Software Wins On AI Slowdown Idea; CrowdStrike, Salesforce, Best Buy In Focus

0:09Good afternoon, everyone. Welcome to Stock Market Today for Monday, September 14th. It's Rachel Fox here. Today, we saw the major indexes bounce off of intraday lows, but the NASDAQ and S &P 500 still closed lower, backed off a little at the end of the session. Here to help me break down all you need to know about today's market action is IBD head of market research, Justin Nielsen. So, Justin, what's on tap for us today?

0:34Rachel Fox:Well, we would be very remiss to not take a look at some cybersecurity stocks because that is where the great action was. So we'll take CrowdStrike. We'll talk about Allie a little bit behind her back since she's not here. And then we'll also take a look at Salesforce, which really helped the Dow out, and Best Buy in the retail space. Okay, great. Yeah, lots to cover here today. We'll get to those stocks in just a minute. But before, I'm just going to give a quick rundown on how the indexes closed. We saw the S &P 500 kind of get a little bit weaker into the close, but it was off lows. It was down 0.5%.

1:09The NASDAQ also closed off intraday lows, but with a loss of 0.6%. The Dow Jones fell 0.2%. And the Russell was down only 0.3%. I believe by the close. We saw some equal weighted indexes sort of outperform, but I'm going to go ahead and share my screen here so we can get into the major indexes. Now, we did see the NASDAQ and the S &P 500 move off of the 50-day line, so that was a positive sign. But this comes after Friday's move above the 21-day line, which we undercut today. So we didn't increase exposure, recommended exposure Friday, despite the strong move, because we're in a market where there's not much follow through right now.

1:57So this is a big week. We've got the Federal Reserve policy meeting, retail sales data ahead, and more events further out. So Justin, what are investors to do with all of this stuff on the horizon? And we're in this one day up, one day down kind of market. it.

2:13Rachel Fox:Yeah, that's the toughest thing because when we're in an uptrend, that's where we shine. When we're in a downtrend, it's easy to kind of stay in cash and wait for better opportunities, but it's the sideways trend that can really be the most dangerous. And that's kind of what we've been dealing with here lately. Plus under the surface, a lot of sector rotation. One sector will look great for a day or two, and then it rolls over and another sector starts looking really good. It's just been very hard to find lasting trends. And exactly as you said, the follow-up strength is just really missing. So a day like Friday looks great, looks like something you want to act on, getting the NASDAQ composite, getting back above its 21-day moving average line in strong fashion.

2:57Rachel Fox:Plus, that was really kind of discounting some news that absolutely could have destroyed the index, you know, with the CPI coming in a little hotter than expected. But again, the NASDAQ just shook that off, went up. But here again, lacking follow up strength on the Monday action. Now, one of the things that was going on here, there was the Anthropics CEO, Dario Amati, was saying how AI really should slow down. You know, last week there were people that were, you know, kind of commenting, former workers of different AI outfits that were saying, look, there's a lot of stuff that's happening way too fast.

3:34Rachel Fox:This is going to get out of control if we don't put in some more regulations and guidelines. Some people saying that, you know, there's a 10 % chance that within a decade the death of humanity comes because of AI destroying humans. You know, real Skynet Terminator type stuff. But, of course, with anything like that, you have your winners and cybersecurity. If you just pull up either cyber, CIBR or bug or hack, take your pick. That was certainly a big winner. Because, look, when you have a lot of these things going on with AI hacking and being able to kind of break out of sandboxes, then your cybersecurity needs to get all that more powerful.

4:22Rachel Fox:But software in general actually had a very good day. And remember, we still have the headlines with oil, USO, you know, being the oil ETF fund that is, you know, that's been, again, skyrocketing. We have the TNX and TYX, the 30-year and the 10-year yield, both showing a lot of strength. I mean, TNX got above 5 % for the first time, I think, in 19 years or something. It's just a lot of headlines that would absolutely destroy a weaker market. But we have been showing a lot of unexpected resilience, really, with all these headlines. One more thing I will kind of point out, you got to look at SMH.

