Small Caps Lead A Broad Pre-Christmas Rally; First Solar, Incyte, Evercore In Focus

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0:16David Saito-Chung:Good afternoon, everyone, and welcome to Stock Market Today for Monday, December 22nd. It's Alexis Garcia here. And the major indexes posted gains on Monday, following up a little nice bullish session on Friday, setting sights for a potential Santa Claus rally to round out 2025. And here with me to help break down everything you need to know about today's market action is IBD Deputy Markets Editor David Saito Chung. So, Hat Man, you're looking very festive today. And I think tech and small caps were also maybe feeling in the holiday spirits today as well. You read my mind. You got the clues from all the decorations, including a bow on that monitor behind me.

1:02David Saito-Chung:I love the attention to detail, you know. Yes, I appreciate that. And those of you who watch IB Live, you know I wore this little silly Christmas bangle here. But happy to be on the show today because we have a lot of interesting market action, bullish all around on Monday. And I've got three interesting stocks to look at. They include FSLR for solar. We're also going to take a look at Insight in the biotech space. That ticker is INCY. And then top it off with a new leaderboard stock in the investment banking world. And that is Evercore, EVR. Nice variety of names and I think reflects some of the broader participation in the market today, Dave.

1:49David Saito-Chung:And let's just go ahead and check in on the major indexes. The S &P 500 finishing the day up six tenths of a percent. The Dow up about half a percent. The NASDAQ also up about half a percent. And small caps leading the way up 1.1 percent. So let me go ahead and get my charts going here, Dave. But, you know, we had a really strong session Friday. We're in a holiday week here, Dave. I'm going to click on over to SPY. That's the SPYDER 500 ETF Trust just to kind of track S &P 500. Again, this one up today. But give me your thoughts on the market action because, again, we're not expecting a lot of volume this week with the holidays.

2:32David Saito-Chung:But how are you approaching things and what's your take on the market? You know, today was really good despite that recent slide we saw that started the week before and then ended with that big cut through the 50-day moving average. And I believe it was that day where the IBD outlook for stocks got reduced from a maximum exposure level to growth stocks at 80 percent to 100 percent down to 60 percent, 80 percent, which means that you could have as much as 40 percent of the part of your portfolio that's devoted to growth stocks in cash. So this is a very pleasant reversal back near highs. And even your chart there, Lexi, shows some kind of base forming within the indexes.

3:22We don't really look for breakouts in the major equity indexes because we're looking for follow throughs at the end of a correction. And overall, it's been a really strong uptrend since that April 22nd follow through day. Nonetheless, you're right, volume is probably going to be muted. So we're going to probably focus more on the price action. I just like the fact, too, that today you can see on that chart, you have a gap between Friday's high and today's low. And that sort of air pocket there implies that demand was pretty strong today. Yeah.

4:01David Saito-Chung:And let's take a look at RSP because we talked about today just the broad participation in the market. this up about seven-tenths of a percent. And again, we're ending off the end of the year. It's been a bumpy ride at times, but a lot of the indexes are really at or near highs as we head into the final couple of weeks here, Dave. So talk to me about market participation and what you've been seeing. Yeah, great questions. I'm glad you want to look at RSP here, Lexi. First off, let's don't really pay too much attention to that 60 relative strength rating. We're using relative strength ratings to find great stocks, not necessarily gauge the strength or weakness of an index.

4:45But what is interesting here is that you have, first of all, the equal weighted version of S &P 500 trading once again near all time highs that that occurred less than two weeks ago. And then if you were to draw a line going back to late September where we have that marked high of 192.30 exactly, we're now above that. And so could that 192, 193 level be a floor of support? In other words, if it pulls back to that level, will institutions sense that's a good time to be adding positions? And if so, then that would keep the technical outlook really positive. So here again, we're focused more on whether RSP and the other indexes are going to newer highs.

5:35Are they finding support where there was former resistance? And then comparing the future down days in terms of the price action with this current advance.

