Watch for Higher Lows in These Three Tech Stocks

StockCharts TV
13 May 202433:46

TLDRIn this episode of the final bar, host Dave Keller discusses the current market trends focusing on the technology and utility sectors, which have shown relative strength year to date. He analyzes Bitcoin's price action, noting its support level around $60,000 and the importance of the 50-day moving average. Dave also covers the performance of the NASDAQ and S&P 500, highlighting the mixed bag of growth and value stocks. He touches on the potential warning signs indicated by the VIX above 15 and the interest rate environment's impact on technology sectors. Dave reviews various stocks, including Tesla, Apple, and Amazon, discussing their technical analysis and relative strength. He also addresses the rotation in the market towards defensive sectors and the implications for investors. The episode ends with a reminder of Dave's upcoming webcast on the 'Sell in May' phenomenon and an invitation for viewer questions.

Takeaways

  • 📈 The NASDAQ is showing slight gains, with technology stocks leading the leaderboard, indicating a continued interest in tech sector investments.
  • 🤔 In a recent poll, 34% of respondents predicted that Bitcoin's value would be between 60,000 and 70,000 USD by the end of May 2024, showing a general consensus on its potential price range.
  • 📊 Bitcoin's price has found support around the 60,000 USD level, which is a significant psychological threshold and also the first Fibonacci support level, suggesting a bounce at this predictable level.
  • 📉 The VIX index increased, indicating higher uncertainty or fear in the market, which is something to monitor closely as it could signal potential market stress.
  • 📉 Gold prices moved lower, with the GLD fund down over 1%, contrasting with the overall trend seen in the precious metals market.
  • 📈 The technology sector within the S&P sectors performed well, with the XLK up about half a percent, suggesting continued growth in tech despite market volatility.
  • 📊 The yield curve shows slight decreases across the board, with the 5-year and 10-year points around 4.2%, hinting at a potential positive environment for tech stocks as rates come down.
  • 🚀 The 'Magnificent Seven' stocks, including Tesla and Apple, had a good day with both seeing gains, indicating a possible recovery for these leading growth names.
  • 📊 An ascending triangle pattern or a head and shoulders bottom pattern is observed in certain stocks like Madna, which broke above resistance around 115, signaling a potential upward momentum.
  • 📉 Amazon's stock chart shows a bearish momentum divergence, which could suggest that the current uptrend might be nearing an end, indicating caution for investors.
  • 📈 Stocks like U and American Airlines are showing short-term positive price action, but with significant overhead resistance, caution is advised for investors considering these names.

Q & A

  • What is the topic of discussion for the segment titled 'It's All Relative'?

    -The segment 'It's All Relative' focuses on the relative strength characteristics of the market, specifically looking at the utility and technology sectors which have been some of the stronger sectors on a relative basis year to date.

  • What is the current state of Bitcoin as discussed in the script?

    -As of the discussion, Bitcoin is trading around $63,000. It has tested the support level of $60,000 and bounced back, indicating a consistent floor. However, to make significant gains and surpass $70,000, Bitcoin first needs to get above the 50-day moving average.

  • What is the general performance of the NASDAQ compared to the S&P 500 and Dow?

    -The NASDAQ is performing slightly higher, while the S&P 500 is not showing much change, and the Dow is down by 2%. This suggests that growth-oriented stocks, which are more heavily represented in the NASDAQ, are doing better than value stocks, which are more prevalent in the Dow.

  • What does the VIX index indicate about the current market conditions?

    -The VIX index has increased to around 13.6, which is above 15, indicating elevated uncertainty and potential fear in the market. While not necessarily bearish, it suggests that the market is not in a low volatility or bullish configuration.

  • What is the significance of the yield curve in the current interest rate environment?

    -The yield curve, with the 5-year and 10-year points around 4.2%, is generally used as a benchmark for interest rates. The fact that rates are coming down is usually a good sign for sectors like technology, which tend to benefit from lower interest rates.

  • How does the performance of the 'Magnificent Seven' stocks relate to the overall market trend?

    -The 'Magnificent Seven' refers to leading growth names like Tesla and Apple. Despite previous underperformance, both Tesla and Apple are experiencing gains, which is a positive sign for the market. Their performance is often indicative of the overall trend in the technology sector.

  • What is the current trend in the gold market, and how does it relate to the GLD?

    -The gold market has seen a significant breakout above a long-term resistance level, which is a constructive development from a technical perspective. The GLD, which tracks gold prices, has also shown strong momentum, although it experienced a slight pullback. The focus is on whether gold can maintain its position above the $2,300 support level on a pullback.

