Market Chop Continues As Medical Strengthens. J&J, McKesson, Alphabet In Focus

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0:26Good afternoon, everyone, and welcome to Stock Market Today. for Monday, November 17th. It's Alexis Garcia here. And stocks slid today as investors await NVIDIA earnings and jobs data this week. And here with me to help break down everything you need to know about today's trading action is IBD Market Research Director Justin Nielsen. Justin, what do you got on tap for us today?

0:53Alexis Garcia:Well, man, it's all about medical right now, it seems like. So So we will definitely take a look at some of those areas, including Johnson & Johnson, J &J. We will also look at McKesson, MCK, and might as well finish up with Google Alphabet being the parent company there, since that is one of the only Mag7 that's holding up as nicely as it is. You know, with all the whiplash going on in the market, Justin, we might need some medical. So that's maybe not a bad idea. But before we get to those stocks, let's just check in on the major indexes. The S &P 500 finishing the day down 1.2%. The Dow down 1.3%.

1:32The NASDAQ down 0.8%. And small caps down 1.9%. So Justin, I'm going to go ahead and get my charts going. But talk to me about what's been going on because we've seen a lot of whipsaw action. We had that upside reversal close on November 7th. And it has just been back and forth since then. the S &P 500 reversing lower today. But, you know, most of the indexes, including the NASDAQ, undercutting the low of this upside reversal, Justin. So talk to me about what you see going on with the market. I'll jump back to the S &P 500 here.

2:14Alexis Garcia:Yeah. So, I mean, really, October 10th, that big, wide day that ended at the bottom of the range. And again, remember, this was, kind of a little jostling back and forth between President Xi and China and President Trump here in the U.S. It kind of led to the sideways area. And once we broke out of that, though, it really did seem to be, hey, game on. Things are coming back. But then we came down to the 50-day moving average line, and we've just seen a lot of very whippy action. So we broke through the 21-day moving average line, got that support, as you mentioned, on November 7th on the 50-day moving average line.

2:51Alexis Garcia:Now, when we crossed back up above the 21-day moving average line, which is exactly what you want to see, nice follow-up to the upside reversal on November 7th, but then we really didn't make any progress. We just tightened up, which normally I wouldn't be too concerned about, but the fact that we didn't really follow up too much before we kind of came down and retested. So the biggest problem here is that we keep on coming down, you know, and not getting the, not getting the follow through, not getting the, the trend. And we're a trend following system. You know, that's what the IBD methodology is all about.

3:31Alexis Garcia:And so when you can't get a trend for more than two days, it's very difficult to make progress. Me personally, I'm getting chopped up. I'm, I'm, I'm not doing well right now. This is not the market that, you know, that I do well in. And it's even worse sometimes you get busy and you're like, okay, well, the upside reversal on Friday allows me to increase some exposure, but I've got to manage my risk and know where my, where my levels are. You get busy, you take a look at other things going on and then you come back to the market and things just look very different from where they started. A lot of the indexes finishing at the bottom of their range.

4:09Alexis Garcia:The NASDAQ composite, not undercutting Friday's low, but I mean, it's back below the 50-day moving average line. And this time it was a close below the 50-day moving average line. That's a big difference. You know, this is really the first close below the 50-day moving average line that we've had since we got above it back in April. You know, so I think that is significant. The support didn't come in today. So that is a concern. What about any thoughts on the Dow? This one still looks like right at that 50-day line here, but also declining today. And I mean, small caps, Justin, also just taking a beating, continuing to fall further below that key moving average.

4:53Yeah.

4:54Alexis Garcia:I mean, you know, the Dow, as much as we kind of rail on it because it's only 30 stocks, it's price-weighted, all these things, it is still a pretty good correlation to what's going on with even the S &P 500 or the general market indexes that have a lot more stocks in them. But yeah, I think the tail here is, look, it had that strong move up and it's got some components in there that are doing fairly well. Some of the more liquid names definitely has that kind of medical exposure as well. And some of the areas that we're doing well, J &J that we're going to talk about in a bit is one of the components, Amgen and Walmart.

5:37Alexis Garcia:Those were all three up today on the Dow Jones Industrial. And then you have a whole host of others that are a little bit more on the staple side, a little bit more defensive where people go to hide because of their liquidity. So the Dow could certainly be doing worse. But there are those areas, you know, it has the Amazon exposure. It has, you know, the tech exposure with Cisco, NVIDIA, Apple, you know, and that's right now tech and AI related does seem to be taking it on the chin. So the Dow Jones is not immune from that. It's got its exposure there, too. The Russell 2000, meanwhile, as you mentioned, you know, look, this was just another case of where the oomph just never finished, followed through on it.

