Small Caps Take A Breather As Global Stock Rally Moves Forward; Arista Networks, Bloom Energy, Vista Energy In Focus

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0:27David Saito-Chung:Good afternoon, everyone, and welcome to Stock Market Today for Monday, January 26th. It's Alexis Garcia here. And stocks rose Monday, despite some political news out there related to more tariff talk from President Trump and a potential government shutdown yet again. Gold stocks also rallied to kick off a big week for the market with lots of tech earnings on the horizon. And here with me to help break down everything you need to know about today's trading action is IBD Deputy Markets Editor David Saito Chung. So Dave, a little bit of a calm before the storm here for a very busy week. Talk about storms.

1:14We hope all of our listeners are safe and sound amidst this huge cold snap across the country. And it is impressive to see most of the indexes up amid a lot of uncertainty on those areas that you talked about. Plus, we have a Fed meeting. Plus, we have a ton of earnings this week. But I'd like to focus on three names that are setting up, one of them being ANET, Arista Networks, A-N-E-T, Bloom Energy, BE, which recently got a nice story from Kit Norton, our news writer, in the New America column, and then finally finished off with an oil and gas name. This might be the first time I've ever talked oil and gas stocks with you, Lexi, and that is Vista Energy, V-I-S-T-A, ticker symbol, V-I-S-T.

2:00All right.

2:01David Saito-Chung:Well, we're going to get wild with that one, Dave. Before we get to that, let's just go ahead and quickly round up how the major index is finished. The S &P 500 up half a percent today. The Dow finishing the day up six tenths of a percent. The Nasdaq up four tenths of a percent. And small caps down about three tenths of a percent here at the close. But I'm going to go ahead and bring up our charts here, Dave, starting with SPY. That's the State Street Spider S &P 500 ETF. Just kind of looking at this to gauge the broader S &P 500, Dave, again, up about half a percent. We've had about four straight days of gains.

2:43David Saito-Chung:And again, we're kind of in this area. We're not too far off highs, but we're also kind of close to the short-term moving averages. So what's your thoughts here? I think these last four days are just simply a kind of relief that the spat over Greenland might get resolved peacefully and that we'll still be friendly allies with folks in NATO because we know that big drop that occurred on Tuesday after the holiday really shook investors up. So the fact that we're back above those short-term moving averages on your chart, I suspect those are the 10-day simple and the 21-day exponential is a good sign.

3:27Right. And if you go to, for instance, let's go to QQQE, I want to jump to the NASDAQ. And this is a really useful indicator of how broad a market rally is, especially among NASDAQ stocks. And you can see that this equal weighted NASDAQ 100 tracker actually hit new highs. So it was actually quite a good day there. So even though we highlighted a little of a pullback in IWM and the Russell 2000, that was certainly well-deserved given how strong the small caps have done well. I also want you to show the S &P 600, which is 0S &P6. And this is a little more focused look at small caps, particularly those that have more substantial sales and earnings.

4:17And it was up even though the Russell 2000 was down. Notice, too, on that daily chart, Lexi, that we hit 1600, which seemed to be a nice round number and then pulled back. Nonetheless, the year-to-date gains for small caps are still really, really good.

4:35David Saito-Chung:Yeah, and since we've been talking about market breadth, let's just go ahead and quickly check on RSP here, Dave. This went up about two-tenths of a percent. And again, nudging closer, hit highs on the 22nd of January, pulled back slightly, but it seems to be wanting to test this 200 level. Absolutely. And on top of that, just like what we talked about with the S &P 500, it is sort of now filled in that negative gap that was produced from the Tuesday of last week. So that's another good sign. So really not that much difference in the recent action between the market cap weighted S &P 500 and RRSP.

5:18All in all, still looking good. And I think the action today justifies the IBD stance of maintaining a 60 percent to 80 percent exposure to equities.

