Nasdaq Breaks Support As Chip Sell-Off Deepens; Knight-Swift, Canadian Pacific, AbbVie In Focus

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0:55Ken Shreve:good afternoon everyone and welcome to stock market today for july 16th it's alissa quorum along with ken shreve here we've got a look at the action in today's session seeing a lot of red out there ken with a lot of the weakness once again focused in the tech sector Yes, indeed, Ali. It's not often when you look at the NASDAQ 100 and you're seeing Keurig, Dr. Pepper, and Old Dominion Freightline, and Syntas, the uniform maker, leading the NASDAQ 100. But that's what we're looking at today, these technology stocks not leading the NASDAQ 100 these days. But, yeah, lots of selling in the NASDAQ 100 today, chip stocks under a lot of pressure.

1:42But we did find three stocks to look at. We're going to take a look at a drug maker, AbbVie. We had great earnings from J.B. Hunt Transport. But we're going to take a look at another trucking stock. That's going to be KNX. And then we're also going to take a look at a railroad stock because railroad stocks, a lot of them hit new highs today. Transport's performed well overall. So that's going to be CP is the ticker. All right.

2:13Ken Shreve:We'll take a look at those stocks. But first, let's take a closer look at the major indexes. So the weakness in tech definitely showing up in the NASDAQ composite with the tech heavy index down one and a half percent on the day. You mentioned the NASDAQ 100 and definitely a fun fact there about what was leading that today. But overall, the Q's down 1.6 percent. So even worse than the Nasdaq composite today. Meanwhile, the S &P 500 finishing down about a half a percent in today's session. The Dow was off by two tenths of a percent and the Russell 2000 down at less than two tenths of a percent here today.

2:55Ken Shreve:Ken, so walk us through your perspective here. We'll kick things off with a look at the S &P. Yeah, well, you know, the S &P, we've been talking about this kind of split market where, you know, the NASDAQ and the weakness in tech stocks has been, you know, very, very pronounced. But, you know, S &P 500 and the NYSE indexes have been fighting a pretty good fight because outside of the technology sector, we've had some pretty good leadership pop up outside of technology. So S &P 500, we saw some selling, you know, pop up in the S &P 500 today, not nearly as intense with the NASDAQ. So the S &P 500 right now testing the testing the 10 day moving average, not a broken index by any means.

3:48Breadth was actually positive on the NYSE. So let's look at the glass as half full. I mean, look at this. Look at RSP here. This is just unbelievable. I had no, no, I was not, I did not look at RSP once today. I was just checking overall breadth on the NYSE and I was seeing it positive all day. Not overwhelmingly positive, but it was slightly positive all day. But to see RSP up 1%, you know, it's just kind of the same story here. You know, just really, really strong showing for RSP again. So, and breadth on the NASDAQ, even though the NASDAQ had a very harsh percentage decline and volume picked up the pace again, and we're going to get another distribution day for the NASDAQ, I have to say the breadth on the NASDAQ, you know, was negative, but it was negative by less than two to one, which to me, you know, wasn't so bad, really.

4:47I mean, because on a really decided down day, you would expect breadth to be at least two to one negative, maybe even three to one negative. But we were less than two to one negative, so that wasn't too bad either. But, you know, in terms of the S &P 500 today, yeah, we were down, you know, not as much as the NASDAQ, but to see it still sitting near its short-term moving averages here, not so bad. And I think, I'm not sure if volume came in higher on the NYSE. It was a close call at last check. Even so, distribution on the S &P 500, much, much less than what we're seeing on the NASDAQ currently.

5:27Ken Shreve:Got it. Yeah. So let's take a look at the NASDAQ. We are, once again, back below that 50-day line. I mean, we've just been chopping around a lot of levels that you would see usually as support in an uptrend. You've got the 50-day, the 21-day, and a round number here at 2 ,600. We're just chopping all around that area. But we are so within this trading range. But it's not looking super bullish here, Ken, especially for the tech sector. It's a lot of chop and a lot of slop. That's all you can call it because, Ali, we were talking yesterday and saying, look at this. I mean, this was a pretty decent close for the NASDAQ.

6:15And we weren't far from, you know, two-week highs yesterday. We closed up near highs. And just like that, the NASDAQ was not far from, you know, a little breakout, you know. And so we were, you know, we knew that NASDAQ was challenged, but it was a pretty good close yesterday. We knew there was a lot of damage among the memory stocks and a lot of the chip stocks still. But to, you know, to see that day yesterday followed up by a distribution today and a lot of selling, it's maybe not a big, big surprise. We're just kind of chopping back and back and forth here. And we know it's an index under distribution.

