Small Caps Hit, Indexes Drop As Oil, Yields Rise: META, QLYS, KNSA In Focus

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0:32Ken Shreve:Good afternoon, everyone, and welcome to Stock Market Today for Wednesday, September 9th. That's Alyssa Coram along with Ken Shreve here. And we've got a look at what went down in the market today. As always, some notable movers to break down. What do you have for us today, Ken? Yeah, same old story, Allie. Rising oil prices, rising bond yields, not good news for small caps. That was a tough index under the most pressure today, but losses across the board. But three stocks to watch today. Good day for Meta Platforms. A nice percentage gain for that magnificent seven stocks. We'll talk about Meta.

1:10Qualys in the security software group, QLYS, coming down to its 10-week moving average. Testing support. and also Biotech Canixa, K-N-S-A, looking pretty good as it forms a base here, K-N-S-A.

1:27Ken Shreve:Okay, sounds like a plan, Ken. We'll get to those stocks, but first a closer look at the major indexes. So I'm gonna start sharing my screen here. The NASDAQ composite down six-tenths of a percent on the day, closing back below the 21-day line. That's a shorter-term moving average. we as active investors like looking at the S &P 500 reached that level yesterday and further deterioration below that today with a decline of a half a percent coming back towards that 50-day line then the Dow blue chips down eight-tenths of a percent today losing more ground underneath that key 50-day moving average and you mentioned it Ken a tough day for small cap so here's the the IWM ETF down 1.4 % on the day.

2:18Ken Shreve:Also at the top of the show, RSP worth mentioning a shout out, the equal weighted S &P 500 ETF. You and I talked about the character change with the first close below the 50 day in quite a while for RSP. This is a signal of market breadth out there. So more weakness today with RSP down 1%. And the catalyst, you said, Same story as of late, rising oil prices. Here's USO up another 2.7%. Can you believe it, Ken? We are almost back at highs here from a couple months ago. Yeah, it's pretty incredible to see that rise in the 10-year yield. Scott Besant and the Treasury is going to be buying a bunch of bonds again tomorrow.

3:06I believe it's$6 billion worth of bonds tomorrow. I believe tomorrow afternoon, that's going to be part of this bond-buying tranche, the second round of bond-buying that the Treasury is going to be doing. Anyway, that caused the interest rates to rise again today ahead of this Fed meeting next week. And chances of an interest rate hike next week still holding right around 60 percent. So the market is leaning towards a quarter point rate hike by the Fed next week. And we've got a key report on inflation coming later this week on Friday, Consumer Price Index. So we'll see what that inflation report has to say.

3:53So inflation, interest rates definitely on the markets mind here. And another tough day for the market. Obviously, small caps took the most heat today. The losses were fairly mild in the rest of the market here. But that S &P 500, mild decline here, still holding above those recent lows. But that test of the 50-day moving average, really not that far away for the S &P 500 here. So we'll see fairly mild decline for the rest of the market. Some selling in the Dow today as well. But yeah, most of the selling in the Dow and small caps today. But yeah, the Dow yesterday, sort of a mild drop below that 50-day.

4:48But definitely the selling picked up the pace today in the blue chip index.

4:53Ken Shreve:It did. Okay, so with a weakening picture for blue chips and small caps and the breadth that we look at through the RSP and then the choppiness with the NASDAQ and the S &P 500, where does that leave investors, Ken, from a posture standpoint? How should they be thinking about portfolio exposure here, making new buys? Because we do have a lot of shifting dynamics underneath the surface. Well, you know, I think it's, I called it, you know, it's kind of a hard, kind of getting to be more of a hard penny market here, you know, where I think you should, if you're going to be, you know, we're still in an uptrend here.

