Was This The Follow-Up Strength We've Waited For? Taiwan Semi, NET, XP In Focus

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0:25Justin Nielsen:Good afternoon, everyone, and welcome to Stock Market Today for Monday, September 21st. It's Alyssa Coram along with Justin Nielsen here. And what a day it was. Justin, you know, if you would have asked me last week if I were to bet that today we would be at a new high on the Nasdaq, I don't know if I would have taken that bet, but look where we are. What a day of power.

0:49Alissa Coram:Yeah, absolutely. And look, this was one of the things that we were talking about on Friday that you have to be ready for. We were using the old Lucy Charlie Brown analogy that, you know, just because Lucy has pulled that football away from us so many times, you got to, you know, you got to be willing to try again. But we'll cover the markets and a few stocks today, including Taiwan Semiconductor, Cloudflare. I do have a position there and Brazilian stock XP.

1:18Justin Nielsen:All right. Sounds like a plan. We'll get to those stocks. But first, a closer look at the major indexes. And you and I did the Stock Market Today video together on Friday, and I think we were bullish heading into the weekend. Bullish, hopeful. And then when the day started out with that gap up, I think our optimism increased as the session progressed. And look at this close today, Justin. The Nasdaq up about 2.3 percent, once again, in new high territory, crossing the prior highs from a couple months ago back in May. So blasting above the marked high from August, getting above 27 ,000, closing above so many levels with this day of strength.

2:02Justin Nielsen:And it was definitely a tech-led day. The NASDAQ 100 was even stronger, up 2.8 % on the day, not quite in new high territory there. but the S &P 500 with a gain of about 1.5 % on the day, clearing a downtrend after that pullback to the 50-day line. And we do have some areas that aren't looking quite as good, including blue chips. You have the Dow here up 0.7 % on the day, so still some repair work needed. And looking at the DIA ETF, we can see that we're about 5 % off the highs there. And then looking at the IWM Russell 2000 ETF, that was up about half a percent today, over 6 % off highs. So even more work to be done there.

2:53Justin Nielsen:But let's start with and focus on the positive here, Justin. And the NASDAQ looks like it's all systems go.

3:03Alissa Coram:Yeah, absolutely. And so I think we just missed getting into new high territory. But the fact that we're just, you know, a fraction away, right? Oh, okay. Yeah, we're right there. 27, 190.

3:13Justin Nielsen:You know, I guess I was just wanting a lot from a record. It might have been a record close. It might have been a record close.

3:21Alissa Coram:I think you're right there. Record close. So, but yeah. Thank you for the detail there. Just a fraction away. So, you know, I think the tie goes to the runner. there maybe. But yeah, I think the big thing is, you know, again, while we were showing optimism, what we've really been needing to see is follow-up strength, right? We've had a lot of these days where we have very strong action and then you get no follow-up strength. And so now the question is, you know, we had kind of a line in the sand, you know, right around the 50-day moving average line. We've been really getting support at that level and at those lows.

4:00Alissa Coram:Once again, on the Fed day last week, we were talking about how we held that lower low, that marked low, and that became a kind of real important line in the sand. We breached it intraday, but then closed above it. And then we were kind of starting to take off from there. And today certainly seemed like the follow up strength that we've been waiting for. Now, some could argue, well, you know, we've had a lot of these strong days and then we kind of pull back or get into trouble. But this one did certainly feel different, right? We had a lot of setups, as you and I were talking about on Friday, a lot of things that were starting to tighten up.

4:40Alissa Coram:And now today was, again, a very, very sharp contrast to a lot of what we've seen. And even within some of the indexes, to your point, let's take a look at the Russell 2000. As we look at the Russell 2000 and where that closed on the day, look, you know, up half a percent is great. But if you go to the five minute chart and see how this kind of played out, this is kind of what we've been seeing a lot of times where you you start strong and you just can't really build on it. for the Russell 2000, it started strong, got up to those highs at the end of the day, and then kind of pulled back. Now let's contrast that with the Qs on the intraday chart, either the NASDAQ or the Qs, either one.