6:55when we hit that high of 27, 190, you know, it was a pretty violent drop, almost a vertical violation type of move. We saw a lot of heavy downside volume. This is when the first real distribution phase really kicked in for the NASDAQ. There was a lot of institutional selling when we first came down. So, you know, to see this chop and slop over the past two weeks, Maybe not a big, big surprise here. So NASDAQ is still in a little bit of hurt here, and it's probably going to take a little while to work its way through this. So the higher volume decline today, maybe not a big surprise. But I think, you know, the markets, at least the NASDAQ's message is pretty clear right now.

7:41So in the tech space, there's really not a lot of good happening right now. The trend is down and seeing a lot of selling in tech land. And, you know, the leadership in the market is pretty clear, you know, in financials, health care, and just a lot of the areas that we saw lead today.

8:04Ken Shreve:Exactly. Okay. Moving on. Let's give our quick thoughts on blue chips and small caps like we like to do, Ken. Yeah, the Dow is basically sitting right alongside the S &P 500 here. It's just kind of sitting right near the 10-day moving average, holding the 21-day line here. So I would put the Dow right in the same situation as the S &P 500. Seeing a lot of Dow stocks holding up just fine here. saw some financial reports. I thought it was interesting to see the price action in Goldman Sachs today. Obviously, we had a really nice earnings report from Goldman earlier in the week. Yeah, it was, you know, I mean, so much for two days of nice gains for Goldman.

8:53I mean, to see that stock down, you know, 5%, you know, I mean, that, you know. Not what we want to see. Not what we wanted to see. I mean, that was a nice response to earnings a couple of days ago. But, you know, down 4 % with some not huge volume today, but typically after two days of strong gains, you'd like to see some nice tight action holding onto those gains instead of a kind of a violent sharp drop, giving back basically all of the gains from the prior two days. So that is kind of, you know, maybe typical action you'd see in an unhealthy market, but at least it did hold at the 10-day moving average.

9:35Okay.

9:36Ken Shreve:And then let's take a look at small cap scan. Here's IWM mild action, I would say here, looking pretty steady and in position potentially. Yeah, holding right at the 21-day moving average. So still holding in an uptrend here. So 50-day moving average is kind of containing the uptrend for the Russell 2000 here. So did have a nice gain earlier in the session. You know, we did have an earnings report from Taiwan Semiconductor. There was some hope that maybe that was going to maybe give a lift to semiconductor stocks. And the numbers were good from Taiwan Semiconductor. We had a nice sales report earlier in the week from TSM.

10:24But, you know, it sold the news. You can see the bottom line and the top line growth was pretty strong again at TSM, but wasn't good enough to help the stock here. So anyway, you know, small caps still fighting a good fight and holding a good uptrend here.

10:44Ken Shreve:They are. And so with the mention of TSM, I know you mentioned the continued weakness in chips. So, you know, can I think with the other breaches recently of the 50-day line, you at least saw some closes off lows, right? But today here, this is the furthest below the 50-day line that it's gotten on a closing basis. And we're just continuing to see more weakness in a lot of the AI-related names and particularly in this chip sector. Yeah, and you can see the SMH took out that low from several days ago, too. So you can see that low from, yeah, right in that area there. It looks like it probably undercut that low.

11:31So it really remains, I don't know how far off highs I haven't done. We'll just go to the weekly.

11:38Ken Shreve:You should tell us. How far off highs? Yeah, 15%. 15%. Yeah, so that's a fairly mild pullback considering how far it's come. So we'll have to see. I mean, to me, a 15 % pullback based on how far it's rallied basically since the April, follow-through day for the S &P 500. Maybe a little more downside to go, we'll have to see. But a lot of these chip stocks have made enormous gains. So a lot of these leaders, after the runs that they've made, many could come down 30 % to 40 % as they build the left side of their bases. So we'll see how much they have to pull back. But, you know. Hi, this is Alex Osula, host of the WSJ's What's News podcast.

12:32Ken Shreve:We bring you the biggest news of the day, from business and finance to global and political developments that move markets. If you're looking for more insights and tools to understand the latest headlines, consider becoming a subscriber to The Wall Street Journal. Visit subscribe.wsj.com slash what's news to subscribe now. The pullbacks have been pretty sharp up to this point, but the pullback in the semis may have a little further to go, but it's pretty rough out there right now. We'll have to see. Exactly. We'll have to see because I think with us still right around that 50-day or 10-week level, you know, if you use your imagination, you could see this as the beginning of just a new digestion on the way to higher levels.