  • What is the significance of the Advanced decline lines and what do they indicate for the market?

    -The Advanced decline lines are breadth indicators for the New York Stock Exchange across different cap tiers. They have all made new 52-week highs, suggesting that the market's underlying strength is reflected in these conditions, which is a bullish signal.

  • What are the implications of a bearish momentum divergence for the S&P and NASDAQ?

    -A bearish momentum divergence, such as the one seen with Amazon, indicates that the uptrend may be nearing an end. If major indices like the S&P and NASDAQ are making new highs on weaker momentum, it could signal an exhaustion in the bullish phase.

  • What is the current state of the healthcare sector in comparison to other sectors like utilities and technology?

    -The healthcare sector is not performing as strongly on a relative basis compared to sectors like utilities and technology. It has a mixed composition, including biotech, pharmaceuticals, life sciences, and medical devices, which can respond differently to market conditions.

  • How does the relative strength of defensive sectors like utilities and consumer staples impact the market?

    -When defensive sectors like utilities and consumer staples show strength, it can be a sign that investors are seeking safety and income, possibly indicating concerns about growth from current levels. This shift towards defensive sectors can be a red flag for potential market downturns.

Outlines

00:00

📈 Market Recap and Technical Analysis Overview

Dave Keller, Chief Market Strategist at StockCharts.com, welcomes viewers to the final bar on Monday, May 13, 2024. He discusses the day's market action, noting a quiet day for the S&P 500 and a slight rise for the NASDAQ. Technology leads the sectors, with utilities and real estate also performing well. The show will focus on relative strength characteristics in utilities and technology sectors. A poll question about Bitcoin's value by May 31st, 2024, is mentioned, with many expecting it to be between 60K and 70K. Bitcoin's current price level and support at 60K are discussed, along with the 50-day moving average as a resistance level.

05:01

📊 Sector Performance and Market Indicators

The paragraph discusses the mixed performance of market averages, with growth stocks outperforming value stocks. The NASDAQ Composite is up, while the Dow Jones Industrial Average is down. The S&P 500 shows little change. The VIX index increases, indicating higher uncertainty. The yield curve and interest rates are analyzed, with technology sectors benefiting from lower rates. Bond prices, the dollar index, gold prices, and cryptocurrency movements are also covered. Sector-wise, utilities and real estate are at the top, with industrials and financials at the bottom. The 'Magnificent Seven' stocks are highlighted, with Tesla and Apple having a good day. The S&P 500 daily chart is reviewed, noting the market's trend and seasonal headwinds.

10:02

💹 Advanced Decline Lines and Gold Market Discussion

The breadth indicators for the New York Stock Exchange are highlighted, showing new highs across different cap tiers, which is a bullish signal. Gold's performance is analyzed, with a focus on the GLD and spot gold charts. The breakout above long-term resistance levels and the formation of higher lows are seen as constructive developments. The potential for a pullback to the 50-day moving average level is mentioned as a level to watch.

15:04

🚀 Stock Performance and Technical Analysis

Madna, a pharmaceutical stock, is discussed with attention to its resistance level at 110 to 115 and how it has turned into support after breaking above it. The concept of polarity in technical analysis is introduced. Apple's and Amazon's stock performances are analyzed, with Amazon showing a bearish momentum divergence, which could indicate the end of a significant run. Other stocks like American Airlines and United Airlines are mentioned, noting their short-term moves and the importance of watching for breakouts above overhead resistance.

20:05

📊 Relative Rotation Graph (RRG) and Sector Analysis

The Relative Rotation Graph (RRG) is used to analyze sector performance. Defensive sectors like utilities and consumer staples are noted for their strength. The daily RRG shows utilities rotating down but then improving. The relative strength of different sectors is discussed, with technology stocks underperforming the S&P 500. Value sectors like industrials, financials, and materials have shown relative strength but are starting to trend lower. The performance of defensive sectors is highlighted as a potential concern for market direction.

25:06

📈 Relative Strength Focus on Utilities and Technology

The focus shifts to relative strength in the utilities and technology sectors. The performance of utility stocks like CEG, Southern Company, and Vistra Corp (VST) is discussed, noting their significant gains and the implications for investors. The importance of not overlooking sectors or stocks based on preconceived notions is emphasized. The technology sector's strength is also noted, with stocks like AppLovin and Toast showing strong relative performance and breakout patterns. The importance of owning stocks that are outperforming the S&P 500 for those looking to beat the market is highlighted.

