Watch for Higher Lows in These Three Tech Stocks
TLDRIn this episode of the final bar, host Dave Keller discusses the market action focusing on technical analysis. He highlights a choppy day for the S&P 500 with the NASDAQ slightly higher, driven by technology stocks. Dave reviews Bitcoin's performance, noting it is currently around $63,000 and discusses the potential outcomes by the end of May. He also covers market averages, noting a mixed bag with growth stocks outperforming value stocks. The VIX index is highlighted as slightly higher, indicating increased uncertainty. Dave examines various sectors, with utilities and technology performing well, and discusses the 'Magnificent Seven' stocks, including Tesla and Apple. He provides a technical analysis of gold, noting its recent breakout and current support levels. Dave also covers the relative strength of different sectors and individual stocks, emphasizing the importance of breadth indicators and the potential implications of defensive sectors' performance. The episode ends with an invitation to a free webcast discussing the 'sell in May' phenomenon and its relevance for 2024.
Takeaways
- ๐ The NASDAQ is showing slight gains, with technology stocks leading the market, indicating a continued interest in tech sector investments.
- ๐ค 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, reflecting market uncertainty.
- ๐ Bitcoin's price has tested the 60,000 USD support level, which has been a consistent floor for the past few months, suggesting a potential bounce back.
- ๐ The VIX index increased, indicating elevated uncertainty or fear in the market, despite the S&P 500 showing little change.
- ๐ Gold prices moved lower, with the GLD fund down over 1%, contrasting with the overall strength in commodity prices.
- ๐ The technology sector within the S&P sectors performed well, with the XLK up about half a percent, showing resilience in tech investments.
- ๐ 'The Magnificent Seven' stocks, including Tesla and Apple, had a positive day, with both stocks up by around 2%, indicating a potential recovery for these leading names.
- ๐ The S&P 500 is showing signs of strength with a new high in April and May, but the RSI drifting above 60 suggests caution as it could indicate a bullish phase nearing exhaustion.
- ๐ Advanced decline lines for different cap tiers on the New York Stock Exchange have made new highs, which is a bullish signal indicating underlying market strength.
- ๐ A bearish momentum divergence is observed in Amazon's stock, which could signal that the current uptrend may be nearing its end.
- ๐ก The relative strength of utility stocks like CEG and VST is noteworthy, with significant gains year-to-date, suggesting a shift towards defensive investments.
Q & A
What is the main topic of discussion in the video?
-The main topic of discussion in the video is the analysis of market trends, focusing on the relative strength characteristics of various sectors, particularly utilities and technology, and the performance of certain tech stocks.
What was the NASDAQ's performance compared to the S&P 500 and Dow on the day discussed in the video?
-The NASDAQ was slightly higher, while the S&P 500 had not much change, and the Dow was down 2%. This indicates that growth-oriented stocks, which are heavier in the NASDAQ, performed better than value-oriented stocks, which are more represented in the Dow.
What is the significance of the VIX index mentioned in the video?
-The VIX index measures market volatility and is often referred to as the 'fear index'. A VIX above 15 indicates elevated uncertainty or fear in the market, which could suggest potential trouble ahead, especially when the S&P is near all-time highs.
How did Bitcoin perform in the time frame discussed in the video?
-Bitcoin was trading around $63,000 and had tested its support level of $60,000, which has been a consistent floor for the cryptocurrency over the past couple of months. The video discusses the importance of Bitcoin's 50-day moving average as a key resistance level to watch.
What is the 'Sell in May' phenomenon that Dave Keller mentions?
-The 'Sell in May' phenomenon is a market adage suggesting that it might be a good strategy to sell stocks in May and hold cash until October, as the period from May through October is historically considered weaker for stock market performance compared to November through April.
What is the significance of the relative rotation graph (RRG) mentioned by Dave Keller?
-The relative rotation graph (RRG) is a tool used to analyze the relative strength and momentum of different sectors or groups of stocks. It helps identify which sectors are leading, lagging, or improving, which can be useful for portfolio allocation and market timing.
What is the general outlook for the technology sector according to the video?
-The technology sector is discussed as being at the top of the leaderboard, edging out real estate and utilities. However, there are concerns about certain tech stocks like Amazon showing bearish momentum divergence, which could suggest that the recent run for these stocks might be nearing an end.
Why might an investor be interested in the utility sector despite its traditionally lower growth rates?
-An investor might be interested in the utility sector if they are concerned about the performance of growth sectors from current levels. Utility stocks tend to be more stable, have lower volatility, and offer decent dividend yields, making them an attractive option for defensive investing.
What is the importance of the 50-day moving average for stocks like Apple and Amazon?
-The 50-day moving average is a technical analysis indicator that can help determine the short-term trend of a stock. If a stock is trading above its 50-day moving average, it is generally considered to be in an uptrend, which might be a positive signal for investors.
What does the term 'momentum divergence' mean in the context of stock analysis?
-Momentum divergence refers to a situation where the price of a stock is making new highs, but the momentum (or rate of change) is decreasing, as indicated by an oscillator like the RSI. This can be a sign of weakening momentum and potentially a reversal in the trend.
How does Dave Keller suggest investors should approach the market based on the current breadth indicators?
-Dave Keller suggests that investors should pay attention to the breadth indicators, which are currently showing a constructive market environment. He advises not to get married to a particular analysis and to be open to the market's changing conditions, following trends and relative strength.