5:21Alissa Coram:We just, we gapped up, we started strong, and we just kept getting stronger throughout the day. And that's the power that we were looking for. It's really hard sometimes to trust the Monday gap ups because you do see those pullbacks like we saw in the Russell 2000, but this is kind of the ideal scenario. So not only did we have a lot of kind of hope coming into this, but then I think as the day progressed, it kind of allowed that optimism to gain momentum, if you will.

5:51Justin Nielsen:Exactly. And I think this is where IBD stands out in our approach to investing in portfolio management versus the rest of financial media out there is this morning on IBD Live, we were saying on a day like today, the game plan, how you handle a day like this, outlining all of the technical wins, so to speak, on the chart that you pointed out, Justin, heading into today. And then what do you do when you get a Monday morning gap up like this in this scenario with the news that we've gotten or that sort of news failure event type reaction playing out that we've mentioned with Jason Shapiro as the inspiration for that or like-minded type approach to that as IBD has.

6:38Justin Nielsen:And we were saying that, and our senior market strategist, Mike Webster, was saying throughout the day, treat this as a time-weighted average price type trade, getting that index exposure, whether you have your trading platform executing that for you, or if you're doing a riff on that manually, just incrementally adding throughout the day. And I definitely was doing that the first half of the day, Justin, getting that exposure back up where I wanted it to be with this renewed strength.

7:11Alissa Coram:No, I absolutely agree. I think that's the way you play it. Because look, we still had reason to go in incrementally. There's, you know, certainly things didn't have to finish the way they did today. So one of the benefits of, again, doing that incremental even throughout the day, whether you're doing your own time-weighted average price or whether you're using an algorithm like someone like an interactive broker that will do it for you. The point is that we're trend followers, we buy on strength, and today we just had a lot of opportunities where things kept on getting stronger. So you could kind of start doling more money out.

7:49Alissa Coram:Now, the problem is you have to be very careful when you're buying on strength that you're not buying too far extended. Right. And that's why kind of getting some of your positions started over the last couple of days was, I think, a good practice to once we got above that 50 day moving average line, once we crossed that downtrend, once we had the Friday action where we got a little bit of follow up strength, You know, it just puts you in a better position because if you if you just wait until you feel like things are all better, a lot of times you're going to miss everything. Right. Because a lot of times you don't feel like things are really on the right track until things are just way too obvious.

8:33Alissa Coram:So having some incremental starts, getting yourself in motion, and by all means, you have to make sure that you're remaining engaged with the market, even when you're not doing much, because that's how you're going to find out where is the strength kind of moving towards? Is it going back to old names? Is it going back to new names? Where is that strength? Where are the setups? Where are the patterns being formed? Uh, so this is why our weekend routines are so important. And, uh, kind of what we suggested on Friday was, uh, a reminder of how important that weekend routine is to kind of go through and find the stocks that are going to be, uh, first, first on your buy, buy card, uh, on Monday morning, if we do get the strength that we, we did.

9:18Alissa Coram:Now, again, as you said, neither one of us had this on our bingo card to be this strong, but you always have to be prepared for that scenario. And that's why your weekend routine and even your daily routine to kind of tweak things is so important.

9:33Justin Nielsen:Yeah. And not getting caught flat footed when you do see the opportunity, you're ready to strike. And yeah, as I said, IABD, we're keeping everyone in step with the market every step of the way. So a key inflection point. Absolutely. Justin, what would you want to see from here in order to say, okay, maybe this does have some legs. Would it be normal to see a little bit of a pullback tomorrow? Where do we want to hold for this bull case to hold?

10:06Alissa Coram:Yeah, Allie, you said it twice, and I think that's the key. We got to hold, right? It's okay to let some of this go. No problem. But I'd really like to see us hold above that marked high. The fact that we got above that, I think, is a good sign. I'd really like to see us hold above that. That's a big ask. At the minimum, I'd like us to see us hold above that last area of resistance that we covered and also the 21-day moving average line. Um, that's, that's one of the problems that we've had lately is that we get above the 21 day moving average line, but we don't stay above it. So that I think is a minimum requirement for me to start believing that we've got something to work with here.

