, I'm not really one to short too much.

7:31But that's been the way, especially if it's a weak volume rally and such. We'll see. I mean, there's a lot of earnings tonight. There's Meta and Microsoft Wednesday night. There's Amazon and Apple Thursday night. So, I mean, we could see some big moves. It doesn't, but it also could be whipsaw. We could rally for a couple of days and then sell off with the next earnings report or the next thing. Oh, we have the Fed too tomorrow. I forgot about that. And which could be a rate hike. That would be a real, not, it wouldn't be a shock, but it would be a surprise. And we're, you know, I think with oil coming off, the Fed is probably going to say, really, do we want to do that?

8:07But it's going to be something out there until the Iran war is really in the rearview mirror. That just seems like something that Fed policy and just in general, oil prices, rates, all that's going to be sort of up in the air.

8:22Ed Carson:Yeah. So we're buckling up for a big week and we will get to some of those earnings movers after the close soon. But Ed, before we get to the individual stocks, I know we want to take a look at some ETFs, but you said something that I think is worth touching on, and that is with the very different look that we have from the NASDAQ and the S &P 500, where does that leave us in terms of how traders should be positioned? I guess part of it depends on what stocks you're in, right? Have traders rotated to the names that are still holding up well, these rotational areas? Or have they moved more to cash, you know, getting out of some of the now beaten down AI names and maybe more of a defensive or cautious posture there?

9:14because we are getting mixed messages at the sector level and at the index level. Yeah, I'm not a big fan of divided markets. And just because you just never know when it might switch over or the sector rotates back. If everybody's moving up, okay, one may take the lead a little bit, but everybody's trending up. And so it's just easier to buy and to hold. But when you have the back and forth, it's just hard. I mean, it's just hard to do that. So I think people can be owning some things, especially if they already owned it. But a lot of medicals, there's a lot of financials. There's, you know, from a variety of things or some, you know, you know, some industrial aerospace names, a lot of things doing well, you know, in different parts of different things.

9:54So you certainly can be doing that. It's just I think a lot of cash makes a lot of sense. And if you don't like to go in some of these other things and some of these are more defensive and some are not. But if you say, I don't want to be in more defensive names, well, then you can sit out. I mean, honestly, you don't have to be doing that. If you're a baseball fan and you don't like soccer, well, you don't have to watch the World Cup. You know, if the baseball games aren't TV, you don't have to do something. You don't have to. So just find that thing. If you want to stick with tech and growth, well, there's times you really have to sit out, at least on the chip side.

10:31There are some software names, but those have been volatile too. I just be cautious. And I wouldn't say, and whatever you do, don't flood everything into one sector. You know, like, oh, I'm going to now go all into biotech, or I'm now going to go on to all cybersecurity, even if there are some names that are worthy of buying or worthy of looking at. That, you know, in this kind of market, I think you really don't want to be concentrated like that.

10:52Ed Carson:Great thoughts, Ed. And then I'll just quickly take a look at some of the sectors that you mentioned, these rotational areas that perform great today. Here's a look at the XLV Healthcare ETF up 2.4 % on the day. Financials up 1.3%, continuing. It's wind streak here, relative strength continuing to improve. You also talked about industrials didn't have a great day today, but it is holding up much better than your tech and your chip areas. And then jets also on the move, of course, closely correlated with the price of oil there. And then you did mention software. wear. So here's a quick look at the IGB up 1 % today.

11:39Ed Carson:This ETF, you know, you got to look at the holdings and all that. Technically, not in my favorite position below those major moving averages, but it is trying to make a turn there. Go ahead. Like cyber or something like that, or one of those ETFs that are cybersecurity. I mean, it's not all cybersecurity, and we'll look at one, but that is in better position. And you could imagine as some earnings come out that, you know, one could take a position in something like that. But yes, there are select names. That's another thing. If when things come back, it doesn't mean that you're a stock. Let's say I stocks round back, march back.

12:15Well, maybe Sandus does not. You know, maybe the other memory names come up, but that one does not. So, I mean, there's a, you know, that's one reason why, especially when things break down, you just want to get out and then, okay, let's just see what happens. I mean, it may be months that you come back to any of them, but the ones you do come back to may not be the ones you owned in the past. And a lot of the traditional software makers are still below their 200-day line. So you want to be looking for the leaders.