5:10Rachel Fox:The chips got massacred today. Now, a lot of them did, you know, you got NVIDIA, you got Taiwan Semi, you know, Teradyne, the whole lot really got a lot of pressure put on them. And so with that AI news, this was the area that got hit the hardest software, again, the beneficiary. But yeah, that's kind of what we saw today. One other thing that I will point out in kind of a contrasting fashion, if you take a look at MAGS, the Magnificent 7 seems to be kind of on the comeback trail, right? So a lot of times we look at this, and when this is outperforming, it kind of tells you about a narrower market, really sticking with the big cap companies.

5:58Rachel Fox:And remember, NVIDIA is in here in the Magnificent 7, and this was still able to close up despite NVIDIA kind of dragging this down. So that was pretty impressive. But if you contrast that with XMAG, which is basically the S &P 500 minus the Magnificent 7, meaning that it's your other 493 stocks, that was looking a lot poorer today. And as you mentioned, RSP, the equal weighted S &P 500, when you take out that market cap weighting from the indexes or the S &P 500 in particular, that's still trading below its 50 day moving average line, you know, looking a little bit more damaged than the indexes themselves.

6:40Rachel Fox:So I think it's still a murky picture out there, not one where you need to go out and be a hero. This is more, I don't want to say completely, you know, put your head in your shell like a turtle, but you do have to be careful when you're poking your head out not to get overextended. And, you know, whether you're a little bit quicker with taking your profits or maybe a little bit smaller with your positions, you just have to be very careful because there's a lot of rotation out there making it difficult. Yeah, it's much more of a swing kind of market. And it's hard not to just want to trace or chase whatever the new investing trend is at the moment and really stick to, you know, your process here.

7:21But I think, yeah, you know, shrinking your position size, being more diligent with your portfolio management, all good things to be doing right now. Justin, let's also take a look at IBIT here, which you mentioned or wanted to bring up. Having a decent day holding up above 2 % in today's action.

7:41Rachel Fox:Yeah, holding up. I do have a position in this. It's been tightening up. So once it got above that 200-day moving average line, I think it's interesting how it tightened up here. something that we put on swing trader was arc w uh this is the arc innovation um fund but with the next generation internet um and you know that has a lot of different you know bitcoin and circle uh which is a stable coin and herd and coinbase and you know different things like that um you know in there um so yeah i think you know a lot of people are looking at the cryptocurrency market and seeing some green shoots there.

8:22Rachel Fox:One thing in particular I'll be interested in is to hear from Jim Ropel because the reason Allie is not with us here today is because she's getting ready for Jim Ropel's appearance on the monthly market report right after this show at 5 p.m. Eastern time. So he, of course, is the cryptocurrency guru that I look towards for information. So I'll be definitely tuning in for that. Yeah, me as well. We'll get to that just after we wrap stock market today. Justin, just I guess if you could give us before we move on to looking at those stocks that you mentioned, just maybe some couple key thoughts on where we're at in terms of key levels to watch here on the NASDAQ and S &P 500 and where we are in terms of portfolio, recommended portfolio exposure.

9:08Rachel Fox:Well, of course, the bad news is, again, we were down, and that's no fun. The good news is, right now, we are getting support at critical levels that seem to be providing the support that we are wanting to see. So, we're resilient in that regard. So for the S &P 500, I think the 7600 level is very important here. We seem to be getting support at that level. That's right around the 50-day moving average line and right around the top of that previous base and consolidation that we've been seeing really from the end of May through the end of July. We popped out of there in August, but so far, we were talking about that August 4th follow-through day.

9:50Rachel Fox:So far, even though we haven't made progress, we haven't broken down either. So you could kind of look at this as tighter action, but eventually we have to break one way or the other. So here's hoping that it's on the upside, but it hasn't happened yet. So that's why I think there's still a reason to be cautious because while that support is holding so far, if that breaks down, then it's a little bit like look out below. On the NASDAQ composite, the level that I'm really watching closely is$26 ,000 for a lot of the same reasons as the S &P 500. you know if you go back and draw a line there you know we're right at the 50-day moving average line and also right at the top of that kind of resistance area that has now become support since we popped above that 50-day moving average line so again we haven't we haven't made progress from that area yet but we haven't broken down completely either so it'll at some point we have to break one way the other and that's going to be what i'm watching very closely yes and this week We have, as I mentioned, the Fed policy meeting.

10:53We have some important economic data. All could be potential catalysts to move things or not. We'll have to wait and see. But let's go ahead.

