Tech Weakens But Drugs Back On Top; Eli Lilly, Jazz Pharma, Match.com In Focus

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0:59Good afternoon, everyone. Welcome to Stock Market Today for Tuesday, July 7th. I am Rachel Fox, your host for today. And in today's market, we saw the major indexes pull back after a positive start to the week yesterday. And we also saw things kind of selling off in the final hours of trading today. Here to help me break down all you need to know about today's market action is IBD head of market research, Justin Nielsen. Hello, Justin. How are you doing?

1:28Rachel Fox:Hello, Rachel. Well, it's more rotation underway, and that makes things a little bit difficult, but we've got some stocks to serve up for you, including some drug makers, Eli Lilly and Jazz Pharmaceuticals. I do have a position in Eli Lilly, and we'll also take a look at Match.com. I have a position there as well. Okay, great. We will definitely get to those stocks. Before we do, I'll give you a quick rundown on what the indexes did. We saw the S &P 500 kind of sell off into the close. It closed down about 0.5%. We saw the NASDAQ lead declines with a loss of 1.2%. The Dow turned negative after opening higher and was down 0.3%.

2:11And the Russell closed down 0.9 % for the day. So I'm going to go ahead and pull up some charts here, Justin. let's take a look at what was going on. We are just kind of continuing to see the shift away from tech, away from AI stocks into some other areas like medical stocks, insurance companies too. David Ryan pointed out some insurance companies that did well on this morning's IP Live show. So we're kind of at a critical juncture here. The NASDAQ closed below the 50-day line today. So what are some of your key takeaways from today's action here, Justin?

2:50Rachel Fox:Well, I think, you know, you have to put it in context of what's been going on for the last few weeks here. We're starting to become trendless where you have these days like yesterday where, oh, it seems like we're getting going, right? We are back above the 21-day moving average line. We're back above the 50-day moving average line. We got the low clearing, that level, 26 ,000 conquered. So you start thinking, oh, OK, well, we're back in action. But then, you know, there's other things that kind of make you a little hesitant. Oh, it's an inside day, right? We didn't even get above the previous day's high.

3:26Rachel Fox:It was kind of a tight close, closing mid-range. So while there are some positives from yesterday's action, there were these negatives. So it's kind of just this mixed message. And there's still a heaviness to the NASDAQ composite right now. There's a lot of distribution that has piled up. So I'm not too surprised when I see a day like today. It's just kind of like, again, we're just not trending right now in a positive way. It's not in a definitive downtrend either, though. You know, so it's not like you're giving things up completely. You know, it's just a lot of this back and forth and chop.

4:04Rachel Fox:And that, to me, is the most dangerous type of market. So you have to be very careful. Now, on the flip side, you know, you got the S &P 500, which did look a little bit better, frankly. You know, when you look at that, this has at least stayed above its 21-day moving average line. And it stayed above the 50-day moving average line. So a little bit stronger there. But, again, it's not necessarily getting that much oomph behind it. So just, again, another one of those things where we are looking for a trend. I should also mention that for the NASDAQ composite, one of the things that people have asked a lot about on IBD Live is the power trend, the state of the power trend.

4:49Rachel Fox:And that is turning off now because the 21-day moving average line, that's the green line on Rachel's charts here, versus the 50-day moving average line, which is the red line. You can't kind of see them because they just got so close together, which was basically meaning, yeah, this thing is going to turn off. It's been under pressure for a while, really since we crossed below the 50 day moving average line. It was under this under pressure condition. And, you know, just to remind folks, the power trend is kind of what we saw at the first part of this rally that started in April, where you're just really trending very nicely.

5:27Rachel Fox:And that's kind of where you want to have your positions, give them room, not be too quick to try and get out of, you know, lose your positions, get shaken out of them. But again, we're in a very different market now than we were from the April to June period. Now we're kind of in, again, more of a pullback phase. That doesn't necessarily mean, oh, we got a full blown bear market that we have to be careful of. But it does mean, hey, this is not the time to be pressing. This is the time to be really a little bit more cautious, a little bit more cognizant of where your stops are, a little bit more on the defensive side.

6:07Rachel Fox:Now, we looked at the NASDAQ. We looked at the S &P 500. Let's look at RSP because the equal weighted S &P 500 is just showing a little bit of a different picture. So this does tell you, OK, how are things really playing out for the average stock, the average S &P 500 stock? Well, it wasn't a great day today because, yes, we were up considerably and lost those gains by the close. But this looks very different, right? We're at highs, at all time highs. We've been trending for the most part above that 50 day, above that 21 day moving average line. So a very different look, which just basically tells you when you're getting kind of this divergence with the NASDAQ looking a little bit weaker, but RSP looking stronger, it just kind of tells you, OK, this could be that we're just seeing that the large cap, the mega cap stocks are really kind of dragging things down.