13:01Ed Carson:Fidelity.com slash Trader Plus. Investing involves risk, including risk of loss. Fidelity Brokerage Services, LLC. Member NYSE SIPC. Great thoughts there, Ed. And I actually think this is a great segue to the cybersecurity stock that we want to talk about today. We like pullbacks within the context of an uptrend. So let's go to Fortinet. Last quarter in early May, we saw an explosive move and a powerful uptrend followed. Over the last couple of weeks, it has pulled back to a rising 50-day line. It's finding support there. We have earnings right around the corner. So this is a critical juncture for the stock.

13:49Yeah, I mean, it has fallen back a fair amount the last couple of weeks. I think people who bought off a little shelf around the 160 area, you know, that's an area like if you add it on or something, that's been round tripped and you're heading into earnings. This could jump up, but it'd also fall. But people who bought the earnings gap up last time or some such or had longer term holdings, that's a different story. It's a really important area. Fortinet really kicked things off. When you think about the cybersecurity movement, basically all moved on Fortinet. It doesn't mean that it'll continue to be the leader.

14:22There's others that look in similar shape, but this one's really going to be important since it's the first one and it was leading in there. Again, there was a shift, a vibe shift from AI being the doom for software to at least being a positive for cybersecurity. And people want to see more of that. I think it's not just the results, but definitely that how is AI going to be something that's continuing growth out there. So, yeah. So, I think it's just, you know, the pullback hasn't been on massive volume. It is an up, you know, this is a pullback in an uptrend. But yeah, I have to wait to see how earnings are.

15:02But, you know, one that we're going to definitely be watching because everybody will be paying attention to Microsoft and Meta. And those will be huge for CapEx and all the whole market and all that. But in terms of stocks that might be actionable, this is really high up on the list that will be reporting tomorrow.

15:18Ed Carson:Well said. And we call it a 50-day test for a reason, right? We don't know if it will bounce or break down like a lot of the AI names. Some of them temporarily tried to find support at the 50-day and then ultimately moved lower. So just because it's holding support now doesn't mean that that will continue and earnings likely will have a lot to do with where it goes from here. So like you said, we'll be watching. Let's go on over to ENVA. following up on this thing that we've covered recently, Innova in the financial sector. We have a strong earnings report that came out a couple of days ago, and the stock is in a very strong position.

16:05Yeah, I mean, just consolidating right at the top of this mini consolidation after a big run, lots of ants, which is suggesting high volume growth. Look at this, a lot of high volume things on that run up. Just a lot of strength here. Relative strength line powering higher. I mean, it dipped a little bit today, but that's just basically at highs. You could have bought it off of earnings a couple of days ago. You could have bought it yesterday. It's still sort of there. It'd be great if it paused for a couple of days too and just let 21 Dayline catch up a little bit. But hey, this one is showing just a lot of strength.

16:42There's a lot of names in this space that are sort of in the payments, small loans. this one has just been doing pretty well. The RS line has been trending higher now for a few years. Sometimes when you see sector rotation, you'll see stocks that the RS line hasn't really done anything for two or three years. And maybe that's indicative that it really only is going to have a short term. I mean, sometimes they really are going to go and go on a big, big run. But this one does not have that problem. This one has been doing pretty well for quite a while here. So that's the kind of thing that we want to see that kind of performance.

17:17It does really like really small loans, I believe. So again, a lot of tight action in there. So it's not just a small consolidation, a tight action, definitely an add on by an opportunity. But I think people could be doing a position here. I just think that people would probably want to keep it relatively small, given that already popped like that. But I do like that it's sort of held for the last couple of days and showing strength.

17:40Ed Carson:Yes, agreed. let's now go over to AMD it was holding up so well versus a lot of the chip names but feels like one of the last to fall here Ed closed below the 50-day line in yesterday's session on Monday sliding further below that level today down 8 % for the week already just two sessions down 13%. So the weekly chart tells, I would say, arguably, of course, we do have a couple of days left in the week and earnings next week, but the weekly chart here definitely tells a story. Very sharp break below a key moving average that 10 weeks. Yeah. Key moving average, breaking below recent lows. You know, this one would have been an easy enough hold up until really the last couple of days.

