Nasdaq, S&P 500 Fade After Strong Start; Meta, Ouster, Shark Ninja In Focus

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0:40Ken Shreve:good afternoon everyone and welcome to stock market today for thursday july 31st it's alissa quorum here and the nasdaq and s &p 500 faded today reversing lower after a strong start despite some positive earnings reports we've got a lot to go over today and joining me now to break down all the action is my colleague, Ken Shreve. Ken, what's going on? Hey, we had a nice, nice open for the NASDAQ early in the session because investors cheered these nice earnings reports from MetaPlatforms and Microsoft. But boy, did those gains fade pretty badly. Let's talk three stocks. Let's talk about MetaPlatforms, M-E-T-A, nice earnings report and a bullish gap up.

1:24And then a couple of names we haven't talked about in a little while, Ouster, O-U-S-T. This is a maker of LiDAR sensors for autonomous driving. And then also Shark Ninja, consumer products firm. You see a lot of their stuff at Costco. And I have a toaster oven myself from Shark Ninja.

1:44Ken Shreve:Yeah, they've got a lot of good stuff we'll check out. Those charts. We'll also check in on Amazon, Apple, and others with their earnings out after the closing bell. But first, let's take a closer look at the major indexes because, Ken, we need to give some added context here for the overall market and conditions that we are currently seeing. We've been in this power trend. So taking a step back, we've been in this powerful uptrend of a market. We did see a downside reversal in Tuesday's session, but further weakness didn't really result from that. Today, a little bit more extreme in terms of the trading range and the downside reversal off highs.

2:27Ken Shreve:Maybe now is the time we finally get some sort of pullback. But boy, has it been a very strong market here, Ken. Yeah, I think today's downside reversal, I think, raises the likelihood of a test of the 21-day line here, which is the green line that you're seeing on the NASDAQ composite chart. We've seen this has been kind of a tendency. It's been happening over the past 10, 12 trading sessions. We've had four times where the index has opened strongly and then given back gains into the close. It happened there, there, there. Yeah, you got it. You got it right there. So this is telling me that the markets could be ready to come in here.

3:12We're not dealing with a really, really heavy distribution day count, but it looks like we're going to get a distribution day on the S &P 500. So, yeah, this is a market that is just starting to look a little frothy to me as well. You know, the amount of stocks that we're seeing up 15, 20, 25, 30 percent in one day. We had the Figma IPO today. And listen, Figma is a great company with pretty outstanding revenue growth. But it was going to price in the high 20s. They raised the range to the low 30s at price last night at 33. and it closed at$1.1759. So a pretty incredible debut, but maybe some frothiness in this name as well.

4:00Ken Shreve:Yeah, and then back to the NASDAQ, a couple of other technical things to point out here. We've been talking about getting short-term extended, right? So do you even just have a little mini trend line over the last couple of weeks of action? I think if we would have closed at the highs today, You really would have started to see, like you said, that acceleration and extension on the index level. So could today be the beginning of a digestion over a historically seasonally weak period? Perhaps. But it could also be the pause that refreshes, Ken, in this strong market uptrend. I mean, we've been just kind of on leaderboard following the market.

4:45And if we have individual stocks that are giving us sell signals, we're trimming or either taking profits. So I think that's a reasonable strategy for a typical growth investor to pursue right now. Again, this was a pretty violent downside reversal today. Yes, support is still holding at the 10-day moving average. And, you know, we did have a lot of really solid earnings reports today. And it's been a great earnings season. Didn't talk about the inflation data that we had before the open today. Really wasn't a market mover at the beginning at all. I remember the NASDAQ was up more than 1 % early in the session.

5:30You know, the core year-over-year PCE index was just a little bit hotter than expected at 2.8%. The market was expecting 2.7%. But I mentioned on yesterday's show that there are some economists that think this PCE, you know, could start creeping towards 3 percent. And it started to do that a little bit today in the latest monthly reading. You know, the Fed obviously still a little bit concerned. I think people were hoping that the Fed would be maybe a little dovish after yesterday's meeting. But I think the perception was that Fed Chairman Powell is really not in a rush to cut rates. And again, as discussed yesterday, that September meeting, I think the odds for a rate cut are down around 40, 45 percent at this point.

6:18They were about 65 percent. Yeah.