10:50Alissa Coram:And again, that just kind of says that we're trending. So, um, Webby has his trend change checklist, uh, which is fun to say three times fast and three days is kind of the magic number. Guess what? Today was number three. So that's where we lean into the trend change a little bit more. Recognizing, again, if you are a little bit late to the party and you're buying a lot of things at the end of the day today, well, a lot of things were probably extended, which is why, again, starting some of those positions on Thursday and Friday, adding to some of those this morning, and then maybe doing that throughout the day was kind of the way to get here.

11:29Alissa Coram:And let's also be honest, because while IBD does a great job at keeping you in sync with the market, sometimes the market is very tricky and it can be very choppy. And a lot of times what we're doing is we're reporting on what the market is actually doing. We don't control it as much as we would love to. But sometimes that reporting means, oh, yeah, this is kind of a time where you want to scale back. This is a time where you want to kind of put on the gas and the market does other things. But that's why we have our risk management rules in place so that we don't get too hurt in those times where we get a little trendless.

12:07Alissa Coram:But we want to be making sure we're not getting too hurt. So when a trend change does happen, we're ready. We're there. We're not completely bruised up in our capital, both, you know, fiscally and mentally, that we're able to participate and in a big way.

12:24Justin Nielsen:This message is presented by KPMG Private. We bring together audit and assurance, tax, and advisory services designed specifically for private companies. With experienced professionals, advanced technology, and the reach of a global network, we support progress at the pace your business demands. Well said. Okay, well, today, absolutely an inflection point. We'll have to see if the momentum can continue. And before we move on to some of the sectors, I do want to get your thoughts on the S &P 500. I do think that this was bullish as well to see us clearing a trend line, some good power here, not quite closing at a new high, but a welcome improvement for the S &P.

13:08Alissa Coram:Absolutely. And again, as we noted on Friday, the NASDAQ was in a stronger position, but the S &P 500, you know, we often talk about, hey, is everyone rowing in the same direction? And while the Russell and the Dow Jones Industrial Average are not right now, let's face it, the NASDAQ and the S &P 500, those are our strongest rowers. If we can get them rowing in the same direction, it's OK to have your five-year-old not doing a great job. You know, that's what I'm equating to your small cap index. It's OK if they're not doing a great job because the power of the NASDAQ and the S &P 500 can really set your boat in the right direction.

13:50Alissa Coram:And I feel like that's what we got today. Again, the NASDAQ really seems to be like the leading index right now. But it's nice to have the S &P 500 right there with it instead of a lot of kind of jerkiness there. So it's nice to see it participate. This one, the downside was it was kind of right there at the 21 day moving average line, a little bit more hesitant. But the power today, I think, was a strong sign of approval.

14:18Justin Nielsen:Yes. And, you know, we were really bullish on the Nasdaq's setup, you know, especially looking at the weekly chart. I know we touched on that as well last Friday. But I think the S &P, too, if this was an individual stock making this move, you know, it would definitely look viable here, has a great technical setup shaping up there. Sure.

14:42Alissa Coram:Okay. And even in your own personal trading, Allie, you found a lot of times those kind of moves above the 50-day moving average line are good places to start positions. We, again, because we're buying on strength, there's a lot of ways to do that. It can be breakouts, but it can also be from pullbacks to moving average lines. And once that strength comes in, once the bounce happens, that can provide us a lot of opportunities. And I feel like that's what we've been seeing a lot of over the last few days. It's a lot of these stocks that are off their highs considerably and maybe weren't participating as much in the last few moves.

15:22Alissa Coram:Those seem to be where a lot of the action has been in the last few days here. Mm-hmm.

15:28Justin Nielsen:Okay. Well, in addition to small caps and blue chips not looking too great, also breadth potentially an issue for some traders. Justin, RSP here up about six-tenths of a percent on the day, but it has the same look of the small caps. It's still in a short-term downtrend below a flattening 50-day moving average. So it is a concern, but I would say if you're screening like how we've been screening or watching IBD Live, there is plenty of merchandise out there, arguably, if you're picking the right stock. So I think that's what it comes down to is it's going to be the stock selection and the risk management.