5:48David Saito-Chung:Speaking of other indexes, let's take a look at the NASDAQ, Dave. this one having a good day up about half a percent, getting above some of these short-term averages here. So thoughts here. Yeah, I don't want to dwell too much on this one other than it's been now two months, right, since the Nasdaq hit an all-time high. So for those of you who have been trying to buy tech stocks, AI stocks, it's probably been rougher sledding, right? And And you see that in the fluctuations of the NASDAQ. It's been range-bound. Easy to say. Even if you're new to charts, you can say, wow, it hasn't made any progress for almost three months.

6:31Very little progress. We're not too far off the high, which is good. But we certainly had a bumpy October to November. So for now, you can see that 2000 price swing over the past several months. And it's very possible we could stay in that for a while.

6:52David Saito-Chung:And let's just quickly check in on the Dow as well, Dave. This one, again, above short-term moving averages and not too far off these highs. Yeah, indeed. I really like to watch the Dow too because there are stocks like Caterpillar and JP Morgan. Those have been really fantastic stocks this year. It goes to show how rotation can occur any year. And who would have thought that Caterpillar, first off, would be a major player in energy production going to future. You know, we've reported at IBD that they're competing with the likes of GE Vernova. That's a stock I actually do own. and other producers of gas-powered turbines for electricity.

7:38And then when you go back to JPM, JPM is benefiting also from lower interest rates and a treasury yield curve that is favoring the lenders because they can borrow cheap and then lend for car loans, business loans, mortgages at a higher rate and pocket that net interest margin. On top of that, lower interest rates, which we've seen this year, at least at the short end of the curve, benefit these banks because then there's more activity in terms of stock buybacks, equity offerings, debt acquisitions, and so forth. So JP Morgan has really been a powerful stock, as has GS. Those are three stocks that have finished the day up four points or more, and there were three others.

8:28AXP, which to me is a great bellwether for the consumer in America and also for travel. Plus, we also have Salesforce. CRM has not been as good a tech stock as others. But Salesforce is, interestingly, Lexi, becoming more interesting, right? Because it's trading above that 200-day line. Yeah, exactly. So I think that the Dow is not performing as well as S &P 500 this year. But we can see going to that daily chart, it's gotten support where it needed. And that was around that red line, the 50-day moving average. And since then, it's actually held above it pretty nicely.

9:11David Saito-Chung:And let's take a look at the triple Qs. That's QQQ. That's up about three-tenths of a percent today, Dave. So what are you looking at here? I'm kind of looking at this as the same as that composite. If we approach those three or four week highs, then what I'd be looking for is any clues that those who bought at those higher levels are willing to sell into any strength. We call that those recent highs overhead supply. So we know that some people are underwater in their QQQ positions or high tech stocks, But sometimes they can be overwhelmed by a big new burst of buying. So just going to watch and wait here.

9:56David Saito-Chung:And you wanted to also take a look at QQQE. That's the NASDAQ 100 equal weighted index. Again, this went up about six tenths of a percent, finishing at the lower end of the range here, Dave. But what are you looking at here? You know, it does kind of look similar to the NASDAQ 100 the more you look at it, right? I mean, today for sure it outperformed almost double what the Qs did. But here again, if you consider, if you don't mind like clicking on the daily price bar of September 30th, which is right next to that vertical grid line, If you go back further to basically the beginning of October, just a little more right there.

10:47Exactly. 101.65. So when you think about it, right, it's almost the end of the year and three months have passed. And the average NASDAQ 100 stock is only up 2 % or 3%. You know, that's not what you would expect, right, for the NASDAQ, which is supposed to be the leading index for growth stocks. So I think this also kind of represents the fact that you have to got to be very choosy with the stocks in terms of the sector, in terms of the industry group, in terms of its leadership within that group, and also in terms of the fundamentals. The market this year has definitely awarded companies that are growing sales and earnings better than their peers and are likely to have good estimates for 2026.