6:22Ken Shreve:So it seems like in terms of how the market reaction continues to play out here with all of the earnings, Fed, economic news, we'll just have to see what kind of digestion we potentially get from here. But the support levels that you pointed out, Ken, I think are critical to the power trend and investors potentially needing to take action in their portfolios. But the silver lining here is that if we do get a pause, I feel like there are so many stocks, to your point that we've been talking about, that have been hard to get positioned in because they've made such big moves. So if we can get some new, fresh setups, that may not be a bad thing.

7:08Exactly. Exactly. And I like that little channel line that you drew earlier. I mean, again, just looking at the market technicals here, this is bumping right up against them. It's a short channel line, but it is connecting three separate highs here. So I think it's telling that NASDAQ, if it starts to break out over this channel line as it tried to do today, sometimes that can be a sign, again, that the market could be ready to take a breather here. So if it does, I think it certainly brings the possibility of a test of the 21-day line into play. That has been a support level several times during this uptrend.

7:51Yeah, so we will see. But, you know, we're also going to just continue to respect a lot of good earnings reports coming out. There were a lot of good ones today, some bad ones as well. But in the end, S &P 500 here is a little bit below the 10-day moving average. So violent reversal for this index as well.

8:14Ken Shreve:Yeah, the S &P finishing down about four-tenths of a percent while the NASDAQ was fractionally lower on the day. Meanwhile, the Dow down about three-quarters of a percent, closing below the 21-day, Ken. Yeah, it looks like we're going to get a distribution day on the S &P 500. It looks like we did get higher volume on both exchanges, so we'll probably add a distribution day to the S &P 500's count. Now, the Dow Jones Industrial Average, not as relevant an index compared to the NASDAQ composite and S &P 500, which we like to follow the most. But here, you have a key test coming up here right at that 44 ,000 level, a break below that 21-day line.

8:57And so I think the line in the sand right now for the Dow is 40, 44 ,000. That's a very real round number. It could try to hold support there. If support gives way, then, hey, maybe there's going to be a trip down to the 50-day line. But Dow looks a little more vulnerable at this point than the NASDAQ and the S &P 500.

9:18Ken Shreve:Same with the Russell 2000. Here's IWM tracking the Russell 2000 down 1 % on the day, also sliding below the 21-day line. It was interesting, Ali, in pre-market trading today, we saw the NASDAQ composite outperforming, and we saw the S &P 500 not far behind, up about nine-tenths of a percent. The Dow was lagging badly, and small caps were actually down before the opening bell when the NASDAQ was up 1.3 % or whatever it was. So the Dow and Russell 2000 have really been kind of moving in lockstep, which is interesting. Blue chip, small caps lagging, and NASDAQ S &P 500 outperforming. So the Russell really looks very similar to the Dow at this point, below the 21-day line.

10:06And it looks like it's coming up to a key test here, that 200-day and 50-day almost converged.

10:12Ken Shreve:Yes. Okay. One more ETF we want to check in on before we check out some stocks, and that is SMH, the chip sector ETF, which has been outperforming very nicely since those April lows. Today, underperforming in a notable way, off by 2.5%, Ken. Yeah, underperformed in a notable way, but held support here again at the 21-day line. So this was weighed down by an earnings sell-off for ARM, A-R-M. That one had a pretty tough day gap below the 50-day moving average. And then it was also LAM Research, LRCX, which had a much better close than ARM did. But LAM Research down more than 4%, but held support at the 50-day line here.

11:03So bad day for chip stocks overall. But, you know, again, technical weakness in SMH, not yet. It's still holding support right where it should.

11:11Ken Shreve:It exactly is. Okay, we'll have to see what Friday's session brings. We know by the end of the week how the charts close for the week, how these stocks close for the week is going to be key. So we've got some tests. Will we pass or will we start to see some deterioration? Only time will tell. I know. We do have to just also – we got this big jobs report tomorrow morning too at 8.30 a.m. Eastern time. And that is we'll see how the market reacts to it. I honestly don't know if the market is going to like a strong jobs report, if it's going to like a weak jobs report. Hard to figure that out with all the volatility.

11:51But the market will react probably one way or the other. So another big one more big economic report to digest before the end of the week.