11:03Rachel Fox:You've got to figure that a lot of the, at least the Fed action, has been priced in already. The expectations are for a cut. But there's always, whenever a Fed chief speaks, there's often a lot of algo crazy reactions to every single word, parsing it in all sorts of different ways. So, yeah, we'll see what happens with that, as you said. Yeah, absolutely. Let's go ahead and take a look at some of the stocks that you brought up, starting with CrowdStrike. All of software had a pretty strong day today. cybersecurity stocks in particular. CrowdStrike looks really good here. It looks like it cleared possible resistance level.

11:45Yeah.

11:46Rachel Fox:And again, Allie was mentioning on IBD Live, you know, she kind of just shared exactly when she bought it. She was like, oh, I'm looking at this. And when she got a break from speaking and changing charts, she took a trade on here. Let's go ahead and take a look at the five-minute chart intraday because, again, when you see something move up, a lot of times you want to see that follow-up strength, and you got that in spades here. So it kind of had its first five-minute bar and flattened out a little bit, and once it got above that, I think that's right around the time that Allie was buying. And look, you got a nice move from there.

12:24Rachel Fox:So you already have, if you bought it there, you already have some cushion. Let's also take a look at the weekly chart, because I think something that really sticks out about CrowdStrike is how well this has gotten support at its 10-week moving out. It's come right down to that level, and each time it tests it, maybe goes down below it, just enough to shake people out. But then by the end of the week, a lot of times it's closing at highs or really bouncing strongly. So that's been positive action. And look, this is something that's got the fundamental chops. It's got a very strong earnings record.

12:59Rachel Fox:You say that earnings line did flatten out a little bit over the last year or so, but it's kind of turned up a little. So that's very interesting. It's got an EPS rating of 94. But there's a lot of stocks out there with great EPS ratings right now, but kind of poor relative strength. This has both. You've got the relative strength line at new highs. You've got a strong RS rating of 96, a strong composite rating of 96. So this has a lot of things going for it. So you had a lot of choices here. I would say Palo Alto, Okta, Fortinet, ZScale or Sail. You go down the list, a lot of strength in this area.

13:38Rachel Fox:Another way to play that, again, is any of the three main ETFs there, Bug, Hack, or Cyber. I do have a position in Bug. We put Cyber on Swing Trader. They're all very similar. Yeah, entries all over the place here. Downward sloping trendline break for HACC. In today's action, yeah, there's a lot going on in this area. Congrats to Allie on getting in on that. It's a great move here today. Okay, let's go over and take a look now at a CRM Salesforce stock, which not quite as big of a move, but still nicely retaking the 10-day line here in a profit zone. But maybe there's another chance for an entry here.

14:26Rachel Fox:Well, and here's where you have to be a little bit discerning when you look at our profit zones. the reality is that the earnings gap up yes you're 20 percent from uh 20 25 percent from that ideal buy point but you couldn't buy it there right it gapped up right through there and so that's not really a real profit zone because if you're if you're not able to buy it there and yes it did go above that area before the earnings but personally i'm not stepping in front of that right ahead of earnings as we pull back to try and roll the dice on that. So the way that I'm looking at this, if you go to the weekly chart real quick, Rachel, you have that strong gap up.

15:09Rachel Fox:And the reality is you're just holding all of those gains very tightly. This is something that we did put on ScreenTrader last week. I missed it because of the restriction period. And then the market kind of faded a little bit on Friday. So I didn't buy it myself. But I'm watching this one very closely because I really like this tight action. And again, on a day like this where you had a lot of things falling apart, this really stuck out. And the computer software enterprise grew. Salesforce isn't alone in here. You've got a very strong group here. A lot of the setups that we've been seeing, whether you're looking at our IBD Live watch list, the growth 250 on market surge, you're seeing that computer software enterprise is a dominant area of those lists and so crm of course is one of the big uh the big uh gorillas in that room with a large market cap and again a member of the dow so that was kind of helping the dow jums industrial average yeah we're seeing uh yeah definitely a strong tight action holding those gains that is absolutely a sign of strength i mean rs line you can't argue with that move over the last several weeks good volume coming in here definitely a good one to be watching um all right justin let's move on to best buy uh bby here all of these stocks that we're looking at today are also in the top 20 ibd industry groups so out of the 145 these are all great ponds to be fishing in great areas to be looking at uh best buy having a breakout here from this uh 9127 entry yeah so now uh this just got goes to show that's where all the wringing of hands on the economy and everything, there is still a lot of signs of strength here with the economy, and one of those being retail.