5:30David Saito-Chung:And, you know, we've been talking, too, about how global stocks, just the international stocks, have been doing well as well. Let's take a look at VT. This is the Vanguard Total World ETF here, about four-tenths of a percent. And again, one that has filled that gap since that January, I believe, 20th downside reversal here. But again, technically in a buy zone here, Dave. So talk to me about what's been going on globally with markets. yeah i i i think we could have our our own separate show just talking about all the other equity markets right around the world i just want to highlight that it it seems like the whole global investor community is still focused on stocks even though we've had incredible runs by some of the commodities particularly silver and and gold i think for most of us who who like to buy stocks that you're probably doing quite well even in your overseas components of your portfolio.

6:35And the fact that we've hit all-time highs here is really amazing. Could you go to a monthly chart on this one too, Lexi? Because one thing I've been looking at closely is whether the VT ETF can give us a sort of heads up regarding the next possible serious correction. If you look at the very left end of that chart, you see that in 2008 during the acceleration of the subprime debt crisis and then big banks like Bear Stearns and Lehman Brothers and WAMU and Wachovia all going belly up, you saw that the world stock market was really punished hard. And anytime you've got a big, big monthly drop, I don't know, four, six, 8 % in a month, that to me is a very important sign to be very cautious.

7:25So if we go now to the right end of that chart, we can see it's just been all blue. It's been month after month of nice gains and something that hopefully will continue for a while and allow those who are long in the market to reap some more profits.

7:41David Saito-Chung:And Dave, I just want to quickly, since you mentioned gold, let's just check in on GLD. Another strong day here, up 1.5%. We keep talking, you know, maybe climatic action, but not so much a climax top yet, Dave. But just thoughts here in terms of the room to run here, because this has been on such a tear. It really has. And I think a lot of people might use the word climactic, climax run, to look, to describe what's happening in the last couple of weeks. But in essence, a climax run is really meant to be used for growth stocks that have broken out, made a big run, maybe doubled or tripled. And then after, say, at least minimum 18 weeks from the start of the rally, then move into like a hyper vertical like move, 10, 20, 30, 40 percent in a day or a couple of weeks, and then signs of exhaustion.

8:41I don't think we're seeing that even though gold has just gone vertical on your daily chart there. If you go to a weekly chart, let's see if there is that same kind of vertical-like move. It's certainly stronger than it has in a long time. But look at how in the October month and December month, or excuse me, actually the September month and October month on that chart, you see that it had this big, big run and finally broke that string of up weeks, but then actually found support at the 10-week line. So my thinking here right now is not to try to pinpoint the top, not try to top tick, as some traders like to call it, but use our standard measures of strength and weakness.

9:31And in other words, look at how it behaves in relation to that 10-week moving average. You know, one of those key moving averages, you've got that 10-week line. It's certainly gotten separated from it. So it doesn't mean that we can't have a significant pullback. But I would say that, you know, for the last year and a half since we've had the stock, the gold stocks and GLD and more recently SLV trading on the north side of their 10-week lines, just to respect that strength right now. All right.

10:04David Saito-Chung:Well, thank you for your take on that, Dave. Let's go ahead and check in on ANET. That's Arista Networks.

10:36Services, LLC. Member NYSE SIPC.

10:40David Saito-Chung:This one, a nice gain of 5.4 % today. Again, we saw this gap up on the 22nd, Dave, here getting back to some new recent highs. Looks like it cleared this recent high of 141. We also kind of maybe had a trend line here to where it may be in an actionable place. So your thoughts here. I just found this as an interesting stock to talk about because you can see in the top left corner of your chart, Lexi, the computer networking group is not a strong group in terms of six-month performance, but it was one of the strongest groups within our 197 industries for the day. And that trend line that you drew there is perfect and shows that, But yeah, for an aggressive trader who wanted to get in earlier before the breakout, now is a time to maybe consider a smaller position.

11:37And so especially so long as it never fills in that positive gap that was created from that Thursday big move. Nonetheless, for those who want to be a little more circumspect with the stock itself, you could just keep watching it and see first, does it get support? First, does it clear 150? That's a clear resistance level. Does it hold around 150 and maybe produce a handle? Or does it just edge higher and then produce a handle when it gets closer to that 164-94 entry? We have earnings on February 12th, so that's something to be mindful of. And also, I want to go to the weekly chart because as much as the stock looks great the last several days, there's actually more volume weighted to the downside.