7:05Rachel Fox:So to confirm that, let's look at MAGS, MAGS, which is your Magnificent 7. This is the round-hilled Magnificent 7. You can see this did get above the 200-day moving average line this week, but it's still below the 50-day moving average line. So acting as a little bit of a drag, not too much today. Again, what I think today was really dragging things, let's take a look at SMH. because the semiconductor space has been one of those strongest areas of this rally. But look at what happened today. Gap down, closed below the 50-day moving average line for the first time since April. So very different look here for the semiconductors.

7:48Rachel Fox:And again, this has been one of the leading areas of this rally. So with this getting in trouble, and it was holding up pretty well until recently, where it just really seemed to kind of give up. And we're seeing a lot of those, the memory stocks, if you look at DRAM, which is a memory stock ETF, you can see that came all the way down to the 50-day moving average line, which again, you could say, hey, that's getting support of the 50-day moving average line, but here's an ETF that is down 25.5 % from its high. So that's no fun. That's one of the things where, again, And when you're losing a quarter of your value in just a couple weeks here, that leaves a mark.

8:34Rachel Fox:And so that's kind of what's going on here is we've got a lot of the tech space that is pulling back and not having a good day. Some of the areas that were strong today, well, the top sector spider ETF was XLE, you know, energy, which the chart here doesn't look great. So again, it had a good day today, but look, you're still below the 50-day moving average line on this one. You've been trending lower, you know, as things, you know, have been getting resolved in Iran. It was kind of looking like these, you know, oil prices were going to come down. Today, you had a move up to the 21-day moving average line, but it didn't close above it.

9:16Rachel Fox:So I think it's a little too early to claim victory here. Um, XBI was another area of strength. Um, you have this, that's just been like, what pullback? Now this has been looking so strong, uh, lately, um, XLV, uh, to a large degree as well, which is the broader healthcare, uh, space, you know, that's, that's moved out over the last couple of weeks. And so again, you do have these pockets of strength that have been, uh, looking just fine, But tech, not so much. Hi, this is Alex Osula, host of the WSJ's What's News podcast. We bring you the biggest news of the day, from business and finance to global and political developments that move markets.

10:02Rachel Fox:If you're looking for more insights and tools to understand the latest headlines, consider becoming a subscriber to The Wall Street Journal. Visit subscribe.wsj.com slash what's news to subscribe now. yeah um tech for the most part although there are some computer software names that also have been true you know holding up all right but for the most part you're right the you know electrical equipment stocks that we've been looking at the ai related plays that we've been in since early april those are all kind of we're trying to back out of them and you know look for opportunities in other spaces like this area.

10:44Rachel Fox:Well, you know, since you bring up the software, because that's a very good point, Rachel, let's take a look at IGV. And again, IGV is kind of brought down by some of these AI plays that have been doing a lot of, you know, your hyperscalers that have been doing a lot of capex spending. You know, so this makes me nervous, right? Coming right up to the 200-day moving average line and getting turned away there. But to your point, not all software is created equal. Hack, by contrast, and I do have a position in Hack, this is your cybersecurity space. Very different look here. This has been trending nicely above the 50-day moving average line.

11:21Rachel Fox:Kind of spent some time hovering right around the 21-day line, but, you know, pulled out of that really, really nicely. Not a great day today with the reversal, but still, compared to most tech, this was only down half a percent. And again, is right there, you know, having broken out recently and just just looks very different from your average, your average tech stock, to be honest. Yeah, absolutely. It sounds like the move is pretty much look at look at some, you know, medical stocks, look at these other areas that seem to be, you know, holding up. So let's go ahead and take a look at the stocks that you brought up.

12:01So first, starting with Eli Lilly, which I believe made a new high today. This one already broke out of this cut base several weeks ago, has been kind of going back and forth, but getting support right at the 21 day line. You know, RS line, not at new highs, but very close. This is a nice move here. Yeah.

12:23Rachel Fox:And look, I, again, do have a position in this stock myself. And you have days like yesterday where it can be very tough because you see the NASDAQ up considerably. You see the tech stocks looking like they're maybe coming back. and Eli Lilly, which has been doing fairly well, holding up nicely, has a bad day. And so you start wondering, okay, well, should I stick with this position? And then the rotation kind of goes right back to the medical names and things like that. And it broke out. And also again, a kind of a, you know, a little bit off its highs, but still I think looking interesting here.

