Strong Start Quickly Fades; Comfort Systems, CVS, Western Digital In Focus

0:00Alissa Coram:Look, when people start to gamify investing, right? So when you think about people being rewarded with balloons and fireworks for trading, which we know is the more you trade, the worse offer you're going to be in the long run. I'm Joe Davis.

0:12Justin Nielsen:And I'm Christine Kashkari. And this is Season 2 of Better Vantage by Vanguard, an eight-part video podcast series hosted by custom content from WSJ and Vanguard.

0:31Justin Nielsen:Good afternoon, everyone, and welcome to Stock Market Today for Monday, June 22nd. It's Alyssa Coram here and a mixed day to kick off the week with some outperformance from blue chips and small caps. Joining me now to discuss the action in more detail is my colleague, Justin Nielsen. Justin, always great to see you. What do you have for us today?

0:52Alissa Coram:Yeah, we'll talk about a few stocks, including we'll cover FIX, CVS, to get a little about that rotation possibly in the mix, and maybe an offensive sell signal with Western Digital.

1:05Justin Nielsen:I like it.

1:07Alissa Coram:Oh, and I do have a position in FIX.

1:10Justin Nielsen:Thank you for disclosing that. All right. Let's first take a look at the major indexes, then we'll get to those stocks. But here's a look at the NASDAQ composite, the hardest hit on the day, down about 1.3%. So with weakness in mega cap tech names, weighing that down. Meanwhile, the S &P 500 down about four tenths of a percent on the day. On the upside, the Dow up three tenths of a percent. And small caps outperformed with the Russell 2000 up nine tenths of a percent. We are in new high territory. There. So and to add a little bit more color here, here's a look at the MAGS MAG 7 ETF down almost 2.1 percent on the day.

1:57Justin Nielsen:So that creating quite a drag on the Nasdaq composite today, Justin.

2:03Alissa Coram:Yeah. And we might as well mention SpaceX, too, because, you know, one of the things when you when you come out with a big a big valuation and get a heavy weight in the Nasdaq composite. Well, guess what? When you're down 16%, that's going to leave a mark. And I think it's important to kind of do some distinguishing between the NASDAQ composite and what's happening with a lot of these heavyweights. And look, a lot of people were pointing to Google or Alphabet and the move down it had, you know, falling beneath its 50-day moving average line. But gosh, 5%, it was, you know, Microsoft, Meta, they were all there.

2:42Alissa Coram:So not something that was tied specifically to Alphabet. And let's also take a look at QQQ, because yes, a lot of these are also in the NASDAQ 100, but SpaceX isn't, you know, and you know, this was a very different look. And one more, just for fun, let's look at RSPT. So if you look at the tech space, because again, usually when you think NASDAQ getting hit, oh, tech must have been getting hit. Well, not really. This is the equal weighted S &P technology ETF and up 1%, 1.1%. So a very different look depending on how you slice it. And then as you said, the S &P 500 not having a bad day. I mean, it was down, but not nearly as much as the NASDAQ composite and the Russell 2000.

3:31Alissa Coram:Also, not finishing at its highs, but still a very decent gain and new high territory for the Russell 2000 and the small caps. And that was despite, if we just look at the zero T and X real quick, that was despite some strength in the 10-year treasury yield. Usually that's enough to kind of dampen the spirits of the small caps, but not the case today. So very interesting look.

3:56Justin Nielsen:Yeah, very interesting indeed. And with the mega caps, you know, it shows you it's a double-edged sword, right? Because for as reliable as those names can be, oftentimes for outperformance, the door can swing the other day as well. So that's why it's so great to have that holistic look, Justin, looking at these other ETFs and some of the individual names just to give us a bit better of a picture of what's actually going on underneath the surface and where that weakness or the strength is coming from.

4:29Alissa Coram:Yeah, as I was looking at kind of your sector ETFs, which I often do, both the market cap weighted and the equal weighted versions, it was surprising that, again, not as bad as you would look and you would think with the NASDAQ composite once again challenging that 21-day moving average line. It's certainly an area that I'm really focused on watching. But again, you have to have the context. What's what's dragging it down? And is it truly kind of everything or is it a little bit more targeted in terms of what's what's dropping? Just one more stat to share with you. The Nasdaq advances over decliners.

5:09Alissa Coram:The decliners did win out a little bit, but it was about 2000 to 2700. And, you know, same thing for the NYSE. it was a little bit more like 1200 versus 1700. So the advancers were overwhelmed by decliners, but not in a...

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5:55Alissa Coram:Big way, not in maybe the way that the NASDAQ composite won't.

5:59Justin Nielsen:Right, exactly. And you mentioned the 21-day line. It looks like we closed right at that level. And that's a key area that we are watching for the power trend. Like you said, there's some nuance there, looking at what's driving that. Justin, would you also say the low from Wednesday and the 26 ,000 level, it seems like those are also levels to watch if we do see further weakness, also the 50-day or the 10-week line as well. And to your point, looking at the S &P 500, we are still above the 21-day line there. So all things that we are tracking very closely.