5:38So, you know, the NASDAQ and the S &P 500 are still, you know, holding above support levels here, but it is getting, you know, a little more challenging. I think the market tide, even though it's still flowing positive, we do have a pretty significant headwind here with rising oil prices and rising interest rates. So that market tide is maybe starting to flow a little negative and that headwind is getting a little more intense into our face. So I think if you're going to be buying stocks, you want to maybe start with maybe smaller positions to start with so that you're not taking on too much exposure to start with.

6:20So if you're wrong, you're not taking too much risk on to start too early. So smaller position sizes, I think, is a good idea at this stage of the game. So I think that's a good place to start. And yeah, I think you just have to be really, really, really, really picky. I think in the S &P 500, you definitely had some good outperformance among the hospital stocks today. So in terms of the leadership, you know, in the S &P 500, I saw some good outperformance in a name like HCA. You know, hospital stocks had really good outperformance today, but, you know, outperforming underneath its, you know, 200-day moving average.

7:08So hospital stocks were, you know, the best performing industry group in our database. UHS, another great performer in the S &P 500 today. But again, sort of out of position here. You had a couple of chip stocks in the NASDAQ 100 today, MRVL, that performed well today. SMH outperformed the NASDAQ today, was basically flat, unchanged. But, you know, chip stocks are still just kind of a tough area to be investing in right now. So the market is just a little bit tricky here. So I think if you're going to be buying stocks, I mean, there are still some opportunities, but they're just pickings are generally slim right now.

8:00So you've got to be very, very discerning and just small to start, I think, is a good strategy here. Yeah.

8:09Ken Shreve:And then in terms of market timing signals that we use at IBD, I think that that 50-day moving average is going to be very key here for the NASDAQ composite and the S &P 500. If we move below that on one of these major indexes, and we're already starting to see that weakness with the Russell, with the Dow, and with the RSP, we need to be careful of seeing that deterioration carry over to the NASDAQ and the S &P 500. So I think investors should be cautious here. However, if we are still using a late 1999 precedent, if that type of market from a technical perspective is still in the cards, then I think we do need to be on the lookout or aware of the potential scenario where buying pullbacks within this chop might be the way to go here, Ken.

9:08Ken Shreve:And of course, traders have to be careful about buying just outright weakness versus a pullback within an uptrend because you don't want to start trying to buy into something that could really break wide open. So that's the risk of buying pullbacks. So you have to take that into consideration. Yeah, the other concern here also is that we're in kind of a seasonally difficult month here, the month of September. We're in the early stages of September here, September 9th. The other thing that's a concern here are just these equal-weighted ETFs. Yes, the indexes are still holding above support levels, but you have the QQQE and RSP are kind of prematurely kind of below their support levels here.

9:59So breadth in the market is weakening before the indexes are weakening. So they're kind of breaking support here. So breadth is kind of not doing well before the indexes are breaking down. So it's not necessarily a total deal breaker here, but breadth in the market today was 3 to 1 negative, which was not pretty bad on a day where the losses on the NASDAQ and the S &P 500 were not entirely bad. So breadth at 3 to 1 negative today was fairly poor. To see RSP and QQE already below their 50-day lines, that's a bit of a concern to me. Again, not making me just kind of flee for the exits here, but certainly has me on the defensive a little more here.

10:52So, again, not terrible declines today for the NASDAQ and the S &P 500. Volume was also lighter, it looks like. Close call on the NYSE today. It looks like right now it's about 1 % lower than what we saw yesterday, about 4 % lower on the NASDAQ. So it looks like we'll avoid a distribution day. But still, we're starting to see distribution days on the NASDAQ start to pick up the pace a little bit. So the market's starting to look a little vulnerable here, but nothing too alarming yet. And again, in terms of the leaderboard model portfolio that Dave and I manage here, we're still in that 60 % to 80 % invested percentage band, even a little bit above that, and still seeing some decent action in the growth stocks that we're holding.

11:48So in terms of the action and leading growth stocks, overall, things are still looking okay. Just, you know, monitoring the price and volume in the NASDAQ and the S &P 500 here. And again, just paying attention to the RSP and QQQE and, you know, just paying attention to some yellow flags out there.