12:25In other words, down weeks in heavy volume, still outnumber up weeks in heavy volume. I really watch that closely. And you'd much prefer to see a stock that has more signs of institutional accumulation vis-a-vis those big up weeks in high weekly volume. And you can see that with like blue skyscrapers. We're seeing more red skyscrapers lately. So let's see if the table's turned there.

12:50David Saito-Chung:All right. How about we hop on over to Bloom Energy, Dave? Switching back to the daily here. This one reversing off intraday highs today down 3.6%. It tried to break above this cup base with a 147.86 buy point. It's pulled back. So are you looking at this as a potential handle maybe? Or what are your thoughts here with the technical action? Yeah, I would agree with you, Lexi, because it's downward sloping. It means there's a shakeout. Lower lows within the handle is exactly what you want to see. you can see that dry up in volume on that daily chart the last four down bars were clearly lower than the 50-day moving average line which is also in red for the volume bars so a picture perfect and sometimes you do find these handles that form just above the left side high of that base sometimes too though the stock might just sort of move sideways for a while and that handle morphs into something else.

13:48Or if there's some big news following this fuel cell supplier to data centers, really interesting company. Like I said, you definitely want to read Kit Norton's, KIT Norton's article in the New America. Really well done. See whether the stock actually decides, you know, it's time to make a move past that prior buy point of 147.86. All these different possibilities are out there. I also like the fact that, Lexi, if you could point out the relative strength line in blue, just underneath the 50-day line, it actually hit new highs as the stock tried to break out, it's pulled back. But we shall see.

14:27I think this is a stock to be monitoring on a day-to-day basis. And in fact, Ken Shreve and I just added this stock to the watch list for IBD leaderboard, which acts as a sort of a turnkey solution to finding, you know, growth stocks.

14:43David Saito-Chung:All right. Well, let's wrap this up with a look at Vista Energy, Dave. Again, oil and gas name, this up 2.3 % today in a double bottom base here with a 55-20 buy point and inching closer to that traditional pivot. You know, oil has had a good start to the year. I think even like Brent Crude's up 6%, something similar to that for West Texas Intermediate. I've just started reading about this company. It's actually based in Mexico, but it also provides a gateway to oil and gas exploration across Latin America. And they say that they have an excellent safety record, strong balance sheet with$320 million in cash.

15:31Also, looking at a recent report, they said that the Q3 production came to about 127 ,000 barrels of oil equipment per day. And they're very actively developing some new assets. So very exciting company from that end. I just, what I don't understand is why the earnings are expected to fall 21, 23 % next year. It could be maybe they have a lot of upfront development costs. That's something for investors who might be interested in something like the AST to check out. in the meantime also want to highlight too lexi within that elongated double bottom if you look at that 5450 peak that happened right at the end of november early december from there to to today is also kind of like a base within that large construction and so 5450 could also be a little bit earlier by point it's nice to see that the stock is trading above all the moving averages and that relative strength line is at the highest level since the start of that consolidation phase.

16:42And finally, let's go to a monthly chart. I want to highlight the fact that this is a stock that has had a really impressive run, not only from the pandemic lows, but also breaking out to 52-week highs and then eventually all-time highs as it got to a$10 and higher share price. So you want to look for those stocks that actually have that history of impressive stock performance as well as the fundamentals to back it up. And I just find this chart quite interesting within the international oil and gas space.

17:18David Saito-Chung:All right, Dave. Well, thank you so much for your insights today. We really appreciate it. Glad to be here. And, you know, I promised 12, 13 minutes and you let me babble on a little bit. Well, I wanted to get your take on gold, so I'll take the blame for that one. Not at all. All right. Well, thanks again, Dave. And that wraps it up for us today. We'll be back with more market analysis tomorrow morning, starting with IBD Live. You can head on over to investors.com slash IBD Live for all the details there. And thank you so much for watching. We'll be right back here tomorrow after the close.

18:26We'll see you next time. We're right there with you. Wherever you're going, we'll get you there. CLA, CPAs, consultants, and advisors. Learn more at claconnect.com slash with you.