13:26Ken Shreve:but tops start somewhere too, right? So, you know, that's why we keep such a close look on those moving averages because that's a great tell. If you start living below the moving average, you can't get back above it, then that's not the trend or the side of the trend you want to be on. So we're definitely in a delicate situation here. Yeah, exactly. And this is just, again, SMH is just, This is just the initial dip below the 10-week line. So it's probably going to try to rally back up and reclaim that 10-week line. And you can get some resistance. It can try to move back above it. It can get some resistance.

14:06And it's likely it's probably going to base for a little while and digest these huge gains that it's made since that initial breakout over the 400 levels. So the pause and digestion for a lot of these semiconductor stocks is part of a normal process. And, you know, we'll see how that basing process plays out. But it's very, very early in the pullbacks for a lot of these, not only the chip stocks, but for the memory stocks that were big, big leaders, not only last year, but for a good part of this year as well.

14:41Ken Shreve:Yeah, it definitely looks a bit weaker if you're just looking at that DRAM memory each year. Yes. Yeah. Pullback has been sharper in this space for sure. Yeah. OK. We're keeping a close watch there. Just a few more ETFs we want to quickly look at before the individual stocks just to give some color to the trading day. Here's a look at the IYT transportation average ETF up 2.8 percent today. Ken, this looks quite strong. Yeah, it was J.B. Hunt last night, J.B.H.T., that got the transports in a good mood. This one held a nice gain all day. Last night they had a good earnings report and a big bottom line and top line beat.

15:28And, you know, the fundamentals in the trucking area has been well documented in recent months. You know, the Journal had a good story about the fundamentals here. Same with the railroads. So the railroads outperformed and we have three reports in the railroad sector next week. So that's going to be interesting to to watch. I'll be reporting on those in my earnings preview column. So we'll be watching reports in the railroad sector. But J.B. Hunt. Yeah. Great, great earnings. And that fueled a great rally for IYT and a lot of a lot of transports this week. So we're going to take a look at KNX in just a little bit.

16:09So IYT, one of the best, better performing ETFs today.

16:13Ken Shreve:Yeah, notable move there. Let's also check out XLV. We've been talking about the strength in health care. And after a little bit of a pullback, now seeing a bounce, Ken, this sector up 2.2 % on the day. Yeah, I think the guys on Swing Trader added this today and thought it was actionable. XLV, you know, clearly the healthcare sector, whether it's biotech or, you know, various industry groups inside the healthcare sector have been outperforming. I thought the insurers were going to take off today. UnitedHealth in the Dow had a very good earnings report. Look at what this stock did. I mean, it was, you know, UnitedHealth was up very nicely in the early going and it was The numbers looked pretty good and the outlook was good and you had Cigna and Humana and all these stocks were moving and just a really ugly day ended up being for a lot of these managed care firms.

17:19Even Humana looked like it was going to break out of this tight period of action in recent days and then this ended up being an ugly day. So anyway, yeah, so these health insurers did not end up having good days at all. But XLV ended up looking okay here. And I think it's still actionable. Did it close? It looks like it closed a little bit off highs. A little bit.

17:47Ken Shreve:Let's check out the closing range while we're here. Still solid, almost 70%. Still in the upper half. But this one, yeah, moved back into a buy zone here. So for health care exposure, XLV looks like a good way to play a basket of health care stocks here. Ended up 2.2 percent and moved back into a buy zone and gapped right above its 10-day moving average here. Yeah. Speaking of, Ken, we'd love your thoughts on the concept of going with ETFs to reduce risk in periods of choppy markets. Seems like that could be one strategy worth considering. If you do want to make new buys, you know, we are more cautious and we have seen that rotation.

18:33Ken Shreve:So, you know, if the individual leadership isn't super clear or traders aren't seeing so much traction in those individual names, perhaps some of these sector and thematic setups might be the way to play for now. Yeah, over the years in the leaderboard model portfolio, we have used them sporadically, you know, at best. I mean, we've typically, you know, gone with individual stocks. But lately, I think, you know, right now we've got three ETFs in the model portfolio right now. You know, we've got XBI in the biotech sector. We've got KRE and we have IYT. In fact, I think we also have XLF. So we've got quite a few ETFs on leaderboard, you know, right now.

19:24Ken Shreve:Maybe the most in a while. And maybe the app, it's absolutely the most in a while. I don't think we've ever had four ETFs at one time in the model portfolio. So it just it really just depends on the on the type of, you know, in the early stages after after a market pullback and we're coming out of a bear market and we get a good, powerful, powerful follow through day like we got earlier this year in in early April. We're not going to be putting, you know, ETFs in the amount of portfolio, especially when the market's giving us a lot of stocks breaking out of bases and and and the market's giving us a lot of setups to work with.

