Indexes Mixed Before Warsh’s Fed Debut; Veracyte, Google, Lumentum In Focus

0:00Look, when people start to gamify investing, right? So when you think about people being rewarded with balloons and fireworks for trading, which we know is the more you trade, the worse offer you're going to be in the long run. I'm Joe Davis.

0:12Ed Carson:And I'm Christine Kashkari. And this is Season 2 of Better Vantage by Vanguard, an eight-part video podcast series hosted by custom content from WSJ and Vanguard.

0:31Ed Carson:Good afternoon, everyone, and welcome to Stock Market Today for Tuesday, June 16th. It's Alyssa Coram here and some mixed index action ahead of Kevin Warsh's debut as the new Fed chair. Should we be concerned about tech's slide after the pop that we saw to kick off the week? Joining me now to discuss that and much more is my colleague Ed Carson. Ed, great to see you. Great to see you. I want to take a look at Verisite, Google, and Lumentum. Okay, we'll take a look at those stocks. But first, let's analyze those major indexes. Kicking off with the Nasdaq Composite, a downside reversal on the day, finishing lower by about 1.2%.

1:13Ed Carson:Meanwhile, the Russell 2000 was down about 9 tenths of a percent on the day after hitting a new high in the prior session. The S &P 500 down about six-tenths of a percent on the day. And we did have a positive session for blue chips, the Dow, up about six-tenths of a percent. So for the NASDAQ being the hardest hit here today, Ed, should we be concerned? Is this downside reversal a red flag? I mean, it's not great to see that. And it looks like an outside day, though I think from a true range, we obviously gapped up. It was a really strong day on Monday, and that was after a few days. So to some extent, it's hard not to – you have to expect some kind of pullback.

2:00It would have been great if it had been less. But also a lot of the stocks that were leading the upside are these high ATR names. When they fall, it doesn't take much for them to get them to fall some more. I will say one thing that makes the NASDAQ look – it was actually worse than this day. If you look at the Qs, that was down substantially more. Not crazy. They're not fundamentally different. But I think this is reflective of SpaceX because SpaceX is in the NASDAQ composite, but it's not yet in the NASDAQ 100. It will be in a couple of weeks now. SpaceX closed off highs, but still 5 % gain.

2:34It's a$2 trillion stock. That matters. And, you know, Google will take a look at that. That was a modest upside, too. So there was – but that's probably why there's a discrepancy there in that front. So, but yeah, I mean, even the Qs, it's still, I guess I'm not too concerned yet. I mean, it's sort of like it's not, this is also why I think in general, why we talk about it, it just takes a few clicks to buy a stock, but the work is before that. The work is when you prepare and you're building watch lists, even when the market was going down. I mean, you should be working on exit strategies and other things, but when the market was going, you'd still be working on this watch list because then on Thursday and maybe especially on Friday, as we started coming up, there were some buying opportunities.

3:18There was buying opportunities Monday as well. But, you know, you want to be on that. That's where the work is. And then you can do that few clicks and the few clicks of glory, you know, but you want to do that, you know, identify the ones, which ones are recovering fast and all that. So this is another example of that, just how you want to do that work. Obviously, when we see momentum in the market or a big gap,

3:41Ed Carson:We'd like to see a continuation of that. But sometimes you do see a little bit of a back and fill type move. And so what are we keeping an eye on here? I guess we can take a look at the NASDAQ composite, but also the NASDAQ 100. And levels are slightly different there. We had that high from that Friday sell-off day. We are now back down below that level. We still are above the Tuesday high from about a week ago, the 21-day line, and 26 ,000 for the NASDAQ Composite. So those are all levels that we're watching. Also, we can do a 50 % retracement from today's high to the gap up high, roughly. We'll see if I can do that there.

4:33Ed Carson:and we like looking to see where we are in terms of like a 50 % retracement with that. Probably going on an intraday chart, you might be able to see it a little bit better, but it does look like we are now slightly below the 50 % from that. And IBD senior market strategist, Mike Webster, has shared with us that, you know, there is a little bit of an art to this, but this type of move, I believe, is the kind of thing that he would be looking at. So can we get back up, you know, by the end of the week above that 50 % level, I think would be one thing to keep an eye out for, Ed. Yeah, I think it's a good point.