12:00Ken Shreve:Yes, that could be very key. OK, let's take a look at one key. earn savvy investors understand consistent growth is built on scale resilience and trust for more than 60 years medline has proven this driven by an unrelenting commitment to their customers today medline is proudly nasdaq listed and is the largest provider of medical surgical products and supply chain solutions serving all points of care with a focus on what health care needs next medline strives to make health care run better see how medline is woven throughout health care and learn Mover from today's session, and that is meta platforms up 11.3 % on the day, gapping up to a high.

12:47Ken Shreve:An impressive report here, Ken, some acceleration on both the top and bottom lines, a favorable outlook as well. Also, I believe they raised their capital expenditure outlook here. Full disclosure, I did take a little position on this strength. What are you seeing with the earnings reaction here, Ken? Well, there were a lot of stocks that gapped up that weren't able to hold these gains. But I think Meta was pretty... Yeah, Microsoft was a good example. But I think Meta was pretty impressive today, finishing with an 11 % gain. You can see the stock just barely edging lower in the after hours. But yeah, this was a great earnings report.

13:31You mentioned that acceleration in revenue. Anytime you're a top-rated growth stock that is selling at maybe a premium multiple, and Meta isn't crazy at 25 times trailing earnings and 28 times forward, but if you're producing accelerating revenue growth, that's normally a good sign, and I think the market rewarded Meta for that 22 % increase in revenue. From a technical perspective, it's a beautiful breakout. This is a classic handle that formed after the stock pulled back to its 10-week moving average. So I think if you missed, for those that didn't buy Meta today and are still wanting to own the stock, good one to keep on the watch list because we always talk about when a stock gaps up, it can hold those gains, move sideways, trade tightly.

14:23You know, but the more that Meta can just kind of hold these gains and just show bullish, tight price action, that could usher in a new breakout to new highs. So excellent earnings report. Mark Zuckerberg obviously is sharp. The really positive response to earnings three months ago when they reported. So they've been knocking the cover off the ball for quite a few quarters in a row now. So I think it's a good one to watch. I don't own it personally, but I'll continue to watch and see how it trades from here. I suspect, unless the market really starts to come in, I suspect this is probably going to hold pretty well.

15:06Ken Shreve:Yeah, that's what we'll want to watch for. Okay, next on our list, OUST. In the auto trucking equipment group, you mentioned the LiDAR technology. Last quarter, we saw a nice move on earnings. Let's see what the percent gain was that day. Up 23 % last quarter. This was an early May report. We have the company's next earnings report coming up in about a week. Talk us through the setup. Well, you know, if you go to the weekly chart here, first of all, you know, fundamentals are really outstanding at Alistair. It's not a big company. It's a small cap stock. You can see the market cap just over$1.25 billion.

15:49But I do like the revenue growth here and like the fact that this stock is finally coming down and coming close to a test of its 10-week moving average. So we'll keep an eye out on this one for a possible option trade next week. It's a$20,$23 stock, so you're not going to be talking about huge premiums that you're going to pay. But a company that, again, the LiDAR sensors that create sort of like these 3D images really help autonomous cars perform quite well. But they're not only in a lot of other commercial markets besides autonomous driving and robotics as well. So we'll see if this, you know, it's been a big, big move for the stock after that breakout from a cup base.

16:39But finally looks now like it could be ready to come down and touch that 10-week moving average. And if it's a strong stock and the market can hold itself together, this one could find support. it. So probably, again, take a look at a call option trade next week because it's technically still holding quite well.

16:57Ken Shreve:Great. Yeah. If you want some earnings option ideas, Ken, you do a great job with the earnings preview column. A quick little tease about, you know, what that entails each week. Yeah. Well, I mean, like next week, there's, you know, hundreds of companies reporting earnings. We're really, really in the thick of earnings season. I go through all these dozens and dozens and dozens of companies and try to find the ones that are setting up the most bullishly. And then we just kind of go through and we narrow down a really big earnings landscape to just a few stocks that we think are acting well. So we'll talk about Ouster.

17:36Probably mention Palantir, obviously, reporting next week. AMD. So these are names that will get some attention in the earnings preview that I'm going to be finishing up soon. But Ouster looks good here. Not a widely known name, but it's got the earnings. It's got the revenue and still showing a lot of strength in this market.