11:34David Saito-Chung:And let's just round this out with a look at small caps, Dave. Again, this one leading the way today up 1.1%. Yeah, this is a good sign for the economy because smaller caps are generally considered more sensitive. Maybe there is also a penchant among fund managers to diversify their assets within equities to a larger array of industries, not just tech and so forth. But I think people have been beating the drum for small caps a very, very long time. And whether they'll truly lead the entire market, I think that's, in my humble opinion, still up in the air. It's going to really depend on everything working out right in terms of the economy holding on, inflation coming down gradually as it has been and earnings among the best stocks within small caps to lead this higher.

12:40David Saito-Chung:And we wanted to also look at TLT. That's the iShares 20 plus year treasury bond ETF. This went down slightly today, about two tenths of a percent. But what makes you interested in this? I'm interested in this, Alexi, because if you notice too, it's come down, which implies that interest rates on the long end of the curve have gone up, even though the Fed has cut rates. And so the steepening of the yield curve is important because it's actually more normalization of the cost of money. And that's a good thing. When you have an inversion in the treasury bond yield curve, that often in history has shown to be a negative for economy and therefore negative for risk assets, including bonds, including equities.

13:29So I find it interesting now that at least the prices of these long-term bonds at the lowest level in about four months, if you go back to August, right? And so I think people are going to watch this because could a further sell-off in long-dated bonds yield to more expensive debt, which could impact the way Wall Street sees valuations for equities. Right now, it doesn't seem like it's really hurting very much. But there have been episodes of volatility in the past when the Fed decided to cut, but the bond markets overall showed more volatility. That's something to be watching for in 2026. In moments of seismic change, through crisis and transformation, It is our real-world experience that delivers.

14:26FTI Consulting. Experts with impact. All right.

14:31David Saito-Chung:Well, let's go ahead and take a look at some individual stocks. You mentioned First Solar. This one, a big winner today, up 6.6 % and peaking above this 281.55 buy point. You know, I've traded this one in the past, Lexi. I don't have shares in this now. If I do have the stock, I would definitely disclose that on a video like this today. But I think it's one that really stood out to me among the stocks that made big moves. You see that 6 % gain, you know, many, many times more than what the indexes did. And so therefore, no surprise that on your chart there, you have the RS line blue dot right next to the 94 relative strength rating.

15:13This is a very bullish indicator showing when a stock breaks out and it's really outperformed the S &P, you see that relative shrink line, that green line on Lexi's chart really shoot up and it's hit new highs. That's why it says RS line new high. We have a standard buy point at 281.55. The reservation I have about buying around there is that if you were to cut your losses at 7%, the stock could actually come down to the 21-day exponential moving average at green line and force you to sell shares on what could be a normal pullback to a key moving average. So my preference here would be actually, you know, if you bought some shares at around 281.55 and it continues to move, then you're going to be a happy investor, a new trader in the stock.

16:03But I would suggest that something as volatile as for solar, maybe consider drawing a trend line from 281.55 across 276.14. And that other recent high, then you get a, yes, you get an entry point around 271, 272, 273. So I'm really watching this stock closely, Lexi. And if it were to test that area of the trend line, maybe that could be a great place to maybe begin a position. If you do own shares already, You know, you're definitely doing well in this stock because you see the stock have a lot of good areas of support at the 21 day, that green line to 50 day and then 250, which is a key round number.

16:51I just want to also highlight some news, not new news, but it was interesting that in November, late November, they opened a huge new facility in the town of Iberia Parish in Louisiana. $1.1 billion price tag, 2.4 million square feet, and 11, wow, 11 times the size of the New Orleans Superdome. That's quite a facility, right? Right.