6:41Alissa Coram:Yeah, absolutely. And, you know, a lot of times we when we break above the 21 day moving average line and what we consider there is that really the low gets above it, then you kind of want to see that hold. And right now, we're right there, right? So this is in market school. We don't consider this a sell signal until you break that 21-day moving average line by at least a few tenths of a percent. Because when you're right there, when you have to actually look at the numbers and you can't tell if it broke it or not, that's usually something we let slide. We call it a kind of a tolerance level.

7:19Alissa Coram:But I think the more important ones are the levels you mentioned, Ali, because again, that 26 ,000 level, an obvious area of support from Wednesday's action. And then also on the S &P 500. Well, and that also kind of is where that gap happened, right? So we did fill it in. Now we really want to kind of see that level hold. And same thing for the S &P 500. I'm really looking at kind of that gap up that we saw last week as the potential deal with Iran looked like it was going to be taking shape. And so whereas Wednesday saw that get challenged, if we can kind of stay above that level Wednesday's low, I think that that bodes well for the market.

8:03Alissa Coram:Now, we can still go sideways for a little bit, and that would be constructive. But if we start falling below that, then yeah, 50-day moving average line, 26 ,000, those are kind of the next levels to be looking at. And the good news is that that 50-day moving average line has been rising. So we're not looking at the same kind of drop that we were seeing just a couple weeks ago. Because again, the rising 50-day moving average line puts it closer and closer when we've been kind of doing this little basing area that we've seen in recent weeks.

8:36Justin Nielsen:Okay. Well, we'd obviously love to see a breakout to the upside. We'll see what we get as the week progresses. I mean, we have micron earnings. Earnings season has died down, but you do have Micron. It'll be interesting to see how that has a domino effect potentially on some of the other AI players this week. What do you think?

9:00Alissa Coram:Yeah. Well, and certainly, you know, computer hardware peripheral, this group is the number one group. It's got all your memory, you know, memory chips that have been just on fire, the clear leaders of this group. And look at how these closed. I mean, very different look from the NASDAQ composite. You look at SMH or SOXX. I do have a position in SOXX. You know, it's a very different look for the chips. These were looking so much stronger than the NASDAQ. Again, you would expect if the NASDAQ composite is taking a hit like that, you would expect that chips were as well. Not so today. There was definitely a lot of strength underneath the surface that was being masked to a degree by the indexes.

9:43Alissa Coram:Now, IGV, the software sector, that was something that we were very interested in seeing how this was getting above the 200-day moving average line. Is this something that's coming back? Not so fast. It's kind of been struggling. I mean, that was a very punishing downturn with only one day up out of a lot. So not looking as great there. Although I will say that CIBR, the computer software security area, does look a little bit better. That's holding up, I think, very nicely. And although it came down to the 21-day moving average line, It just hasn't like given up completely. So I like I like the pullback here much better than in IGB.

10:29Justin Nielsen:Right. Yeah. Much better look to that. Hopefully we can see this round out the right side while we're taking a look at some thematic and sector ETFs. Why don't we take a look at a few more? Justin, you take the lead. Anything else you want to take a look at?

10:46Alissa Coram:We can't cover the day without giving a nod to XLE, the energy stocks, having a little bit of a bounce here after getting pummeled lately. And again, a lot of this is headline driven, headline driven on the way up and headline driven on the way down. But it was interesting to see a little bounce there. So something to be just noting and keeping an eye on. But XLV and XBI, two areas. I do have a position in XBI, but the healthcare area and biomed biotech area, XBI in particular, really looking strong today. This one hasn't been easy. It's been basing through a lot of this great action in the markets, but a very, very nice move last week and a continuation follow-up move there.

11:35Alissa Coram:This has been on leaderboard for quite a while and a really nice move today. So whether you got into this recently, whether you helped through that base and have been holding this for a while, like leaderboard has, you know, there's, there was kind of room to, I think, trade around this position, maybe not sit with the full position through the base. And that's what leaderboard did. You don't have to keep the whole thing. You can kind of trim it, trade around the core position. And then if it comes out again, you can, you can add right back. This episode is brought to you by Google Chrome. You think you know a browser, but Gemini and Chrome, that's new.

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12:32Justin Nielsen:Yeah, makes a lot of sense. Okay, let's take a look at a couple of individual names. Here's Comfort Systems, ticker here is FIX, up 5 % on the day, a nice close at highs, and clearing a key level. This 2000 area was a recent area of resistance for the stock, but it got above it with some gusto today, Justin.

12:58Alissa Coram:Yeah, so it's kind of exactly what you want to see here. Now, I did have this stock. Um, I participated in that move from 1500 to 2000, but when it crossed below the 50 day moving average line, again, I'm, I tend to be a little bit more of a short-term trader. So June 5th is, uh, definitely where I trimmed quite a bit. Um, you know, as it broke the 21 day moving average line, the first, uh, first one that you tagged already. Um, you know, I think that was the June. What was, Oh, I'm sorry. That wasn't the June 5th. That was, was that, um, oh, you know what? Yeah, I think I was still holding it through there.