17:58Ken Shreve:Yes. Okay, let's also go to Shark Ninja. Right at that 120 level, that's a high area for the stock that it peaked back in February. It's right there again with a week before earnings. Yes. Hard not to find stocks that are set to report earnings here, but Shark Ninja is another interesting name because it's near the top of this base, getting some early resistance near the 120 level, but this looks to me like a little handle could be forming here. So another one that could make sense as a call option trade. I think the handle is in the process of forming right now. It hasn't been a lot of volume as the stock has come in over the past four days.

18:45Revenue growth did slow quite a bit in the first quarter numbers when they reported earnings. But the stock still gapped up and growth has started to slow. But still a company with pretty good fund ownership here. And still looks like it could be in the early stages of a move here. It hasn't been trading for all that long. So the fact that it's up near this 120-23 level and backing off highs could be setting the stage for more upside. We'll keep an eye on this earnings report next week as well.

19:20Ken Shreve:Okay. Let's check out some of the earnings reactions out after the closing bell. Some big ones. So let's go to Amazon. It looks like shares are down a little less than 4%. The early reaction here, I believe they did have a profit beat, but it's the outlook. it seems like, Ken, that investors are focusing on right now. And as a reminder, especially for those who are our Spotify listeners, we'll paint the picture for the chart for you here. This is a stock that has had a really nice move since the April lows. So it's been rallying into this report, but what do you make of the reaction, Ken? Well, this has actually been one thing I've been really, really impressed about because I was a little bit concerned as we headed into earnings.

20:05Well, what about this huge rally that the market has made? And what about these stocks that have been rallying over the past three to four weeks, you know, pricing in a lot of good news ahead of their earnings reports? And what have we seen? We've seen extended stocks get even more extended. They've gone higher even after a strong pre-earnings move. So I'm not surprised to see some stocks sell the news here. I haven't obviously had a chance to look at Amazon's report yet, But, you know, it looks like this is, you know, down three and a half percent. But, you know, the explosive move it's made over that 218.40 entry, it's probably, you know, ready to pause and digest gains here.

20:46So we'll see if it can hold the 10 day line possible. We could see a test of the 21 day line. But even if it does that, you know, the uptrend would still be intact here. So not surprising to see Amazon sell the news, but it's still early and we'll see what tomorrow brings.

21:02Ken Shreve:Yes. Okay, a couple more to get your thoughts on. Let's go to Reddit. This one actually was moving in the regular session today, which was a 7.5 % gain. And look at this, Ken. It's now up another 12 % after hours. Yep, yep. So this is, again, just an explosive earnings mover. And, you know, the top line growth has been there for a while with Reddit. You see in the first quarter, the revenues were up 61%, expected to rise 51%. I assume there's going to be a pretty nice revenue beat there. But, you know, a stock that was still kind of deep inside of a base here, this was quite a pullback when Reddit, you know, corrected from$2.30 down to below or right around$80 a share.

21:50So I think that's a 60%, 55%, 60 % plus correction. But rallied back and looks like it's going to be able to break out from deep inside this base. But it looks like fundamentals are still very much intact here, judging by the stock's aftermarket reaction here.

22:09Ken Shreve:Yeah, so this will definitely be one that we cover on IBD Live in the morning as well. Now let's go to KLAC. You mentioned some other CHIP reports that came out today, including LAM Research. So in the same group, KLA moving down in sympathy during the regular session by about 5%. Earnings out tonight. So far, shares down, I'm seeing about 2%. 2%. And, yeah, you can see KLA did make a stand at the 50-day moving average today, dragged down by the sell-off for LRCX today. But, yeah, so it seems like a fairly muted response so far to earnings. Great acceleration in earnings and revenue here, too.

22:55So we'll see if that 50-day test pans out. Stock's under just a little bit of pressure, though, it looks like. Okay.

23:02Ken Shreve:And Cloudflare, ticker NET, earnings are out. Here's another one, Ken, more than doubling off of its lows. It did pause for a bit a couple weeks ago, recently punched above the 200 price level. And now I'm seeing shares up 6.5 % after the bell. Yeah, I've been getting a lot of support consistently at the 21-day line. And, you know, it's just kind of biding time, consolidating below the 200 level. So, again, not surprising. The top-line growth has been there for Cloudflare for some time now. So stock up nicely in the aftermarket. Listen, we had two great earnings reports today from Meta and Microsoft.