16:11Justin Nielsen:It is a factor to be aware of, though. But I will say, Justin, it seems like there have been past market cycles where you don't have this breadth indicator on your side, but you can still have really notable market advances. So it's picking our spots and relying on something that we do a really great job of, and that's finding the leadership, looking for that relative strength, those standout stocks that are going to get us that portfolio outperformance.

16:40Alissa Coram:Yeah, absolutely. And I just want to reiterate what you were saying there, Allie, because I think it's important and recognizing, I think what RSP is telling us is that importance of stock selection. You know, there are some markets where you can really get away with throwing a dart and it doesn't matter where it lands, you're going to win. But this is not that environment. And I think RSP is showing that, you know, that you do have to really be looking for the stronger stocks out there, whether you're looking at the fundamentals and then also using the technical action to kind of match. OK, yes, these are these are in line, You've got a strong company with solid earnings and a good story behind it.

17:24Alissa Coram:And the chart is also telling you that this is something that is being bought, that the demand is there for this stock. That's the combination that we're really looking for. And as RSP is showing, there is a lot of stocks that are not are not participating in that way. You know, let's just do a quick. This is something we did on Friday, but worth revisiting mags, which is the magnificent seven and X mag, which is the other four hundred ninety three in the S &P 500. And it's a very different look. Look, I like that X mag is potentially breaking a downtrend here. but it's very clear that the Magnificent Seven is in a much different position.

18:09Alissa Coram:This is where a lot of the strength is and so you have to kind of really find out hey am I am I really truly in the A type stocks or am I in some of these also rands and you know some of the ways that you can determine that relative strength is a big way of doing that and you have the line from Friday where we were showing how, look, the relative strength on this versus the S &P 500 has been in a very different angle, right? And this is the angle that we want to see, where something is going up in relative strength on that relative strength line and getting stronger. And this was a very clear breakout.

18:48Alissa Coram:So something important, I think, for the indexes that are market cap weighted. So of course, you're going to want to see the biggest market cap stocks doing well.

18:58Justin Nielsen:Absolutely. Okay, so we'll take a look at three more ETFs than our three stocks, and we'll get going on that. So the chip sector with a compelling and notable move here today, Justin, up 4%, and this is changing character. We had a couple of areas where this ran into trouble around the 50-day moving average, an opportunity for some investors to go short the chips, which had been leading in that strong power trend that we had in the spring. Finally, seeing this turn a corner, it looks like. Hopefully, the strength can continue here. But not only did we get a close above the 50-day on Friday, so character change signal number one, but we are now following up on that strength, just like in the major indexes.

19:47Justin Nielsen:So next stop, potentially that round number of 600 and the marked high. But it's great to see progress from the chip sector if you're a bull. Corporate megastores are spending millions lobbying D.C. politicians on one-sided policies that send small businesses tumbling. They want to enact harmful credit card mandates that take resources away from your local credit union and community bank, leaving Main Street businesses with less access to credit, making it harder for your family to pay for everyday goods like gas and groceries. Tell Congress to guard your card and oppose the Durbin Marshall credit card mandates.

20:24Justin Nielsen:Paid for by the Electronic Payments Coalition.

20:28Alissa Coram:Absolutely. Again, this is this is one of the things that truly feeds NASDAQ moves a lot of times. And especially in our AI era, this is providing so much of the infrastructure for that AI, the data centers and everything else. So I think very important. And look, this is where you have to be willing to change your mind. I think a lot of us were looking at those bumps on the 50-day moving average line and getting turned away as a very negative sign. And you certainly could have been viewing it that way on Thursday. Here we go again. and even on Friday, you could be saying, look, I'm not sure I'm ready to believe it, but today that's where you really have to change your mind and get with the program here.

21:11Alissa Coram:But it also does kind of show you how this was, I think by far one of the strongest areas in the market today with the percentage gains. And this is also where a lot of things are well off their highs still. And again, it kind of shows you that there was this top in June where it looked like, okay, we're basing, we're consolidating. And this is where people can very easily give up on things. But you have to remember that it's during these bases that, you know, they can potentially set up for the next move. So you always have to be aware of that. Yes, there are those cases where a stock will base or it'll look like it's basing and it just never comes back.