12:08Ken Shreve:Yeah. And I think the individual leadership too, right? We've seen a lot of sector rotation, but focusing us on the stocks with that continued relative strength, also something very key that we're watching here at IABD because again, not to harp too much on the precedents, but we do love looking at our historical charts here at IABD. But in that choppy period in the late 1990s, you did underneath the surface have a lot of really stellar winners. So perhaps it's just about selective stock picking, like you said, being aware of your position size. There are stocks that are working out there, but just need to be aware of the risk in these types of conditions.

12:52Ken Shreve:Let's go ahead and take a look at meta. A big move here today, Ken, on some news, up over 6.5%. Tell us more. Yeah, yeah. There was some news. There was some weakness in the Magnificent Seven today. There was not great days for Amazon and Google today. There were some weakness, some laggard stocks today. But Meta, great day for Meta. The news came out late yesterday that they announced basically a personal AI assistant that they are calling Muse. This is a personal AI assistant that can send email. It can buy movie tickets. It can do shopping and all sorts of things. So it's kind of a new AI assistant that was taken very positively by the market.

13:47So a great percentage gained by Meta platforms today. Again, I think the journal had a story about this yesterday afternoon, but the stock moved today on the news. And Meta, of course, a company that has had a lot of headlines around it lately. They just obviously settled a big court case for many billions of dollars. And they've been certainly spending a lot of money lately on their data center and AI infrastructure. And so this is, you know, good news for the company, this personal AI assistant. There's going to be a kind of a free model and also a premium version for this personal AI assistant.

14:32So, yeah, nice move off lows for Meta. Nice gap above the 200-day moving average for the stock today. So a nice little uptrend starting for Meta platforms. And again, mostly mild declines for most of the magnificent seven today. Tough days for Amazon and Google, but a great day for Meta here. And yeah, we'll see if maybe get some sideways movement here. I don't know that I'd chase the stock after a move like today, but now that it's back above all of its moving averages, watch for some sideways movement and maybe get a little base here and another opportunity to buy it.

15:11Ken Shreve:Yeah, an interesting turn here. Can it get out of this downtrend? From a relative strength perspective, it is making some progress above its moving averages through that view as well. So, you know, what are your thoughts, Ken, on some of these mega cap stocks trying to pick some buy points around those longer term moving averages? I don't think Meta could quite be considered a long term leader through the specific criteria that we look at for that from a relative strength perspective as well as an earning stability perspective. But it does have these nice periods where it can outperform, Ken. Yeah, well, I think a name like Betta, again, the fact that it has moved so nicely off lows and that it is back above its 200-day line, what you want to do now is just when you see an explosive move like this, is it able to hold up here?

16:20and is the market comfortable where it's at after such a strong move off lows. And if it can show strength and support and trade tightly near highs and just kind of move sideways above the 200-day moving average and not be volatile and whip back and forth, basically just kind of trade sideways up here, I think it could very easily give an alternate entry. So I think the strong move today is task number one. And let's see if it just moves sideways here and maybe form a flat little base. And I think it could easily be viable again. But we just want to see it show some strength after the move today.

17:11See if it shows price support. Mm-hmm.

17:17Ken Shreve:Okay, next on our list, let's go over to Qualys in the cybersecurity software group, sitting right at its 10-week moving average. And we've seen a lot of cybersecurity stocks perform well in recent months, Ken. Qualys, one of them. So, a pullback buying opportunity brewing here. What's your take? Well, this is, again, how you want to see a stock generally act after, you know, this was a stock that gapped up after earnings. You can see that big weekly move after earnings. And then this was sort of a gentle pullback after earnings to the 10-week moving average. And there's generally a pullback in light volume.