6:26Alexis Garcia:um it's it's below the 50-day moving average line it was kind of the first one to get below that line and really hasn't made made much um you know much power uh so the trend there didn't really last uh and small caps you know again they were they were doing okay they were starting to trend above their 21-day moving average line for a while but it just never really kind of got its relative strength in gear. And really, since October 10th or shortly thereafter, that relative strength has been back in its solid downtrend. And talk to me about market breadth, Justin, because you mentioned AI tech-related stocks taking it on the chin.

7:07We can see that with RSP down about 1.3 % today. We can check QQEW as well, also down about 1.1%. Again, trading below those 58-day moving averages. So what are your thoughts here?

7:23Alexis Garcia:Well, yeah, I mean, the fact is, it's not just AI, right? There's a lot of tech. And whereas the mega caps, you know, the FNGS, for instance, which is kind of the top 10 in terms of your FAANG plus, you know, it's not just those that are struggling. The RSP shows that the average stock, it's a lot of the top 10, the MAG7, and the other 493, there's a lot of struggles out there. And with this trading below its 50-day moving average line, you just have to be a little bit more cautious. For a while there, we were kind of excusing it because there were a whole host of areas that were working and still making progress.

8:05Alexis Garcia:But now when it's kind of getting more of the indexes falling in line with RSP, you just got to be a little bit more concerned. And look, this doesn't mean that we're in a bear market period where we have to really get our canned goods and go into the bunker. But, you know, look, any bull market has its pullbacks and you've got to make a decision on how you're going to handle those pullbacks. Are you going to try and reduce your exposure, make sure you live to fight another day, reduce your drawdown? Or are you more of the type that you're just like, okay, I've got some good cushion on the stocks that I have.

8:40Alexis Garcia:I want to get the long-term capital gains and I'm just going to let these base and know that I could be looking at 30 % drawdowns on some of these stocks. Both ways can work. You just have to make sure that you're sticking to some type of rules. You have an exit strategy, even if it's taking more of a drawdown, but you have some type of exit strategy to know, hey, things are getting worse than I expected or my hypothesis is not holding up. But yeah, it's, you really have to kind of know your style and stick with it. The last thing you want to do is start saying, okay, well, my style is this, but the market did something I didn't expect.

9:22Alexis Garcia:Let me change and, you know, start saying, oh, well, now this is my experiment, right? Exactly. Let's take a quick look at the 10-year treasury yield because we also had, you know, some possible comments from a Fed official this week that maybe more rate cuts weren't coming in December, but this one down slightly today, about four tenths of a percent. But we've seen this ticking up here and really kind of holding steady over the last couple of weeks. Yeah, I think it's going to be worth watching. But really, the main thing here is we're going to start getting some data that we've been lacking.

9:58Alexis Garcia:You know, now we've been kind of filling in some of the holes with private sector data, ADP kind of taking the place of the Bureau of labor and statistics. So, you know, it's not like we've been flying completely blind. But once some of this data starts coming out, the Fed keeps on, you know, pounding the table on how they're data dependent. So when some of this data comes out, I think that's going to give us a little bit more clarity on a potential move by the Fed and what what could be in store there. But right now, I think they're they're really kind of coming out and saying, hey, I mean, even even Even Fed Chair Powell, when he was questioned on the possibilities of a December rate cut being a lock, he said far from it.

10:43Alexis Garcia:So I think investors have really kind of started embracing that message and knowing that there's a lot of uncertainty there. And so we'll see what happens when some of this data starts coming out. We've got non-farm payrolls and things like that that are going to be trickling in this week. And as you mentioned at the outset, Alexis, worth repeating, we've got NVIDIA earnings. So, I mean, a lot can change based on NVIDIA earnings, you know, either way, right? It can make things a lot worse if there's something in there that is like, okay, some of these AI stocks might be in further trouble, or it could smooth a lot of this over.

11:20Alexis Garcia:So that's going to be a big thing to be watching as well. Well, let's take a look at SMH. And that's the semi-conductor ETF. Speaking of NVIDIA, but this down 1.4 % today. And again, kissing this 50-day line, Justin. But give me your thoughts here, because clearly in a downtrend since hitting this 372.78 high. So what's been going on with chips? Well, I mean, whenever I see upside reversals, especially support at the 50-day moving average line, like we saw with the indexes, like we saw with SMH, Hey, that's exciting. That's kind of like, oh, we can start maybe doing some buying here, buy on the pullback.