13:06Rachel Fox:The pullbacks, as you mentioned, to the 21 day moving average line, getting support, some real strength coming in to kind of entice investors back into this stock. But holding up relatively well, you certainly have a lot of the talk about the Red Trutide and everything that's coming out that Eli Lilly has. Let's go ahead and take a look at the weekly chart as well, just to put this move in perspective because, or actually even the monthly chart, because this really did have such a strong rally here. And, you know, you might look at this and say, well, gosh, lately that relative strength hasn't looked great.

13:46Rachel Fox:But if, you know, if this rotation does take hold, you can see that this relative strength line is on the verge of, you know, maybe taking out those highs. And so when you see something that has been basing for a while and not participating, it's normal to see that relative strength line take a break as well. So I'd be interested to see if this relative strength line can retake those highs. And Eli Lilly looks like it's, you know, been been set up to do that. Now, it remains to be seen. Again, the rotation could just go right back to AI. We could have a little pullback and things could go right back.

14:24Rachel Fox:And the AI has been sucking a lot of the money out of the room. So I'm prepared for that. But in the meantime, this is an area that does seem to be working. And so today was just another example of how this this one tends to work when the NASDAQ isn't. Yeah. And are you do you see this as extended or is this a place to add, do you think, for people who are in it? I think I think for a traditional, you know, position trade, this is extended. But, you know, if you were doing a swing trade, then a lot of times I'll use like the the little pullback that we had. I'll kind of use that. And, you know, sometimes I'm looking at like a 15 minute or 30 minute chart.

15:07Rachel Fox:So if you go to like an intraday chart, you can sometimes kind of see see patterns there. And you see that this kind of did like, you know, take a little pause here. And then today it kind of broke out of that. Now, it didn't really move. I would have preferred for it to kind of move past the first 30 minute high right there at 1250. So I didn't add to my position. I was kind of waiting for that to happen. So that's what I'm looking at. But look, after that big move that it had to end June, it was completely legitimate for this to kind of take a little bit of a break around 1200. But I like how it's held up.

15:48Rachel Fox:And so, yeah, 1250 is a place that I may be adding to my position. Absolutely. That is a good area to keep an eye on. All right, let's move over to Jazz, Jazz Medical, which is another in the medical space, pharmaceuticals. This one having a nice outside day here today. We're not getting an RS line blue dot here, but it does look like the RS line is pretty much at new highs. This one broke out yesterday, showing more strength today. Yeah. And sometimes you don't get the blue dot once it gets out of a base. So that might be what's going on there. And sometimes you'll see it on the weekly, but not on the daily.

16:31Rachel Fox:You know, that's not the case here, but I think it's because it's out of the base already. Whereas a lot of times that blue dot comes when you're still within the base. But yeah, the outside day was particularly attractive to me. You know, it kind of, you know, did a little shakeout underneath that 243-32 traditional buy point and then came right back. And I like the way this one closed. A lot of things got weak, as you mentioned, Rachel, at the close kind of came in. We saw that with HACC. We saw that with the NASDAQ and S &P 500. But this one ended up closing strong. So a nice close there. While this did come up strongly from that 50-day moving average line, it hasn't gone straight up.

17:15Rachel Fox:So it doesn't look too far out of there, too far extended. You know, I would have preferred maybe a little bit of a, a little bit more of a pause out of this one, but it's okay that it didn't happen. And then if you don't mind, could you just real quickly show the EPS table at the bottom? And just to kind of, you know, put a point on this, that this has got some very strong numbers that have been coming out. You know, this last one, the 175, you know, look, that's a little misleading because it was going from losses on its earnings per share to positive, but it's doing that in a big way. So you can see how these numbers have been growing.

17:59Rachel Fox:Gosh, you know, let's look at the annual numbers, you know, from 1320 to 1829 earnings per share to 2090 in 2024. 2025 took a hit, but let's look at how 2026 and 2027 show this getting right back on track. So a very interesting look there. I'm going to give a bonus stock here. Since we are in the pharmaceutical space, let's just also take a look at TGTX, another strong one. This is in the profitable biotech. We have split our groups up into three different ones, profitable biotech, revenue biotech, and development biotech. Personally, I kind of stay away from the development biotech myself because those are a lot more speculative.

18:41Rachel Fox:I prefer to stick in within the profitable biotech, those that are already turning profits and TGTX, TG Therapeutics is a good example of that. Very strong numbers, you know, here in terms of the earnings growth and revenue growth. And a nice little pause there right after hitting that 20 to 25 percent profit zone and a strong day today, closing near the top of its range, breaking out of kind of that little consolidation. So again, a lot of strength in this space, whether it's medical, profitable biotech, the pharmaceuticals, you know, or just even broader areas. Medical certainly seems like the place to be right now.