Mindmap

Keywords

💡Technical Analysis

Technical analysis is a method used to forecast the direction of prices through the study of past market data, primarily price and volume. In the video, Dave Keller, the chief Market strategist at stockcharts.com, uses technical analysis to break down market action, focusing on chart patterns and historical performance to predict future trends. It is central to the video's theme as it guides the discussion on market behavior and stock performance.

💡NASDAQ

The NASDAQ is a major American stock exchange known for its electronic trading platform and listing of technology companies. In the script, it is mentioned that the NASDAQ is pushing slightly higher, indicating a positive trend for technology stocks, which is a key point in the analysis of market performance.

💡Relative Strength

Relative strength refers to the performance of a particular stock or sector in comparison to a benchmark or to the overall market. The video discusses relative strength characteristics of various sectors, emphasizing the importance of understanding which sectors are outperforming or underperforming. It is used to identify potential investment opportunities and market trends.

💡Bitcoin

Bitcoin is a decentralized digital currency that operates on a peer-to-peer network. The script mentions a poll question about where Bitcoin will be by May 31st, 2024, and discusses its current price level and support levels. Bitcoin's performance is relevant as it represents the cryptocurrency market, which is often viewed as a speculative investment and can indicate broader trends in risk appetite among investors.

💡Fibonacci Support Level

A Fibonacci support level is a type of price level determined by the Fibonacci sequence, which is often used in technical analysis to identify potential support and resistance levels in the market. In the video, it is noted that Bitcoin has found support at the first Fibonacci level, which is a significant factor in its recent bounce.

💡VIX

The VIX, or Volatility Index, is a measure of the stock market's expectation of volatility based on S&P 500 index options. A higher VIX indicates greater expected volatility, while a lower VIX suggests more stable market conditions. In the script, the VIX is mentioned as having moved up, signaling increased uncertainty in the market.

💡Yield Curve

The yield curve is a graph that plots the interest rates of bonds across different maturity periods. It is used to predict future economic conditions. In the video, the yield curve is discussed in the context of interest rates and their impact on sectors like technology, which typically perform better when interest rates are falling.

💡Advanced Decline Lines

Advanced decline lines are indicators that measure the cumulative number of advancing and declining issues on an exchange. They are used to gauge the overall health and breadth of the market. The video highlights that despite the S&P not making new highs, the advanced decline lines have, which is a bullish sign indicating underlying market strength.

💡Gold

Gold is often viewed as a safe-haven asset and its price movements can reflect investor sentiment and economic trends. The video discusses gold's technical chart, noting a breakout above long-term resistance levels and the potential for continued strength in gold prices, which can be an important factor for investors looking at commodity markets.

💡Seasonality

Seasonality refers to patterns in financial markets that recur at approximately the same time each year. The video mentions the 'sell in May' phenomenon, which is a seasonal strategy suggesting that stocks tend to perform worse in the May to October period compared to November to April. This concept is discussed in the context of whether it might be a winning strategy for the year 2024.

💡Momentum

Momentum, in finance, often refers to the rate of change of an asset's price over time and is used to predict the future movement of that price. The video discusses momentum in relation to stocks like Amazon, noting a bearish momentum divergence, which suggests that the recent uptrend might be losing strength and could be nearing an end.

Highlights

Dave Keller, Chief Market Strategist at stockcharts.com, discusses market action and technical analysis.

The NASDAQ slightly higher, with technology stocks leading the gains.

Utilities and technology sectors have been relatively strong year to date.

Bitcoin's price action, with 34% of poll respondents predicting it will be between 60K and 70K by end of May 2024.

The importance of the 50-day moving average for Bitcoin's short-term momentum.

Mixed performance in the market with growth stocks outperforming value stocks.

The S&P 500 and VIX indicators suggesting potential market uncertainty.

Yield curve and interest rate environment's impact on technology sector performance.

Relative strength characteristics of various sectors, including utilities and technology.

Madna, a pharmaceutical stock, showing an ascending triangle pattern and resistance turning into support.

Apple's stock chart showing signs of a potential upward momentum after a gap higher on earnings.

Amazon's bearish momentum divergence indicating a potential end to the current uptrend.

The significance of breadth indicators and how they reflect overall market participation.

Gold's technical analysis showing a constructive development with higher lows and a long-term resistance breakout.

Relative rotation graph (RRG) analysis indicating a shift towards defensive sectors.

The performance of utility stocks like CEG and VST, which show significant gains and strong relative strength.

AppLovin's consistent breakout patterns and its performance as a top-ranked stock in large-cap space.

Toast's stock behavior post earnings release and its potential as an outperformer.