5:12You certainly don't want to see us falling further, like in below that 21. When you start going below the 21-day line, then you're going below some of those resistance levels. And even if the market is still like, even if you say, well, I think the market is still in pretty good shape, if you bought things on Monday, there might be, you know, individual names. And one of them, you know, like not saying this was necessarily a buy, but like momentum and other things. Some stocks are falling more. There were some names that held up. Some names rose today. But you have to make those decisions there, you know, along the way, you know.

5:44Ed Carson:Totally agree. I mean, you do have the index action informing your decisions with individual stocks. But ultimately, the two can be doing different things, right? So you do have to keep that in mind. And we do see downside reversals at the index level that can lead to further downside weakness. Not necessarily always, but it can. So we do have levels that we are watching on the downside as well. What about for the S &P 500, Ed, your thoughts on how this is looking? And we can also take a look at the RSP, not down quite as much today. Yeah, I mean, SPY is sort of like that half NASDAQ, half not kind of situation.

6:30And it's weighted more to these mega caps, too, that are not quite as volatile. Yeah, so SPY is holding up reasonably well. It just has some of the same things. You wouldn't want it to get below those levels that you were talking about. It just has a little bit more room than the NASDAQ. RSP looks pretty good. There was finally some weakness on that just coming down, but it's like that's looking very strong. Yeah, and the Dow was rising on financials. And also the benefit of Caterpillar was one of those AI stocks that was rising today. I mean, not all of them were. So Dow was the beneficiary of that.

7:04So there's, you know, anyway, SPY, yeah, SPY basically looks a little bit like the NASDAQ, but just not as much in a little bit more room. Mm-hmm.

7:13Ed Carson:And since you mentioned the action for SpaceX already having such a huge impact on the major indexes, what are we supposed to call it now, Ed, the Magnificent 8? I mean, you could put in 9 or 10, and you could all, you know, argue, yeah, there's certainly like, you know, you could absolutely add Broadcom and Taiwan Semi. you could make it the top 10 if you wanted to, because those are all, I mean, some of them aren't looking magnificent for sure. A lot of them have been struggling. But yeah, there's a lot. But SpaceX at one point, I think, was higher than Microsoft, higher than Amazon. It came off those.

7:50So I think it's only the sixth highest or something. But it's an enormous market cap. And maybe now it can calm down. I'm not saying like, but in terms of like that enormous index changing kind of situation. I mean, you know, at least on a day-to-day basis. I'm sure on any given earnings day or anything, there'll be news. But yeah, I mean, look, it came off highs, but yeah, that's amazing. We still have to wait now. I mean, those who got that IPO allocation, great. You know, they got some shares there. But now I think you want to be looking for an IPO base. And whether that IPO base starts at$250 or starts here, you don't know.

8:27I mean, you don't know. Or if it's$300, you could go up a long way. But if this is going to be a great stock, it will provide a legit base opportunity at some point. But you have to show a little patience here because if this fell to 180 tomorrow, would anybody really be surprised? You know, not really. You know what I mean? You know, just not – so, yeah. But nice, nice close because it was almost giving up all its gains. But, you know, even if it's fallen today, honestly, that's what new IPOs do.

8:59Ed Carson:Right. I think that patience is hard for a lot of traders, given the historic nature and the incredible valuation. But I'm also going to wait for that IPO base, Ed. And an IPO base isn't a guarantee. There's plenty of stocks. They will set up that IPO base, and then they'll even break out, and then they'll flop. So, again, there might be a buying opportunity, but with IPO bases, and there's huge opportunities often with them, but there's also the chance for spectacular failures. I brought this up at Astera Labs from a little over a year ago, and that's ultimately worked. But that one, again, this was in my mind because people were talking about this on the first few days.

9:38Look at me. I want to buy it. I want to buy it. I want to buy it. Then it slumped. And then it did do something. Then it came off. And boy, it sort of had an IPO base. And then it just sold off quite a bit for quite a while. And so it came back, but you didn't know that. And it's just, that's the kind of thing that could happen with new issues. You just, again, even if everything is great, there's reasons to like it. There was sort of a breakout there and there. I mean, I'm not sure if it was a classic, you know, it didn't go all the way to high, but it looked like a clear buy signal and then it flopped very quickly.

10:11So you just treat IPOs carefully. That's all.