Outlines
๐ Market Recap and Bitcoin Poll Results
Dave Keller, the host and Chief Market Strategist at StockCharts.com, welcomes viewers to the final bar on Monday, May 13, 2024. He discusses his recent experience at the Money Show and the current state of the S&P 500 and NASDAQ. A poll question about Bitcoin's value by May 31, 2024, is highlighted with various predictions from the audience. A chart analysis of Bitcoin's recent performance is provided, noting its support level at 60,000 and the importance of surpassing the 50-day moving average. The market averages are reviewed with a mixed bag observed, but growth sectors outperforming value sectors. The VIX is noted to have increased, signaling potential uncertainty or fear in the market.
๐ Sector Performance and Interest Rate Environment
The script covers the performance of various sectors, highlighting the technology sector's strength and the relative performance of the bond market, gold prices, and cryptocurrencies. The yield curve is discussed, with a focus on the 5-year and 10-year points as indicators of the interest rate environment. The script also touches on the performance of specific stocks and the 'Magnificent Seven', a group of leading growth names including Tesla and Apple, which are experiencing a rebound. The daily chart of the S&P is analyzed, noting the market's current strength and comparing it to previous trends. Seasonal headwinds are mentioned as a consideration for future market performance.
๐น Advanced Decline Lines and Gold Market Analysis
The host analyzes the advanced decline lines for different capital tiers on the New York Stock Exchange, noting that they have reached new highs, which is a bullish signal. The performance of gold is discussed in detail, with a weekly chart showing a significant breakout above a long-term resistance level. The GLD fund's performance is also reviewed, highlighting its strong momentum since the October low. The script emphasizes the importance of watching gold prices and the GLD fund, as they show signs of continued strength.
๐บ Stock Breakouts and Market Breadth Indicators
The script discusses the importance of reviewing market breadth indicators and the significance of breakouts in individual stocks. It mentions several stocks that are moving, including Madna, Apple, and Amazon, each with their unique chart patterns and potential implications for future performance. The focus is on recognizing valid breakouts and understanding the potential risks and rewards associated with each stock. The relative strength of different sectors is also compared, noting the concerns with certain sectors like utilities and consumer staples outperforming.
๐ Positive Short-Term Moves and Overhead Resistance
The host reviews the short-term positive moves in stocks like American Airlines and United Airlines, noting the tactical breakouts but also the presence of overhead resistance. The need to be cautious of breakouts above resistance is emphasized, as it can indicate potential future market direction. The script also discusses the importance of monitoring breadth indicators and the overall market conditions, inviting viewers to submit questions for a future mailbag show and promoting an upcoming webcast on the 'Sell in May' phenomenon.
๐ Relative Rotation Graph and Defensive Sectors
The Relative Rotation Graph (RRG) is used to analyze the rotational environment of different sectors. The script notes the strength of defensive sectors like utilities and consumer staples. It also discusses the performance of growth sectors in comparison. The host uses the RRG to identify which sectors are improving or deteriorating. Individual stocks within the utilities sector are highlighted, showing significant breakouts and strong relative strength. The script concludes with a reminder to follow the trends and not be afraid to own stocks from sectors that are demonstrating strength, even if they are outside of one's traditional areas of focus.
๐ Relative Strength Focus on Utilities and Technology
The host emphasizes the importance of relative strength in stock selection, using the examples of AppLovin and Toast, which have shown significant outperformance. The script discusses the stepwise breakout pattern of AppLovin and the gap higher on earnings tendency. Toast's retest of previous highs and the potential for a breakout above current levels are also noted. The focus is on owning stocks that are outperforming the S&P 500 to achieve the goal of outperformance. The show concludes with a reminder for viewers to continue watching for more content and to engage with the channel.
Mindmap
Keywords
๐กTechnical Analysis
๐กNASDAQ
๐กRelative Strength
๐กBitcoin
๐กFibonacci Support Level
๐กS&P 500
๐กVIX
๐กYield Curve
๐กMomentum
๐กAdvanced Decline Lines
๐กPolarity
Highlights
Dave Keller, Chief Market Strategist at StockCharts.com, discusses market action using technical analysis.
The NASDAQ slightly pushes higher, with technology stocks leading the gains.
Utilities and technology sectors have been relatively strong year to date.
Bitcoin's price action is discussed, with a poll revealing predictions for its value by May 31st, 2024.
The importance of the 50-day moving average for Bitcoin and its current stall is highlighted.
The mixed performance of market averages is noted, with the NASDAQ Composite outperforming.
The VIX index increases, signaling potential market uncertainty despite the S&P's sideways movement.
The yield curve's slight downward trend is observed, with implications for technology sector performance.
The performance of the 'Magnificent Seven' stocks, including Tesla and Apple, is analyzed.
The S&P 500's daily chart is reviewed, noting the potential for a new all-time high.
Seasonal headwinds and their potential impact on the market are discussed.
The relative strength of different sectors is examined, with utilities and consumer staples showing strength.
Madna, a pharmaceutical stock, is highlighted for its technical breakout and ascending triangle pattern.
Amazon's bearish momentum divergence is noted as a potential concern for the market's upward trajectory.
The importance of breadth indicators in assessing market strength is emphasized.
Gold's technical analysis is provided, noting its long-term resistance level and recent breakout.
The GLD ETF's performance is contrasted with spot gold, noting a strong momentum despite a recent pullback.
American Airlines' short-term price action is discussed, with caution advised due to overhead resistance.
The Relative Rotation Graph (RRG) is introduced as a tool for analyzing sector rotation and performance.
The defensive sectors' strength is noted as a potential warning sign for market leaders.
AppLovin's stock performance is highlighted, showing a consistent breakout pattern leading to significant gains.
Toast's stock is reviewed, noting its gap higher and the importance of following through for continued growth.