Stocks Extend Losses As Market Prepares For Rate Hike: Guardant Health, Twilio, Sunoco In Focus

0:12Ken Shreve:Good afternoon, everyone. Welcome to Stock Market Today for Tuesday, September 15th. It's Alissa Coram and Ken Shreve here. And stocks with losses today and the major indexes sitting at some critical levels ahead of a key interest rate decision from the Fed. Ken, what do you have for us? Yeah, rising interest rates, rising oil prices again, Ali, and more losses for stocks. But I wanted to take a look at Garden Health. GH is the ticker there. Another good day for software stocks. So let's take a look at Twilio. T-W-L-O is the symbol there. And then finally, on my list, I want to take a look at Sunoco.

0:55S-U-N in the energy space. We had energy stocks outperform again today, so a little something for everyone today.

1:03Ken Shreve:Yeah, a couple of bright spots to check in on. We will do that. But first, let's take a closer look at the major indexes. Here's the NASDAQ composite down 0.8 % on the day, back below the 50-day line, and the 26 ,000 level, so a round number there. Meanwhile, the S &P 500 down a little less than 0.5 % on the day. This is hovering right around just under its 50-day moving average in that breakout area. Meanwhile, in blue chips, the Dow down 0.6 % today, so continuing to live below the 50-day moving average here. And then in small caps, we have the IWM ETF down 0.9%. We know small caps are quite interest rate sensitive, so not a surprise to see the weakness there, Ken.

1:51Ken Shreve:But give me your take on where things stand at this critical juncture. A lot of eyes are now focused on what the Fed is going to do, but seemingly more importantly, how the market's going to react. Well, yeah, big Fed meeting tomorrow. I think it's, you know, at least the market is widely telegraphing a quarter point hike by the Fed tomorrow. We certainly have had that 10-year yield racing higher. It closed at 5 % today, just a little bit under 5 % it looked like. It did hit a high earlier this morning of 5.04%. So it is looking likely that we're going to get that quarter point hike tomorrow. So the market has been quite jittery about rising interest rates, Not only here, but across the pond, too.

2:48The European Central Bank has been raising interest rates as well. So money is getting expensive not only here, but around the world as well. So that is causing the markets to get a little bit jittery here. But going back to the NASDAQ, we're holding at kind of a 40 % to 60 % invested percentage here. We're kind of sticky around the 26 ,000 level right now, kind of holding above some recent lows here. Obviously, that 50-day moving average is still sticky. So we're kind of holding above some pretty significant support levels here. So we'll see if support holds. Tomorrow, we'll probably get a pretty good idea how the market is going to react, and we're either going to hold here or not.

3:43So we'll see. I think we'll know after tomorrow if we're going to hold these levels or not. So we haven't corrected too far off the recent high for the NASDAQ. It's been a much steeper correction for blue chips and small caps at this point. So far, so good for the NASDAQ. It's been quite a sell-off for semiconductor stocks. Another day of outperformance for the software sector. and that has managed to keep the NASDAQ's pullback so far relatively contained. We're probably going to get another distribution day for the NASDAQ today, and we've seen that distribution day count for the NASDAQ kind of pick up the pace.

4:26We're going to have now seven distribution days in recent weeks, and that's getting a bit on the heavy side. So I wouldn't call it an index alley that's under heavy distribution at this point, But seven distribution days or higher volume declines, that's a lofty distribution day count. And we're not looking at a bunch of heavy or big percentage declines. But seven distribution days is seven distribution days. And we pay attention when we see distribution in the indexes. So not far off highs at this point, but definitely looking a little vulnerable here, but holding support so far.

5:18Ken Shreve:We are. And tactically speaking, from a portfolio management perspective, I think we have a very clear level. And so one thing to expect with the Fed, we do know, right, is we will see volatility. We don't know where things ultimately will land by the end of the regular session tomorrow. Or sometimes you do also have a day two counter reaction that could be in the cards. But when we first get the news on the wires, right, be prepared for things to be a little bit of a roller coaster ride. Can you've covered Fed decisions and the market's reaction to those decisions many, many times. and it's pretty rare for that initial reaction to hold, right?

6:03Ken Shreve:You sort of get an overreaction either direction, it seems like, which can ultimately be the direction by the end of the day, but there will likely be some digesting of the news. So we'll just have to be prepared for that to play out. And then it seems like if we do get a material break below the recent lows, It seems like potentially the next support level to the downside could be around$25 ,000. So might want to get a little bit more defensive if we see that. Or if we do get some fireworks to the upside, I think there's a compelling case to be made for raising exposure. And depending on how the leadership looks, we'll know perhaps how conservative or aggressive to be if we do get a jolt higher.

6:51Yeah, yeah. So, you know, we'll get the decision at 11 a.m. Pacific time tomorrow, 2 p.m. Eastern time, and then there'll be a press conference at 11.30 a.m., 2.30 p.m. Pacific time. So that two-hour window between 11 and 1 p.m. Pacific time tomorrow, there'll be plenty of volatility. And then the following day, you know, we'll be volatile as well. So we'll just have to see how the market digests the information. And, you know, what we know right now is that we've seen some, you know, obviously some volatility ahead of the Fed. We've seen some signs of institutional, you know, selling ahead of the Fed decision.

