Indexes Up, But Strength Is Uneven; Taiwan Semi, Amazon And Cadence Design In Focus

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0:24Good afternoon, everyone, and welcome to Stock Market Today for Monday, September 8th. It's Alexis Garcia here, and the Nasdaq hit fresh highs to start this week, and investors are waiting for some key inflation data to come in on Wednesday and Thursday before the Fed's big announcement on rate cuts on September 17th. And here with me to help break down all the action you need to know in today's trading session is IBD Market Research Director Justin Nielsen. Justin, what do you have for us today?

0:56Alexis Garcia:Well, we'll talk about a few stocks. We can look at the chips. I spent a little bit of time there because it's, I think, representative of the market, how things are just kind of shifting under the surface. So we looked at Micron on Friday. We're going to look at Taiwan Semiconductor today. Also, big caps having a decent day. So we'll take a look at Amazon. And then also kind of related to chips in the chip design area is cadence design, which looks really interesting. I do have a position in cadence design, but that's one of the long-term leaders that we can revisit. All right, Justin. Sounds like a great game plan for today.

1:31Before we get to all that, let's check in with major indexes. The NASDAQ finishing the day almost up half a percent. The S &P 500 up two-tenths of a percent. The Dow up almost three-tenths of a percent. And small caps up about a tenth of a percent. So let me get our charts going here, Justin. And we can start. I believe I'm on the NASDAQ here. Again, hitting a fresh new high today. So talk to me about what you're seeing unfold in the market right now.

2:03Alexis Garcia:Yeah, at least it's a closing high, right? And certainly not as strong as it was at the start of the day. We kind of frown a little bit on Monday morning gap ups because those can be very tricky to handle. You're kind of buying in the strength only to see it fade throughout the day. It's almost better when it gaps down and then closes strong, which is kind of what happened with the Russell 2000 today. I mean, the Russell was struggling for a good portion of the day, but whereas the NASDAQ closed in the bottom of its range, the Russell 2000, which is something we've been talking about as a place where money has been flowing to, that kind of got a nice close in the upper part of its range.

2:44Alexis Garcia:And then the S &P 500 was kind of right in the middle, you know, there with a about a quarter percent gain. Again, kind of right there at that 6500 level, a really important level, I think, in terms of the round number. But we'll see. We want to get above there and then stay above there. So right now it's just kind of teasing at the moment. Don't we love a good tease here? And then let's get your thoughts on the Dow, because this one was down a little bit earlier today, but coming off those lows to finish in the highs as well. So thoughts here. I mean, you know, you take a look at the weekly on the Dow and the fact that it had that big move a couple Fridays ago and has just really been holding tight.

3:29Alexis Garcia:I mean, that's a good look. The problem is it's the Dow, right? It's 30 stocks, price weighted. That makes it a little bit tougher. Although, I mean, look, it does a great job of kind of getting a sense of the economy, but it's not always representative of the entire market. And what we're seeing here is really these pockets of strength. We're kind of seeing rotation potential, but it kind of starts rotating, and then it seems like it goes back to the same old stocks. And then there's a lot of back and forth. So I was saying on IBD Live this morning that I kind of have my foot in straddling two areas, you know, the rotation play with the home builders and the Russell 2000.

4:10Alexis Garcia:And then some of the old the old standbys, the leaders that we all know and love, like your, you know, A-Labs and things like that. Yeah, definitely seems like tricky conditions here right now, Justin. But let's take a look at some market breadth indicators, starting with the QQEW. That's the NASDAQ 100 equal weighted index. Let me switch back to the daily here. That one finishing the day up almost four tenths of a percent, still under that 50 day line. But what are you seeing in terms of market breadth? Yeah, this was really interesting, too, because the way that the day started, we were looking at some strong gains on the NASDAQ, but QQEW was down, you know, which kind of suggests, OK, the breadth wasn't there.