10:15Ed Carson:Exactly. Great reminder. Having some sort of base to trade off of does help improve your odds, but it doesn't guarantee them. So, all right. Let's move on. More to discuss with you, Ed. Before we get to the stocks that we want to take a look at today, I guess also on the tech talk here, QQQE, something to mention. Fill us in. Much like the Qs, only this one actually gotten to a high. So again, it's much nicer when you have a day like this off of a record high. So this same kind of loss as the Qs, but a little bit better technical position. Again, you don't like the reversal, but it was in a better spot.

11:01Ed Carson:And your technical take on the Dow? I mean, that's a nice move. And actually, you know, the last few couple of weeks, it's done pretty well. I mean, last on the RS line, again, the financials in this index were doing well today. Caterpillar was one of the AI stocks that was rising. And the construction and energy names for whatever reason in the AI space were generally up where chips were generally down. And that's just the way it was. And that was a pretty sharp drop. And there was a lot of losses. I mean, it wasn't like this name is what did it. There was a lot of names that were down. And we're going to look at an optical name that was even worse.

11:43So there were areas, the more techie AI parts of AI were weak.

11:51Ed Carson:Yeah, so SMH down 4.8 % on the day. I do want to position still on this. I'm sorry. I'm sorry. I do. I always have to say that in SMH. IGV, that bounce. I mean, there are certain names that are in there, but some of the leading stocks that had a nice move yesterday didn't have great moves today. Most of them still look okay. They just gave up yesterday's gains. A few of them, not so much. You know, this one could easily bounce tomorrow. And, oh, okay, it's an aggressive buy signal again. So not terrible. well, you just would have liked to have held the gains from yesterday because that was sort of the buy signal on some of those names.

12:25Yeah.

12:25Ed Carson:Okay. Let's check in on the 10-year Treasury yield, Ed, seeing this come off today. And it's a notable week at the Fed. Yeah. So this is now undercutting some recent lows and getting right to the 50-day line. I mean, this has generally been falling with oil prices, so it's not a shock on that. Yeah, it's going to be interesting. Nobody expects the Fed to do anything except they might shift from an easing bias to a neutral or a tightening bias, maybe more likely neutral at this point, because the Fed's probably got to be thinking, I don't know what's going to happen. Inflation might come off because oil prices are coming down, but at the same time, the economy might pick up.

12:59I mean, so probably the Fed isn't going to be doing anything for a few months. I mean, that's probably what they're doing. But what Kevin Warsh has to say will be important. I mean, it's not just what he says. It's just the markets have to get used to what and how he says things. It's like, well, what, when he says this, does that mean that? You know, because he's not going to say we're raising rates, we're cutting rates. He's not going to say that. He's just going to say language that he's going to have to, you know, he's going to have to tailor that and the markets are going to have to understand that.

13:29So, you know, I think it helps that the market probably isn't expecting any moves for a while, so they're not. But it is a learning process on both sides. What is he saying? And is he saying it in a way to soothe markets without, you know, hiding the truth, as it were?

13:45Ed Carson:Yeah. Okay. And we've also been closely watching the price of oil. This helpful, usually, but not for equities today, Ed. No. Oh, and it's getting close to pre-war levels. I mean, it's actually quite impressive because it's going to take a while for oil production and oil stock barrels to normalize, but it really has come down. But yeah, maybe there's just a limit to that. I mean, maybe the stock market's already pricing it in because the market has obviously rallied for quite a while now, even when oil prices were pretty high. But definitely good for the economy. This is one reason why the Dow was probably up and, you know, RRSP wasn't down that much.

14:25the real economy is getting a boost from lower oil and lower treasury yields.

14:55Yep.

14:56Ed Carson:Okay, let's take a look at some tickers of interest. Starting with Verisite, ticker here is VCYT, breaking out of a cup with handle. Shares up 3.6 % on the day. This stock really got going in early May on an earnings report that has fueled shares over the last couple of months and ultimately leading to a blue dot breakout here. Ed, will this finally get the stock going for a longer stretch? It's had short periods of outperformance, but not long-term outperformance. Yeah, I was actually really surprised to see the RS line at a new high, given that, you know, going sideways for quite a while, but obviously it was sort of just the right time for one of those things to get that with the market sort of going sideways over the past month?