7:46And we've seen interest rates really spiking. And that's typically not, I mean, this has been quite almost a parabolic move in that 10-year yield, quite a move higher. So we'll see how it all resolves. But like we talked about on IBD Live this morning, I think a lot of the panel has been taking defensive steps. And any new buys that have been tried recently have been very, very small positions. So if they don't work out or if the market tells you that your timing was wrong or if a new buy turns tail immediately and you're sitting on a loss, you're probably better off just cutting bait and taking the foot off the accelerator here.

8:44because market tide does seem like it has started to flow a bit negative. So we'll listen, as always, to what the market's message is, and we will adapt accordingly. But definitely paying attention to some negative messages recently and playing a little defense right now.

9:08Ken Shreve:Yeah. All right. Well, let's do a rapid-fire technical view on the other major indexes, starting with the S &P. Yeah. So, S &P 500 is also in a similar position to the NASDAQ. It's slightly below the 50-day moving average, but it has not been a violent break. And again, similar to the NASDAQ, we've seen some distribution in the S &P as well. The distribution day count on the S &P 500 is a bit lighter than it is on the NASDAQ. Not by much, but I think we're going to see mild distribution on the S &P 500 as well. But mostly a similar situation. It has been not a violent break of support here. Still holding pretty close to the 50-day moving average.

9:56Ken Shreve:Okay, and blue chips? More selling. Definitely in the blue chip index, sharper correction off highs, more of a violent break of the 50-day line and testing a round number here. So this is a very key support level, 52 ,000. Not testing a moving average, but 52 ,000 obviously is a key support level. It tested it once before just four days ago and rallied. Now it is testing 52 ,000 again. So we'll see if it holds or not. If it doesn't, you can see those lows from several weeks ago, they could hold for the Dow. Yeah, back several weeks ago, some marked lows there that would be the next support level to watch for the Dow.

10:48Ken Shreve:Okay. And then let's take a look at small caps. Also want to get your thoughts on the RSP, but we'll go to IWM first. Yeah, so the next support level for the iShares Russell 2000 is going to be that round number of, looks like it's about 250 that we're going to be looking at for IWM here. So still has a ways to go to get to that 200-day moving average, but we will see. But under selling pressure, just like blue chips here. So small caps and blue chips are lagging at this point. And, you know, 250 looks like the next level to watch for IWM. Yeah, it is kind of small. It looks like, I think it's 280.

11:37Ken Shreve:Oh, 280, okay. 280 is right there. It is a small screen. Yeah, it is. I know it is a small screen for you, Ken. Let's go to RSP because this also has shown us a weakening picture for the average stock. Yeah, breadth today, the breadth has been weakening in the market. It was about 2 to 1 negative overall on the NYSE today. But yeah, we saw RSP give up that 50-day. This is the equal-weighted ETF version of the S &P 500. Gave up its 50-day moving average. We're paying attention to breadth on a daily basis. It was a 2 to 1 negative on the NYSE today. And, yeah, this is just showing that breadth has been deteriorating on the NYSE and gave up the 50-day moving average a little more than a week ago.

12:28Ken Shreve:Mm-hmm. Good stuff. Okay. Not looking – the breadth picture is not looking great, but you would expect that when the market is starting to go into pullback mode here. All right. Well, let's take a look at some stocks that do look good right now. Ken, I know you've been tracking garden health in the medical sector. Shares up nearly 5 % today, heavy volume, a blue dot breakout. Every once in a while, you're seeing a breakout that is working. They haven't been working great, and we'll see if this one can follow through. It was a nice little setup day yesterday for garden health. health. This is a leaderboard stock.

13:13And actually, this was trying to break out during IBD Live this morning, and it wasn't actually looking very good because it was breaking out. And then it gave all those gains back, and it just was looking like it was going to be a failed breakout because it gave it all back. But then the stock found its footing and strengthened and actually ended up having a pretty good day and a close near high. So, you know, solid breakout, good volume for Garden Health. Interesting company here. It's a company, they're known for their liquid biopsies, which is a type of blood test that detects cancerous cells in the blood.

13:58And, you know, Garden Health is, you know, achieving very, very solid top line and bottom line growth with these liquid biopsies as a diagnostic company. So excellent top line and bottom line growth and a great breakout today. And a stock that has been trending higher for quite some time. So you can take a look at the weekly chart here and see a stock that has performed well for quite some time. It has just formed a series of bases and because of a series of nice quarterly earnings reports and just a great track record of execution. Great top-line growth that has just performed very well. So we have it on leaderboard, and nice to see it breaking out today with a good bullish relative strength line in new high ground.

14:51So a good day for Garden Health, and nice to see a breakout working in a market where it's tough for breakouts to work in this type of environment. but Garden Health did well today.