11:58Alexis Garcia:You've got an area where you know where you're wrong. But I'll be honest with you, I like to immediately see a follow-up to that move. And we're just not getting that with a lot of these upside reversals that we saw on Friday. They're not necessarily undercutting the lows of Friday, but they don't look good. So that's what I'm concerned about here. We're either back at our 50-day moving average lines in a lot of these cases or crossing underneath it. So I think this is a concern. So I was buying this on Friday, and I was selling it today. It just wasn't giving me the follow-up that I wanted, and I needed to reduce exposure.

12:35Alexis Garcia:So this was one of the areas where, again, it just didn't feel like it was worth taking that risk when it just seemed like none of the stocks were working and things were getting worse rather than better. Yeah. How about XBI? We've been saying medical seems to be what's working right now, this up seven tenths of a percent. And, you know, again, we saw this pullback here to the 21 day, found support and has been moving higher since. Yeah, this just looks so different from everything else. You know, the medical, biomed, biotech, this is like what pullback, you know, where all of these things are crossing below their 50-day moving average lines.

13:16Alexis Garcia:This is, you know, this is at recent highs and looks, you know, looks like there's no problem. Getting support of the 21-day moving average line, not even coming close to the 50-day moving average line. So again, I have a position here. This is where I'm kind of leaning in towards. And there were a lot of stocks today in this space, even though this, you know, did finish off its highs. There were a lot of stocks in this space. You know, no matter how you look at the market, if you looked at what stocks were closing high in their in their ranges, what stocks were up the most, bio biomed biotech was an area that was just, you know, sending a bunch of signals.

13:53Alexis Garcia:A few that we talked about on the IBD Live show this morning included ARQT. This was one that Chris Gessel, our chief content officer, brought up. Halo, you know, this is Halazime. This one looks set up. This one just recently got above its 50-day moving average line. But, you know, again, it closed at the low of the range, but still above its 50-day moving average line. The list goes on. Jazz Pharmaceuticals, that had some news that sent that higher in the medical ethical drug space. ONC, I do have a position in this. It's on Swing Trader. It's on leaderboard. Again, closing low in the range, but still looking very different in terms of its position than a lot of the other stocks out there.

14:37Alexis Garcia:And I would, again, just to shift over to XLV, a little bit broader on the medical side, This just looks, again, very different. Yes, it has pulled back a little bit, but this pullback is just so mild, still staying above the lows of Wednesday of last week, really not coming down hardly at all, never tested the 50-day, never tested the 21-day. I mean, this is still above the 10-day moving average line. So just looks very different from a lot of the other sectors out there. Yeah, seems to be wanting to hold these gains pretty well here, Justin. Why don't we take a look at GLD? That's the gold shares ETF.

15:17This went down 1.2 % today. Trying to get support here at the 21-day line. But talk to me about gold, Justin, because this had been on a run for so long and it's pulled back. You know, tried to come back again. But again, thoughts here with gold.

15:33Alexis Garcia:Yeah, and certainly it had such a strong move that I was selling into that strength. and then kind of the last bit I was selling was, you know, the day after it made that 403.30 high when it, you know, fell sharply. And look, when it was living below the 21-day moving average line, I think anyone could have said, look, maybe this is done for a little while and it has to base, but then it started coming back and, you know, I was buying some more. But now we're, again, back below the 21-day moving average line. It's not as bad looking as a lot of tech, But at the same time, it's not great looking either.

16:11Alexis Garcia:So when something doesn't feel like it's giving me an edge, I'd rather just not play. And the gold miners are kind of in a similar boat. You know, GDX, this undercut, the gap up of Monday of last week, you know, that just got undercut. And it's just not holding like you would expect in a strong trending environment. And that's what it comes down to. We're just not really trending in a lot of areas. Most finance teams are spending on the wrong things. Expense reports, spend policy PDFs that nobody reads, a close that stretches into weeks. That's maintenance, not momentum. It's time to get Brex AF, a gentic finance that eliminates that work before it starts.

16:51Learn more at brex.com slash AF. All right. Well, let's take a look at some individual stocks, starting with Johnson & Johnson. That's ticker J &J. today. This one is seems like it's trending, Justin, up 1.9 % today, getting to this round 200 level. But talk to me here about what's going on with Johnson & Johnson.