18:38I mean, it was really volatile. And this is the kind of thing, and David Ryan was talking about how volatile it was. So it really wasn't providing any opportunities because that was sort of messy. That wasn't great. But you could have said, well, maybe if the market can straighten out, this will tighten up and yada, yada, and earnings will come out.

18:53Ed Carson:And I mean, you know, so that's all. But sometimes the last one's to fall. Of course, if AI stocks mount a comeback, AMD may bounce back. But, you know, especially, you know, I think that, yeah, whether you wait or something, I think if it's down here, this would seem like a pretty clear sell signal by the end of the week at the very least if it doesn't bounce back. And it certainly could. But then you also have earnings. Do you want to be, you know, do you want to at least lighten up ahead of earnings? And what's the chances that it's going to look so strong in a week that you say, I want to take my whole position in there?

19:29I mean, you know, everybody has their risk tolerance. But there's just the risk that right now that good news is often being sold and bad news is being crashed. And so, you know, we'll just see how that all works out. Because I would like to see if it bounces back, I don't see where it's a buying opportunity. You would need to tighten up, it would seem like, in this situation. But a lot of growth, and this is also where you can't just look at the fundamentals. Fundamentals look strong. The fundamentals look strong. But the fundamentals almost always look strong in these big winters. Let's just call up Sandus for the moment.

20:05Nobody has earnings like Sandus, basically. These earnings are insane. Exactly. And they're going to be in the four-digit earnings for several quarters. You know, that's just crazy. That's the kind of stuff that... What? I said, but.

20:23Ed Carson:But. It's already over 50 % off of its high. Already over 50%. And that's the thing. That's the thing. It doesn't matter. Maybe this is wrong and blah, blah, blah. it, but you can't sell off of fundamentals. I mean, sometimes the fundamentals will trigger a sell, but often it'll do that. So you can't say, look at AMD, that's going to do it. It's like, well, AMD could come out with earnings and the guidance even looks okay on the surface and it still drops 20%. I mean, that is very much in the picture of the way we've seen things recently. So I think it's one to watch. This might be one of the AI stocks to watch if it holds up relatively well, you know, it might be one of the first that does provide a buying opportunity.

21:04I don't know when that would be because it is a messy chart.

21:07Ed Carson:Fusion powers the sun and stars. General Fusion is working to bring the zero carbon abundant energy source to Earth. As global electricity demand surges, Fusion has the potential to deliver clean, scalable power for a growing world. Proudly NASDAQ listed, General Fusion is the first publicly traded pure play fusion energy company in the world. With its magnetized target fusion technology and operational demonstration machine, General Fusion is advancing toward commercialization, targeting a first-of-a-kind fusion plant around 2035. Learn more at GeneralFusion.com. Yeah. And you were saying on IBD Live, the markets are kind of grumpy right now, right?

21:47The market, I don't know it's a catch-22 for AMD because obviously they need the AI giants like Google to announce massive CapEx spending, but it feels like they do it. It's like, well, that's not sustainable. So even when they do raise it, I mean, okay, it's fine for Google to sell off, but the sell-off in these other AI names since Google raised CapEx has been amazing, especially when you combine that with oil prices. I mean, if you had told me that Google is going to raise CapEx and oil is going to be down like, I don't know, 15, 20%, and you told me, oh, by the way, Sandisk will be down 30%.

22:22It's like from there, you know, it's like, but that's what's happening. So, yeah, markets are grumpy and markets can turn happy again. But right now it's just taking a very negative view of, you know, somebody can always find the gray cloud in a silver lining kind of thing. That's how the markets are right now.

22:42Ed Carson:Yeah. And like you said, plenty of potential catalysts to change things as the week progresses. But that's definitely the mood of the moment. Let's take a quick look, Ed, if you don't mind, at some of these stocks with earnings out late. We are seeing Seagate up 9.5%. Obviously, this could be a good sign. One thing to point out, just given the grumpy mood of the market, is sometimes you do see these explosive moves after hours and then by pre-market or the open the next day, that's reverse lower. Didn't Intel do that, I feel like? Yeah, Intel did that. Yeah. And there's also a possibility you have one good day.

23:26But if the trend is against memory and trend is against AI or whatever, if you're in the face of a sector or market downtrend, you can sometimes get a one-day pop. This one looked the best heading into that last sell-off, but, you know, yeah, I mean, you're right.