16:55Rachel Fox:So in the home furnishings, electronics area, again, as you mentioned, a top group, Best Buy really stood out today in terms of a breakout. And you'll also note that this did have some volume behind it. You know, volume percent change, that 20%, I think that's the number that we show on the volume percent change. That means it was 20 % above average. So a decent showing there. Not quite as high as it was a couple weeks ago around earnings, but you're noticing that the volume is coming in on key areas where it's showing up in a positive way. Even the earnings, even though that was a big pink volume spike, you look at where the stock closed on that day, well off its lows in the upper part of its range, That's something that is appealing, especially the fact that it was able to get back above its 50-day moving average line.

17:50Rachel Fox:That's one of the reasons why this has an accumulation distribution rating of an A, because it's not just about where the volume comes in, it's also about where that stock closes. It's not just about it being up for the day or down for the day, it's about, again, where it closes and how much progress it's making. So those are the things that go into that accumulation distribution rating. That's why Best Buy here has a very strong showing there. Now, the one caution is, a lot of breakouts haven't been working. So that's something to just note about this current environment. And it goes back to that whole trend of what we've been seeing of a lack of follow-up strength.

18:26Rachel Fox:So that is the caution here for Best Buy, but it does have a lot of, in a different market, this would be a no-brainer, right? It's just, you know, set up very nicely. This market, it's a little bit tougher. So we'll see how this plays out. Eventually, these breakouts will start working again. And again, it's not like they're all failing. It's just that enough of them are failing to make it to where you start not trusting them. That's why we've been a little bit more focused on the pullbacks, the pullbacks especially to moving average lines like the 21-day or 50-day moving average line. So to be clear, these are pullbacks in an uptrend, not trying to catch something that's been falling apart and has been in a strong downtrend.

19:12Rachel Fox:We're really trying to get these pullbacks amidst a strong uptrend overall. So Best Buy, again, this one's been basing. Relative strength looks pretty good, and it's a classic breakout. So now we'll see if we get some follow-up strength on this one. Yeah, I would say definitely one to watch. Maybe not Chase here when you're at the top of this buy zone. I mean, it's a strong close, so that's definitely a positive. But yeah, in this market, buying near the top of anything is kind of tricky. But still a good one to be watching, a good one to keep an eye on. I think that's going to do it for our stock selection here today.

19:50But Justin, do you have any final thoughts or anything else we should be thinking about going into tomorrow's market?

19:57Rachel Fox:You know, another couple areas, a lot of defensive of areas were doing pretty good. One other area that I'm watching, KIE, is insurance. And that does tend to be a little bit more defensive. That did fall back below its 50-day moving average line recently, but it had been holding up well. Just an area I'm watching. And there did seem to be a lot of interest in kind of the healthcare space. XLV is typically what we will follow for the healthcare. But if you look at some of the underlying components, they're even stronger. Some of the hospitals were looking pretty good. NUTX was an example there.

20:40Rachel Fox:And then I was also another ARK Innovation member that I was noting was ARKG, A-R-K-G. That's in the genomics field. And that looked like it was kind of getting some support at a moving average line. So So just again, there's a lot of interesting things going on in the biomed, biotech, medical space. The medical area still holds a lot of the top groups. So certainly an area that I'm watching very closely. Yeah. I mean, definitely not a market to be sleeping on while we're not, you know, trending with strength higher. There's still a lot going on under the surface and a lot of things brewing. So it's an interesting time for sure.

21:22But thank you so much, Justin, for sharing all of your thoughts here today. I think that'll do it for our Stock Market Today episode. For today, we will be back here 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 also, you can catch IBD's Alyssa Korn with Jim Ropel, founder of The Ropel Report, on our monthly market report going live at 5 p.m. today. It's a great wrap-up of what happened in the market over the last month and Jim's outlook on the market going forward, so be sure to check that out.

21:58Thank you so much for joining us today, and we'll see you right back here tomorrow after the close.

22:13Thank you.