17:12Alexis Garcia:Well, I'll be honest, I don't know what's happening with the company itself. I do know what's happening with the chart. And look, the fundamentals, you've got to kind of forgive some of those. You know, we look for 20, 25 % in the earnings growth. And we like to see that in the sales growth. Single digit is, you know, hard to get excited about. But that relative strength line is telling me a very, very interesting story. That relative strength line going at that type of angle says, hey, something's going on here. Now, I didn't buy this one because I had, you know, Eli Lilly, I had Amgen, I had ISRG.

17:52Alexis Garcia:So I was kind buy this. We didn't put it on Swing Trader, but this one was actionable last week and is continuing to move higher. Look at the volume behind the move today. Just again, a very different picture. And this has kind of a sweet spot here because not only does it have that medical exposure, but this is also kind of considered a little bit more of the defensive name, you know, a very liquid leader. And that just kind of shows you when these stocks do well, Well, you know, the defensive names like your XLPs and things like that, which is your consumer staples, your Coca-Cola's, you know, KO, that tells you something a little bit about the market when these are holding up better than a lot of other things.

18:33Alexis Garcia:So Johnson & Johnson has that defensive nature to it, but it's also in this medical space that's doing so well. All right. How about we look at McKesson? That's MCK. Hey, Justin, this one up 1.6 % today. And again, had this big gain here on November 6th after it touched the 21-day line. Nice wild upside reversal. And it's really trying to just hold here. So thoughts here on the chart. Yeah, I like how it got wild and now it's tightening up. Let's go to the weekly chart here because you know you're dealing with kind of a slower mover when you see all of these blue shaded areas of three weeks tight.

19:17Alexis Garcia:But look at the relative strength line. You know, the relative strength line, again, is saying, hey, this is something that is, you know, outperforming the market recently. And again, for as wild as that day was, the fact that we're tightening up now certainly tells me that folks are, you know, okay with the valuation where it is right now. And if we can break to the upside, this is something that I think could be actionable, whether you call it like a three weeks tight by the end of this week or something like that, something that I'll be watching. And again, the fundamentals are a little spotty here, not as strong as we like to see, but 39 % in the last quarter with a 10 % earnings, I mean, 10 % revenue growth, that's nothing to slouch at for a company this large.

20:03Alexis Garcia:So it's$105 billion market cap and still putting up solid numbers like that. One more thing to just note, if you scroll up a little bit on the numbers there, the EPS growth rate of 15 % down just a little bit, yeah, perfect, and earning stability of six. So this just has very stable earnings. 15 % might not be much, but the fact that it's able to do that year after year is pretty gosh darn impressive. And for those that look at PE ratio, I personally don't myself, this is a lower valuation too. So So it kind of has some of that appeal for value players, which, again, you know, if you do comparisons of growth versus value, that's something to be watching.

20:45All right. How about we wrap with Google? That's Alphabet, the parent company there. I'll switch back to the daily here, Justin. This one up 3.1 % today, finishing the lower end of that range in heavy volume. But what's been going on with Google?

21:02Alexis Garcia:Well, yeah, it's never good to see a move that finishes so low in the range. But you do have to consider where it came from on Friday. The fact that it had that gap up, you know, this is more mid-range if you consider it a true range. And the way that I do that is I'll take the close minus the low. And in this case, I'll use the minimum of either the low of that day or the previous day's close. So in this case, using the minimum, I would give me the previous day's close. So I would use the close minus Friday's close and then take the high of today minus the low of Friday. So you take those two numbers, make it a ratio.

21:46Alexis Garcia:And this is, you know, this is kind of in the upper part of its range, if you consider it that way. So, again, not great that it came off its highs. But the fact that this is holding up so well in a market that is not favoring tech says, look, if you're going to be in it, this is maybe a place to be. Also, take a look at that weekly chart. You know, pretty tight action over the last few weeks if it remains tight this week. and then you kind of see a break above highs, that's something to be watching for and could be actionable at that point. All right, well, we'll be keeping an eye on that. Justin, thank you so much for your insights today.

22:24What do you have going on this week? You're our host with the most.

22:28Alexis Garcia:So tomorrow we have a Swing Trader status update. So this, again, has been a tough month really for Swing Trader as well as myself. But we will talk about, again, do a little bit of hindsight analysis, Monday quarterback analysis to see, hey, is there something we could have done better? But sometimes it's like you're following the rules and it's just you have to acknowledge that it's not your system. We've also got John Kosar, who will be on the podcast this week. He's from Asbury Research. It's amazing how he has a little bit of a different take than the IBD methodology, but comes up with a lot of the same conclusions.