15:05Ken Shreve:Yeah, exactly. Ken, remind me where Leaderboard was getting into this one. Garden Health, let me just check my sheet here. Garden Health we added in late, let's see, Garden Health was actually added in late May. Late May, May 27th was the entry. Okay, so the breakout from the cup. The reason why I want to point this out is the patience. here, right? As it's been base building, it's tested the 50-day line for, you know, a good handful of sessions here, but not a material close below that level. So from a position trading standpoint, having that patience, and I think especially with the earnings reaction, right?

15:54Ken Shreve:You had a gap up, weak close, it's kind of been going sideways, but it's held that guardrail. Exactly. And buying right definitely helps. We were arguably even a little late on May 27th when we bought because on May 27th, we probably could have bought even a few days earlier. But, you know, we managed to still get it at a reasonable time, and it was still in the early stages of breaking out. And, you know, it managed to move nicely from there, and we were able to sit through, you know, normal pullbacks without the stock ever really coming close to our initial entry. So it helps buying right. And sometimes buying right means buying when a stock is up near high.

16:49So it's often counterintuitive, but it's kind of at the crux of our buying methodology. Buying strength often means buying a stock when it's up near highs. And that's what we did with Garden.

17:05Ken Shreve:And the trade never went negative, right? Right, exactly. Yeah, giving it the benefit of the doubt. All right. You mentioned the outperformance in software. So let's go to Twilio. Look at the day that this stock had at 4.4%. I think arguably actionable here on a trendline break. Also retook the prior pivot around that 238 level. So a name to watch in software. Yes. And we have been watching Twilio for quite some time and software had started to move and we had been watching Twilio just kind of sit around its 21-day moving average and just wondering when it was going to start to move. It had been a longtime performer in the software sector, but it finally started to move today.

17:56And anyway, this was a nice move for Twilio. This is a company that operates basically a customer engagement platform, a cloud communications platform. So basically businesses, they can add voice and short messaging services, voice and text on apps and websites and things for customers. But it's been around a long time, and it's tracked in the enterprise software group. And, you know, again, a company that gave a buy signal today off of the 10-week moving average. It also kind of reclaimed a prior entry point from a recent base buy point. So a couple of different buy signals. I think it's still in buy range here.

18:47Like the shape of the relative strength line, it's up near highs. It's not in new high ground, but it's perched close to new highs. Good relative strength rating. It might not be the leader in the enterprise software group. There have been a lot of strong performers in this group, but I like the fact that the relative strength line is still up near highs. Still look at it as one of the fundamental standouts in the group. Trendline breakout today, good support at the 10-week moving average, 50-day moving average. So I think it still looks right here and good solid name in the enterprise software group.

19:28Yeah.

19:29Ken Shreve:And in terms of its customers, one of the most notable ones that comes to mind for me is Uber. So messaging with Uber, Lyft, Reddit, Dell, Resi, Shopify, HubSpot, Stripe. Big time. So, yeah, a number of their clients there. Yep. All right. Moving on, we want to check in on Sunoco. Bright spot. Oil and gas refining group breaking out this week and adding to gains today up 1%. Oil, just like interest rates, oil has been ripping higher. I think oil hit 100 WTI, which is the benchmark U.S. oil prices. I think that hit$104 a barrel today. I didn't get up. Oil was up 4%,$105.50 I saw it last trading in electronic trading.

20:30Yeah, so oil has just been ripping higher. Sunoco is tracked in the refining group. I don't know. Sunoco does not do a whole lot of refining at this point. They're mostly a fuel distributor, and they operate a bunch of terminals where they store natural gas liquids, and they do a lot of fuel distribution at this point. So not so much refining. However, just a great breakout for Sunoco today and still in a buy zone. Oil and gas stocks were among the best performers today, were among our best performing industry groups. I think drillers were among the best performing groups inside the oil and gas sector.

21:16Didn't see too many actionable stocks there. Fundamentals are a little sketchy in the driller group, but refiners also outperformed. And Sunoco is a really solid name inside the refining group and a stock that really just looks like a base-on-base pattern to me. You can see it broke out over that 72 level and then formed another base on top of that prior base. So it looks like a base-on-base pattern and a stock that is still in buy range from that second breakout. So holding in that blue shaded area. So Sunoco looks good here. Closed just under 80 and still in that 5 % buy zone. So nice top composite, highly rated stock in the refining group.

22:07So look at that relative strength line in new high ground. Looking pretty good.

22:12Ken Shreve:Yeah, it is. Let's go to the weekly and see. Not quite a blue dot, but it's basically there. Yeah, it's basically there. Sometimes, you know, sometimes that blue dot doesn't appear. It looks like it probably should be there, but, you know, maybe it's just quite on the verge. Not quite at a high, but pretty close. Anyway, Refining Group has been a real superstar and lots of leaders, and Sunoco is definitely one of them in that group. Yeah, look at that triple-digit growth. Very impressive. All right. Well, thanks as always, Ken. We appreciate it. You betcha. My pleasure. And thanks, everyone, so much for tuning in.

22:56Ken Shreve:That's it from us for today, but we will be back with more tomorrow morning on IABD Live. Investors.com slash IABD Live for all the details of our daily morning live stream starting 10 minutes before the opening bell. We'll see you there, and then we'll also see you right back here tomorrow after the close.

23:24Thank you.