13:32Alissa Coram:But June 5th, you know, definitely knocked a lot of stocks out of my portfolio. And just a few days later, this did cross below the 50-day moving average line. So trimmed a little bit on June 5th and then got rid of the rest on 50-day moving average line break. But, you know, sometimes they come right back. And I think it was a nice little pause. This took around 2000, seemed like it was hitting its head there and broke through today. So I actually bought this as it, as it gapped up, um, just started with a smaller position and then I was able to add to it today. Um, I think that's also when we put it on swing trader on, on that day.

14:10Alissa Coram:So I had to wait for the restriction period. Um, and then, uh, yeah, now, now that it's broken through 2000, we'll see if this can continue further. Now, keep in mind, you might be looking at this and say, oh, well, what is it that they do? Oh, it's mechanical electric contract services, uh, construction products, you know, HVAC systems and all of that, well, you know, that doesn't sound too exciting or too technology based. But as we've, as we know, a lot of these AI stocks or AI adjacent, if we call them data centers, they run hot and they need cooling. So that's what's going on with this comfort systems as well.

14:45Alissa Coram:And you can see that it's got a very solid, you know, number of quarters under its belt recently. Oh, yeah. So, you know, an EPS growth rate of 110%, triple digit gains. And these are not from small numbers. These are, you know, from, you know, multiple dollars in the earnings per share. So you've got the highest possible EPS rating of 99. You've got a strong RS rating. You see that the relative strength line is getting into new high ground before the prices and composite rating of 98. So a lot of things going for this particular stock.

15:24Justin Nielsen:I agree. I'm not in this one, but I think that the benefit of something like this is it's an AI stock, but it is more of a steady AI name. This is not your wild, volatile, you know, 10 to 12 % ATR AI stock. This has an average true range of about 5.2%. And then those incredibly solid fundamentals that you pointed out. And then if you look at the 10-week line, the red line on the chart here, that's been a very reliable guardrail. And that's the type of leadership that we love to see. So with something like this, it seems like at least as of now, the personality over the last year plus is you can get that AI exposure.

16:11Justin Nielsen:You can get that outperformance with something that's so fundamentally strong, but it's not so wild that, you know, you have to be super crazy active in it, you know, with wild moves. It doesn't mean that you're not going to actively trade around it, but it's just not the same kind of personality as some of those really whippy, high-octane AI names. Yeah.

16:39Alissa Coram:And, and that does help because if you have a portfolio full of those high octane names, it's really tough when you get a day that all of them are coming in. And, um, you know, if, if you're, if you're dealing with 10 % ATRs, well, guess what? They can move down 10 % in a day and that's normal. So, uh, definitely nice to get something a lot steadier. And this is one of the benefits of looking at that weekly chart. You really get a sense of that personality, uh, both in looking at how this handles its 10 week moving average line, but also let's not forget that green line, the earnings line. That's a really nice angle of ascent there.

17:15Alissa Coram:And again, not very whippy. It's a very nice, steady earnings line that we have to go along with that price action. So when you've got the two kind of going, rowing in that same direction in a very nice, stable way, that's a recipe for success.

17:31Justin Nielsen:Yeah. Really great combo there. We've got over a month until the next earnings report as well. Okay, next on our list, Justin, let's go to CVS. You mentioned this as a sign of potential rotation here. And I believe David Keller, one of our recent IBD Live guests, was talking about this one. Let's take a closer look at the daily chart. Broke out of a long consolidation in early May around the earnings. And it's been pretty smooth sailing since. We did have a pullback to the 21 day line, but this has been in a very strong uptrend for the last couple of months. Yeah.

18:12Alissa Coram:And what I like is that when it pulls back, it pulls back in a pretty orderly way. It gets support in areas that you'd like to see it. And then today it was kind of nice that it was taking out a round number of 100. Uh, we kind of refer to these sometimes as Jesse Livermore numbers because, uh, over a century ago, he talked about how those levels can be psychological levels. And once you pass, you pass them, it can really kind of move the stock forward as an area of resistance gets left behind. So those those pullbacks, again, nice and orderly. This also is in a different area. So we saw XLV and XBI act very well today.

18:52Alissa Coram:So if you're looking for some other areas to, again, diversify, maybe so that you don't have everything in AI or AI adjacent stocks because let's face it, if you're in some of these building heavy construction, you're in an AI stock. You just might not realize it from the industry group name. But yeah, the pullback, nice and orderly and something that was crossing above 100. Here again, good to look at the weekly chart to kind of get that overall sense. Always good to get the big picture on some of these. While it doesn't have the same kind of steady earnings growth that we saw from Fix, this does have kind of a turnaround situation going.

19:31Alissa Coram:You can see where those negative growth quarters were, but it seems to be trying to right itself. And so while, again, not as smooth sailing on the earnings line, definitely looks like it's been turning a corner. So something to be keeping an eye on, again, for a little bit of diversity in your portfolio.