17:19David Saito-Chung:We're going to need all the power we can get for these data centers. A hundred percent. Exactly. You know, and they basically, you know, began production. Let me see here. According to the news release, they are expected to add 3.5 gigawatts of annual nameplate capacity once they get to full ramp with a goal towards 17.7 gigawatts of solar based energy by 2027. It seems like they're very, very, very proud of bringing jobs to this part of Louisiana, 800 new manufacturing jobs. But just, you know, beyond that, just look at the recent acceleration in sales growth. You went from low to mid double digits, excuse me, mid to high single digits in terms of revenue growth to an 80 percent increase.

18:14and the earnings estimates look really, really strong for 2025, which is closing out obviously in a few days, but then 2026, acceleration expected in earnings growth. That's something that really excites us over here at IBD. So this is a stock I'm going to be watching very closely.

18:32David Saito-Chung:All right. How about we take a look at Insight? That's ticker INCY. This is a biotech name, Dave. This went down almost 2 % today, but holding above the 21-day line. Yeah, it sure is. The reason I brought this one up, Lexi, is I don't think we've had this one on stock market today for a while. But it is a highly rated stock, 98 composite, 91 relative strength. You see that the stock recently broke out of a very long base in the summer, moved sideways for a while, but then really accelerated on the Q3 results. So there we go. Exactly. And then now it's formed a new base and getting support around the 50-day moving average.

19:16This happened to be one of the biggest decliners within the IBD 50, if I'm not mistaken. And yet this was an inside day. I found that very interesting. Of course, this is a quiet trading week. We have Christmas off and then Friday could be pretty quiet too. So we only have Tuesday, Wednesday in probably decent volume activity. But I like the fact that the stock did not finish below 100. It also was an inside day in which today's high, today's low were inside the confines of the prior Friday's high and low. So one to consider. And Ed Carson, fellow co-host on IBD Live, recently wrote about some interesting phase one clinical trial results regarding its treatment for a rare blood disease in which people have overproduction of their blood platelets.

20:14And that caused the stock to drop a couple of weeks ago, but you can see the stock is still trying to recover. All right.

20:21David Saito-Chung:Well, let's take a look at Evercore just to round this out, Dave. Again, this is a financial name. This one up about 2.6 % today. And again, just peaking above this 349.91 buy point out of a handle. Yeah, exactly. And this is one of the classic patterns that we look for among highly rated stocks that break out. It was on the watch list of leaderboard not long ago, and then we decided to shift Evercore, a leading investment bank with great numbers, to the actual leaders list. It's now a 5 % weighting within the leaderboard model stock portfolio because even though it's not really moving super past the handle that you see there with a 349.91 pivot point.

21:14That pivot point is basically the highest price in that handle. It's a perfect handle in our view. You see that gentle slope down within the handle. There's a little bit of a shakeout of uncommitted holders while it traded very close to 350, which is very close to the left side high. And now you had a stock that gapped up, held that gap compared to Friday's action. Volume was light, but we saw strong volume on Friday on quad witching. And if you look just a few weeks to the left of that, you see that as the stock was building the right side of the base, there's generally a little more volume on the upside in November and December than on down days over those three months.

21:55So we'll see. We'll see how well this one does. And, you know, it's a mid-cap that's striving to become a large cap at$13.5 billion. If it works out, then it's a clue to us that maybe financial companies across the gamut will help keep the bull run intact.

22:21David Saito-Chung:All right, Dave. Well, thank you so much for your insights today. We really appreciate it. and Merry Christmas to you and your family. We really enjoy having your festive spirit here with us. Well, it's totally my pleasure and big, big Merry Christmas, Happy Holidays to you, your fam and all of us. All right, well, that wraps it up for us today. We'll be back with more market analysis starting tomorrow morning with IBD Live. You can head on over to investors.com slash IBD Live for all the details there. And remember, Tuesday is a regular trading day. Wednesday will be a half day going into Christmas Eve.

23:01David Saito-Chung:But thank you so much for watching. We'll see you right back here after the close.

23:29David Saito-Chung:We'll be right back.