20:02There we'll be using individual stocks and taking advantage of breakouts. But, you know, during trickier times in the market, we won't be afraid to use ETFs. But KRE has been a nice winner for us and XBI has been a nice winner. And in biotech space, when you have that single stock risk and, you know, biotechs can be quite volatile with these FDA, you know, Phase one, phase two, phase three trials, they're particularly helpful in the biotech space. So XBI, test on the 21-day. We trimmed this one back a little bit today with this little break of the 21-day moving average. This used to be a full position, but we've trimmed this back to a half position now, still holding a nice game.

20:55But this is starting to pull back. We're even starting to see some selling in the biotech space now. So even though we've got some individual biotech holdings as well, starting to see, you know, some profit taking in this area as well. But we're all for, you know, ETFs. They make perfect sense in certain types of markets for sure.

21:17Ken Shreve:Okay. Well, with that strength in transportation that you mentioned, let's check out KNX. This is Knight Swift Transportation. Look at that bounce after the orderly pullback. Yeah, I think I'm going to take a look at this one for earnings preview for an option trade, only because the numbers from J.B. Hunt were pretty good. Now, I want to just say right from the start here, the fundamentals at NightSwift, you can see the composite rating here of 50 is not great. But, you know, NightSwift is going to be a little bit of a turnaround story here. You can see the earnings, you know, going forward are really expected to turn around here.

21:59But the technicals here are what really, you know, catch my eye here. First of all, you know, the breakout was very solid. and then the pullback to the 10-week moving average here is really just what you want to see. So I'll start with the technicals here. And, you know, the pullback is very orderly, showing, you know, tight action in, you know, a bit of an unorderly market here. Obviously, the selling in tech is, you know, well-documented. But this is just a normal pullback here. The trucking group is strong. We know leadership is pretty good here. Good earnings from J.B. Hunt, like I said. I think we'll see nice numbers from Knight Swift next week as well.

22:44So we'll take a look at a call option next week. I don't know how actively traded this is in the option market. Sometimes that can be a deal breaker if it's very thinly traded. Sometimes there are big spreads between the bid and the ask, and liquidity can sometimes be an issue. So we'll have to just see what the liquidity is like with Knight Swift in the option market. But it's in a good setup here. So we'll take a look at it. And then in terms of, like I said, Allie, the composite rating is weak. But that's only because of just kind of a bit of an inconsistent track record of recent growth. But in a turnaround case like Knight Swift, I'm willing to forgive that because the growth going forward and the fact that it is a turnaround story, willing to maybe take a shot here, and the fact that it is in a strong industry group.

23:34So good technicals, the fact that it does look like a decent turnaround story, I think this one looks pretty good in a decent group.

23:43Ken Shreve:All right. Well, you make a compelling case there. There you go. Looking forward to reading more about it in the earnings preview column. All right. All right. Elsewhere, we want to take a look at CP, Canadian Pacific, Kansas City, and the transportation rail group, up 2.7 % today and arguably actionable. We don't have, I was going to say, we don't have earnings right around the corner next week like we do with KNX, but it is coming up at the end of the month, it looks like. No, but three railroads reporting next week. Canadian Pacific is not one of them, but Union Pacific. Years reporting. Yeah, Union Pacific, and there's a couple of other U.S.-based railroads reporting as well.

24:29Canadian Pacific merged a couple of years ago with Kansas City Southern, which used to trade under the symbol KSU. So that's why the name is shortened, Canadian Pacific, Kansas City, Southern is the full company name. But anyway, the weekly chart here was interesting because I'm still looking at this stock in a buy zone. If we just go to the weekly chart for CP, I think this one passed an alternate entry today. It's a little tougher to see. Why don't we go back to the daily chart here? because this stock initially broke out over a handle buy point of 88. And then it came down and tested its 50-day moving average.

25:19And it bounced off the 50-day moving average. And to me, I look at this as breaking out over an alternate entry of 9152 here. So I think 9152 is an actionable alternate pivot. So 9152, I think you can use as an alternate buy point here. So at 9291, I don't think the stock is very extended here. So, you know, after a test of the 50-day line, I think 9152, you can use a 5 % buy zone based off of 9152. So if you're looking for a railroad, you can maybe think about a small position here. You do have a lot of railroads that broke out to new highs today. Some have already broken out and are probably a little bit extended.