18:03And it is now testing that red line, which is the 10-week moving average on the weekly chart. That's the 10-week moving average. And on the daily chart, that line is the 50-day moving average. So this is just a test of support here. And it's finding support right where you would expect a strong performing stock like Qualys to find support. So I like to see a stock bounce and find support. So this is a test going on right now. So if Qualys starts to firm up and starts making progress off the 10-week line or even on the daily chart, if it starts making progress off its 50-day moving average, that would tell me that the buyers are coming in and offering support.

18:51So I'm just going to watch and see if Qualys can start finding support here. But so far, it looks like it's making a good effort to find support here. But let's see if it can start rallying and let's see if the NASDAQ is still in good shape here and is ready to start rallying itself. So, so far, it's a good test of support. Looks like a healthy pullback, mostly in light volume here. So I think it's still on an uptrend here and still has a chance of working. And I still look at this one as one of the better performing names in the security software group. So Qualys is still a name to watch here with a good relative strength line, too.

19:38Ken Shreve:Absolutely. Let's go to Canixa Pharma, KNSA. Some nice tight action in this new base here, Ken, sitting right at highs. Look at that relative strength line. It has a blue dot, which means the RS line is at a new high while it's building a base or as it's breaking out. So in this case, as it's building a base under that 80 level. and outperformance has been seen in this stock going back more than a year, about 18 months, Ken. This has been a fantastic market outperformer setting up another potential buying opportunity for traders with this really nice tight action. Yes, profitable. We recently divided our biotech sector into three different subgroups here.

20:29So, Conixa is in the profitable biotech group because it's making money. And another biotech that soared several weeks ago after reporting earnings, and this was like a 30 % mover on earnings because they raised their full-year revenue outlook significantly. And their main drug is called Arcalist. And this is not a drug that they developed themselves. This was a drug that was developed by Regeneron, R-E-G-N, as a mega cap biotech. But Regeneron developed Arcalist, and then they licensed it to Conixa all the way back in 2017, so many, many years ago. Arcalist is a drug that treats a cardiovascular inflammatory disease, but they've been treating this disease for a long time.

21:27and it has turned into quite a moneymaker for him. And this drug is being looked at for other indications and it's in other trials right now. Nice upside reversal yesterday off of the 21-day line. The stock got kind of pulled down late with the broad market. It was trying to make a move above 80 earlier in the session. But, you know, I just like the way that this pullback kind of stopped at the 21-day moving average. Again, that 21-day line for really strong performing stocks like Conixa in the biotech space can be a nice support level here. So this is a really nice-looking base setting up at the 21-day line.

22:10And, again, it's holding gains, really showing strength and support after the breakout. And that blue dot on the relative strength line is just showing you how strong the stock is with the relative strength line in new high ground, even though the stock is still just off highs. So this is, you know, still seeing a lot of strength, Allie, in the biotech group. And, you know, K 'Nixa is, you know, one of the quality leaders here. So setting up another base here and look at the fundamentals along the bottom, the top line and the bottom line growth for, gosh, how many quarters in a row. So, you know, really, really, really strong company here with, you know, outstanding fund sponsorship.

22:56Got all the qualities you like to see here.

22:59Ken Shreve:Yeah, a compelling one to watch. Thank you, Ken. You got it. We appreciate it. And thanks to everyone for tuning in. And that's it from us for today. But we have our weekly Investing with IBD podcast hosted by Justin Nielsen starting at 5 p.m. Eastern today with guest Joe Fami, a fan favorite. So make sure to tune in to that live at 5 on our YouTube channel or you can listen or watch wherever you get your podcasts. And then we'll see you in the morning on IBD Live. Rachel is hosting the Thursday crew. So we will see you there. investors.com slash IEBD live for all the details of our daily morning live stream starting 10 minutes before the opening bell.

23:42Ken Shreve:And then we'll see you also right back here tomorrow after the close.

24:02Ken Shreve:this show is for informational and educational purposes only and nothing should be construed as a recommendation to buy hold or sell any securities any securities and investment strategies discussed may not be suitable for all investors make sure to consider consulting with your financial advisor before making investment decisions.