4:54Alexis Garcia:And also on IBD Live, we were noting how the advancers were getting outpaced by decliners. But that's not how we finished. It looks like the advancers just edged out the decliners on the New York Stock Exchange and also on the NASDAQ with a little bit more of a favorability to the advancers over the decliners in that index, or I should say on that exchange, the NASDAQ exchange. Let's take a look at RSP as well. This is the S &P 500 equal weighted ETF. This went down fractionally today, Justin, but looking pretty flat here from last trading day on Friday. So thoughts here? Yeah. So and look, when we kind of looked at the indexes on Friday with Mike Webster, you know, one of the things that it looked a little stallish, stalling ish, it kind of was flat action.

5:48Alexis Garcia:It kind of showed an unwillingness to kind of continue to move up. But you usually expect some weakness to happen after that, especially when you close low in the range. And in the RSP and in the Russell, we got a little bit of that. But it was, again, a really, it was a lot more mixed as you were looking at it throughout the day. It was kind of, you saw the strength going from different areas, starting in some places and moving out of there. Other areas, it kind of stayed there the entire day. So it was very, very odd behavior. But again, what closed best? It was the RSP. It was the QQEW. It was the Russell 2000.

6:29Alexis Garcia:Whereas the NASDAQ and FNGS, some of the things that we're doing that are FNGS is a good representation of your mega caps. That was still up considerably, but it just didn't really make progress beyond where it opened today. It just kind of faded from its open. So that's kind of the, I think, again, we're still in this era of trying to decide where that money is going to shift to. I think there's a little bit of indecision right now. And we've got that rate cut that everyone's looking at, the jobs number on Friday. I think one of the things that was signaling is, okay, yes, a rate cut is kind of a lock now, maybe even a 50 basis point cut.

7:10Alexis Garcia:But sometimes you've got to be careful because you've got to be careful what you wish for. Because rate cuts, if it's needed, that usually means that something is broken in the economy and the jobs report, you know, suggesting that maybe the labor market has some struggles. Remember, the Fed has a dual mandate. It's against inflation, but also has to support, you know, full employment as much as possible. So it looks like that might have to shift towards that employment part over the inflation part. So it's going to be really interesting, I think, to see what happens over the next couple of weeks ahead of this Fed meeting.

7:46Alexis Garcia:And there just might be a little bit of back and forth and indecision until then. Yeah, certainly. And it seems like the expectation that maybe there be a jumbo rate cut, as you said, growing there. Let's take a quick look at the 10 year Treasury yield. This down today, almost a full percentage point. But again, what is this telling you in terms of the yields and maybe what people are expecting? Yeah, I mean, it's certainly, you know, I usually look at the FedWatch, the CME from the CME group to kind of get my sense of what people are expecting. Because the reality is, while there is a inverse kind of relationship between your 10 year treasury yield and your stocks, it doesn't always hold on the short term.

8:31Alexis Garcia:That might be okay long-term, but sometimes short-term, you can see divergences from what you expect. And so at the end of the day, I'm really going to look at the indexes to kind of gauge. I look at a lot of the sector spiders, both the market cap weighted ones. So that's like your XLY, your XLK, as well as your equal weighted ones, like your RSPD or your RSPT, which are the respective, I guess, ETFs for the technology and the consumer discretionary. So I kind of like to look at that to kind of say, okay, where is the strength? And then the ultimate arbiter of how strong the market is, or maybe how strong your decision making is, is your own portfolio.

9:19Alexis Garcia:That gives you a lot of information as well, because sometimes you can have great market index action, kind of like what was happening in 2023 after we got out of that bear market of 2022. But it was very narrow, right? RSP was not participating, the equal weighted S &P 500. It was really the Magnificent Seven carrying the indexes up higher. And if you weren't in those, you probably weren't having a great time in your portfolio. So I think you have to kind of, you know, not just focus on the 10-year treasury and say, okay, okay, this is what this means for my stocks, because that can be very different, whether or not you're in the small caps, your home builders that are a little bit more interest rate sensitive, or some of these other AI plays or mega caps that really it doesn't matter too much if you've got a falling or rising 10-year treasury yield, because a lot of those big mega caps are sitting on so much cash.

10:16Yeah, Justin, a great way to kind of look at everything there. Let's take a look at some more sector ETFs, starting with the FFTY. That's the Innovator IBD50 ETF. This one up about nine-tenths of a percent today. But again, talk to me about what this is saying about growth stocks and how you're seeing where the money is going right now. Yeah.