15:48Yeah, that's an interesting question. They recently released a new test. They do a lot of cancer tests, and they recently released one that will, like at least for breast cancer, they'll, you know, in addition to the genomic testing sequencing, they'll use AI to help determine, hey, does this patient need chemo or not? And I think that'll be, that could be a huge boon. You can imagine that would be great to see, like, will it really be useful or not? And this is an area that's getting some strength. There's some other names, you know, this one's profitable. And so maybe that could be something that could revive growth a little bit because growth isn't supposed to be that great, but you can imagine that picking up again.

16:25So yeah, it's a bit of a story stock, but there's a number of cancer testing companies that are doing interesting things. So this could be sort of a, it just seems like an area that investors are starting to get more excited about, like Garden Health is another name that comes to mind. So So, you know, finding, testing, and using AI. There's a number of these names. And those two names right here are probably the ones that are, you know, that are in best technical shape.

16:53Ed Carson:Mm-hmm. Okay. So, a potential breakout in the works this week for this medical services name. Next on our list, let's go to Google. One of the Magnificent Seven, Magnificent Ten. we'll figure out what new name we want to go with I'm sure but bouncing off of the 50-day line and it seems like Ed for a stock with an average true range of 2.8 percent that has shown out performance over the last year it does seem like the type of stock that you would want to buy at a pullback area. I mean, of course, you look at the last breakout and it round tripped. So, but I think in general, not just given the last couple of months of action, just the personality of this stock, I feel like really lends itself well to this type of entry.

17:54Ed Carson:Again, not guaranteeing success, but just the putting the odds in your favor. Yeah. And there's a limiting losses kind of things. I mean, yes, anything can happen, but is this stock going to fall 10 % in a day? Very unlikely. I mean, unless there's something catastrophic going on in the market or some, by the way, we're going to break up Google or something just like what, you know, out of nowhere. So that like, if this fell below the 50 day line, that might be a place where you could exit and that wouldn't be very far so that, you know, your losses could be limited in a way where some other names are just these 10%, 12 % ATRs.

18:26It's hard not to let them go a little bit. They're always going to move some. So this one is interesting. So yeah, it's that ATR, I like that, especially in this kind of market, especially if you already have a bunch of names that are going to give you heartburn and, you know, kind of thing. Above the 21-day line, sort of breaking a trend line on a weekly chart, there is the one thing I think is just a hair below the 10-week line. I don't know where it, maybe it closed above, but I thought maybe like just the tiniest, you know, just a few cents. So it'd be nice to get just above that, you know, off of that, but we'll see.

19:01I mean, it's like At this point, you breathe on it and the stock will go one way or the other on it. But so, yeah, and also a little more strength would be nice because I think the relative strength line was just getting up to the moving averages. It depends on a weekly basis. Check it out. Yeah. So like on a, you know, it just sort of changes. So I think it's right there. So any more strength would also be a positive. So I can imagine if you say, I want to see just a touch more because it already was, yeah, breaking a trend line. It was already above there. But now it's clearly above the 21-day.

19:33You know, there's some short-term levels there. Yeah, so, you know, this one probably isn't going to be the leading stock of the rally, but, you know, it could be a solid performer for sure.

19:44Ed Carson:Yeah, I think if it has an update tomorrow, it wouldn't be too stretched, right? I feel like there are a lot of those high-octane stocks that, you know, your buying window is so narrow. And it seems like with this, you know, tomorrow would still probably be acceptable if it can head a little bit higher and get those RS moving averages that crossover fully in effect. So we'll see if it can make that happen this week. Okay. Well, speaking of high ATR Whippy stocks, Lumentum, L-I-T-E, sorry, the ATR, 9.4%, but this was down 8.5 % on the day after four up days in a row. But, you know, I think that this is a good example of sort of a buyer beware, know the personality of the stock.

20:41Ed Carson:And this was something that David Ryan, I know, was talking about on IBD Live this morning, these trap doors in the market where it can be really tricky, you know, with these types of stocks because buying on a pullback to the 50-day can be so rewarding. But other times it can just chop you up. Yeah, this has done this a number of times, you know, just over that little stretch that you drew there. And we'll see. Maybe this is the moment. Maybe it turns around. I mean, on the opticals. So I'm not going to say this is dead. It's not that far below the 50-day line. It's not below recent lows. It's just one that's really tough.