19:23Yeah. I mean, relative strength line is you can't question that. And top notch.

19:29Rachel Fox:Yeah. Yeah. Really good. So, yeah, two, two, three great names there from the medicals to take a look at. Let's round things out here with Match Group, which not in the medical space. This is over in the online dating space. and I think they own some other online apps and things like that, making a breakout from a cut base here. Yeah. And, you know, I don't know what's going on, to be honest. I don't know what the catalyst is here. But sometimes what I start with is, oh, here's a good looking base. Now, let me take a look and see if I can find out what's going on. So a very classic breakout. You know how I was asking kind of like, oh, gosh, I wish this would have pulled back a little bit or paused.

20:16Rachel Fox:That's exactly what match did here. You know, it got up to that 3894 level, took a little brief pause. And now today it just kind of blew through there. So I really like the look of that. Again, I do have a position in this. We added to swing trader. So I just waited for my 30 minute restriction period to end. And I started a position on this today. So I think it looks strong. I think it looks actionable. My next thing is, and I didn't get a chance to do this, so I started small. I'm going to do a little bit of looking into it. You know, is there news? Is there a catalyst that's kind of driving this?

20:52Rachel Fox:And that might, you know, cause me to go a little bit larger with my position. But at least I have a starter position in it. And so I can always build from there. Yeah, absolutely. This one may present future add-on buy points through pullbacks or that sort of thing. I'm noticing, yeah, pretty solid expected earnings growth over the next few years and a nice accumulation distribution rating of A here. So this one is definitely one to maybe keep an eye on here. Let's see if we can get to some new highs. And look, it hasn't been doing much lately. So the relative strength, again, it doesn't doesn't bother me so much that this is a 66 because this has sat out.

21:37Rachel Fox:So, again, if I'm going to be, you know, what's gotten me interested in this is I'm trying to look for areas that haven't been moving, that haven't been on people's top burners. And that's that's where I'm a little bit more forgiving on the RS rating if I'm seeing rotation. So, again, because this hasn't participated, you know, I'm looking to see, OK, if money does start flowing into other areas, what's setting up, what's breaking out and match match comes up in that regard. Yeah, absolutely. All right, Justin, thank you so much for sharing your expertise and knowledge with us today. As always, I think that will wrap it up for today.

22:19Any any last thoughts before we head into tomorrow?

22:22Rachel Fox:You know what? Just if folks are interested, the podcast tomorrow, we're going to go live at five with Andrew Chanin. He runs the UFO ETF. So I'm sure we're going to talk a lot about SpaceX, you know, how that's sucking a lot of the air in the room. some of the market mechanics that go behind how to determine what level is appropriate for a position size here, since it's coming on at such a large position size for the NASDAQ 100. So, yeah, we'll be talking about that and some other space stocks that are worth mentioning and technology that is very interesting in terms of the future for space. So it's going to be great to talk with Andrew Shannon.

23:07Rachel Fox:we go live at 5 p.m. Eastern tomorrow on the podcast. All right. Thank you so much, Justin. Yeah, everyone go check out the podcast. Always tons of great information and educational content for you there. So thanks, Justin. That'll do it for today. And we will be back with more market analysis tomorrow morning, starting with IBD Live. So you can head over to investors.com slash IBD Live for all the details there. I'll be joining you again, hosting tomorrow morning. So thanks so much for watching.

23:53Rachel Fox:Hey, this is Telus Demos. And I'm Miriam Gottfried. We're reporters at The Wall Street Journal and the hosts of WSJ's Take on the Week. It's a weekly show that gives listeners a leg up in the world of markets and investing. From the Fed's moves to market bubbles, we dive into the biggest deals, key players and business news ahead. If you're looking for more news and tools that you can use to help navigate the markets, consider becoming a subscriber to The Wall Street Journal. Visit subscribe.wsj.com slash take on the week to subscribe now. This show is for informational and educational purposes only, and nothing should be construed as a recommendation to buy, hold or sell any securities.

24:31Any securities and investment strategies discussed may not be suitable for all investors. Make sure to consider consulting with your financial advisor before making investment decisions. Fusion powers the sun and stars. General Fusion is working to bring the zero-carbon abundant energy source to Earth. As global electricity demand surges, Fusion has the potential to deliver clean, scalable power for a growing world. Proudly NASDAQ listed, General Fusion is the first publicly traded pure-play fusion energy company in the world. With its magnetized target fusion technology and operational demonstration machine, General Fusion is advancing toward commercialization, targeting a first-of-a-kind fusion plant around 2035.

25:08Learn more at GeneralFusion.com.