10:40Alexis Garcia:So, I mean, we talk about the Russell and the small caps and the areas like home builders. Maybe we just throw up ITB real quick. I do have a position in this and also the triple leveraged version. But, you know, there's strength. There is strength here, but there is still strength in the traditional growth, too. So it's hard to tell exactly if that rotation is fully or is it going to lift more boats. So, again, there is kind of, I think, still a little bit of indecision there. But it is important to see that FFTY, I mean, look, that's making new highs. So growth is still widely in favor. Now, one of the things about the innovator IBD50, the IBD50 in general, is it does rotate to where the strength is and it's a weekly rebalance.

11:29Alexis Garcia:So you would expect this to hopefully catch that. But sometimes it can be a little slow to get more of the rotation names in there. But right now it's making new highs along with the indexes. So I think that's a positive for growth. Let's take a look at GLD. That is the Spider Gold Shares ETF. This one up about 1.1 % today. So thoughts here on gold, Justin? How strange is it that you have growth going so strong and GLD doing even better? You know, so it really is kind of this head scratcher a little bit. You know, you usually think of GLD as your hedge and kind of going counter, but that's just not the case right now.

12:10Alexis Garcia:Now they're both going up. So this again kind of speaks to that thing, the divergences that you might normally expect aren't necessarily happening. But yeah, we've been talking about this for a while, the way it was tightening up. GDX, which is the gold miners, that's also been very strong, maybe a little bit extended for a lot of those miners themselves. And remember, the miners do tend to move more than gold because it's almost like a leverage position there. but you know and either either direction up or down but gold GLD kind of gave you a little bit more of a recent entry in just the last couple weeks here all right let's take a look at SMH you mentioned the strength of chips today Justin this up 1.1 percent so talk to me about semiconductors and what you're seeing in that sector yeah it's it's interesting because you think of SMH, and of course, the first thing you think of is NVIDIA, but it's not really NVIDIA, which, I mean, look, that's a 20 % position in this Van X semiconductor fund.

13:15Alexis Garcia:But NVIDIA, if you just pull that up real quick, NVIDIA is not really where the strength in chips is right now. NVIDIA is below its 50-day moving average line, whereas SMH looks very different. Some of the things that are helping is your TSM, which we'll talk about in a little bit. Your Broadcom, AVGO, I do have a position in that. Micron, which we mentioned on Friday, that's a 4.5 % position there, and that's doing fairly well. So it's, again, even in SMH, a very narrow look at a chip area, it's a mixed message, right? The NVIDIAs, the AMDs are not doing nearly as well as some of these other areas that are looking just much, much stronger in the chip space.

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14:50So talk to me about what you see setting up here.

14:52Alexis Garcia:Yeah, Friday certainly was a legitimate entry, I think, as it was getting gapping up above the 50-day moving average line and also crossing that resistance at 240. Nice to see the follow-up today. So you've got a couple options. Look, if you're a position trader, this is a legitimate flat base. I mean, you're looking at something that, let's just take a step back to the weekly chart had a nice, nice move from, you know, during this rally, came out of this cup, really moved nicely, just not giving up much gains. This is only a 10 % depth to this flat base that we have here. And I think I think you probably have your, your best fit on instead of standard fit, it looks a little bit looser than mine.

15:36Alexis Garcia:But you know how to do that? We'll do it live. We'll go to the rent. Go to the wrench. If you go to the wrench on the right-hand side? Yeah. So you're going to go to standard there. Yep. And you're going to see much, much tighter action there. Now that makes the flat base look flatter, right? You know, so yeah, only 10 % there. We're, you know, we kind of touched the 10-week moving average line, but we've been getting support there. So you have this 248.28 potential buy area. Again, you could have gotten it as it was going through 240 as an early entry. You can wait for that 248 if you'd like.

16:12Alexis Garcia:Or what I like to do sometimes is start an early entry and then follow it up with the traditional entry. And that kind of gives you a little bit of an edge, especially when you've got a choppy market. It can kind of keep your losses a little bit smaller and prevent you from buying extended because you look at the last couple days here and you might say, okay, well, gosh, if TSM has another strong day, how excited are you going to be to buy on this breakout when you just saw a three and a half percent move on Friday and a one and a half percent move, you know, today, you know, that's that's five percent just in the last couple of days.

16:49Alexis Garcia:So, you know, we could digest here, but it's certainly, again, has already offered a buy point. You know, it looks like another one at 248, 250. You're kind of getting another area right there. So a good setup. And again, showing where there's still strength in the chip market, not just in NVIDIA. All right. Well, let's take a look at Amazon, Justin. You mentioned some of the big caps doing well today. This went up about 1.5%. And again, looks like it's just below that$236.53 buy point. But another one that looked like possibly had an early entry last week. Yeah. Yeah, 234.08 was a previous resistance area.

17:34Alexis Garcia:You could have even said, okay, I'm going to sneak in a little bit lower with the Thursday high of the previous week. That was just a little bit lower. Not this last week, but the week before. So yeah, there were options here for getting into this. But here again, it's the mega caps don't seem like they're giving up, right? Every time you think that they're out and the rotation is coming out, they show strength. like they were this morning. And Amazon, even though a lot of the mega caps pulled in a little bit from their highs today, Amazon's still closing well in the upper part of the range and still looking like that 236.53 entry is something that it can be offering here.

18:16All right, let's head on over to Cadence Designs. That's a chip designer. As you mentioned, a big theme today was chips. This one up 2.7%. Nice gain here. building the right side of this flat base with a traditional 376-44 buy point. So thoughts here, Justin?

18:37Alexis Garcia:Yeah. So again, I do have a position in this. It says it's in computer software, but again, because they're designing chips, it has a lot of exposure to the way the chips are going. So let's go to the monthly chart on this one, which is a little different. You can see this monthly chart shows just this phenomenal uptrend that this has had over a long period of time. Now, a solid uptrend is not enough to get me excited. What really gets me excited is when that relative strength is also doing very well. And Cadence kind of flatlined here for a little bit. It was having this really phenomenal relative strength, but the relative strength wasn't that exciting for the last year and a half or so.

19:21Alexis Garcia:So it was basically keeping track with the S &P 500. And why would you go with an individual stock if you're getting about as much performance from the S &P 500 and all that diversification? But that does look like it could be changing. And let's go to the weekly chart. One other thing about cadence design that's interesting is this has the long-term leader quality. So if you look at the EPS growth rate, 21%, and you can see that on the chart there to the left. If you go to just the left a little bit in the boxes, you see EPS growth rate of 21%. Do you see that, Alexis? Yeah, perfect. And earning stability of four, which here, we usually are saying one to 99, 99 being the best.

20:09Alexis Garcia:Well, here it's one to 99 with one being the most stable, 99 being the least stable. And you can see that with this green earnings line that we have that you've got really stable earnings for cadence and you have for a long time. So that puts it in this long-term leader category. And a lot of times with our long-term leaders, well, we want to kind of buy them on pullbacks over breakout. So you've got this really tight area where you had the 10-week moving average line offering support. And today we kind of broke out above that tight area. So this is something that we put on Swing Trader today.

20:45Alexis Garcia:After the 30-minute restriction period, I bought some as well. And I've had success on this a number of times in the past. So this is something I was very comfortable with owning. I do tend to hold on to this one for a while. So while I'm kind of starting it as a swing trade, this is one that I do like to turn into a position trade if I get some cushion on it. So that's the way I'm handling this one. And again, you also have a 10 % deep flat base here. So you can wait until that 376.44 entry, the traditional entry, but you also have the option of getting in, sneaking in early, and then following up with maybe an additional buy if it does that breakout.

21:28All right, Justin. Well, thank you so much for your insights today. We really appreciate it. And that does it for this edition of Stock Market Today. We'll be back with more market analysis tomorrow morning, starting with IBD Live. You can head on over to investors.com slash IBD Live for all the details there. And we'll be having Mark Minervini join us on Wednesday as a special guest, so you won't want to miss that. And thank you so much for watching. We'll see you right back here tomorrow after the close.

22:25strewn across five kingdoms. Yeah.

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