Good morning,

July was a short but solid month for our ETF models, with both portfolios outperforming amid declines in their benchmarks since our last trades on July 7.

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Good morning,

We got a timely Mailtime question last Tuesday, which was essentially, “What would make you bearish?”

Our astute reader noted semiconductors and weak seasonality, and I added on concerns with leadership and the risk of a dollar breakout. Later in the report, I also noted a breakdown in the chart of large growth stocks is something that could make me outright bearish on US equities.

Well, throw in surging bond yields, and we pretty much got all of that over the following three days. A pessimist might even throw in that I’m going on vacation next week, so what better time for $h*t to finally hit the fan?

The culprit, of course, was the Mag 7 as both Alphabet and Tesla massively disappointed and posted huge drops on Thursday.

If strong participation and breadth are the cornerstone of the bull case, the charts of communication services and consumer discretionary are probably the best starting point for an outright bearish case. After all, if we’re going to be bearish equities, we probably need to see clear signs of said equities breaking down.

That said, two major factors should keep investors grounded and not yet running for the exits broadly.

One, the money leaving growth stocks is still finding a home in other areas. Real estate and energy broke out last week, utilities may be next, and healthcare and financials remain on firm footing.

Two, while a correction seems perfectly reasonable given the confluence of factors, it’s hard for me to get outright bearish knowing the three best quarters of the Presidential Cycle are waiting on the other side of September.

That starts with Q4, which has been lower in midterm years only three out of 19 times since 1950.

This week’s report will review:

• SPX technicals

• The bear case for equities

• Sector and ETF movers

• Commodity strength

• Rising rates

• The dollar and key crosses

• and more!

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Good morning,

Okay, today’s title is a little hyperbolic. But, one of the big observations from our “Small-cap growth ideas” report two months ago, was just how many companies are benefiting from the semiconductor/data-center buildout, and few seem like technology companies at all.

We’re seeing that correlation play out in both directions recently, as many of those companies, and some much-larger industrial bellwethers, are correcting with the memory trade.

We’ll start today by highlighting a few of the most important, as well as key levels that could separate a routine pullback from more-concerning tops.

We’ll also look at:

• Energy long ideas

• Discretionary coming under pressure

• Healthcare

• Two REITs ready to break out

• Hot List updates

• Key levels to watch on Alphabet and Tesla today

• and more!

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Everything is AI

Caterpillar bouncing at the neckline (just like DRAM)

Already had a 20% drawdown (using intraday levels). And sure, the chart isn’t broken yet. But if CAT can’t get above the 50-DMA (which has notably flattened, unlike other pullbacks below), this is going to look a lot like a right shoulder.

Just a routine pullback for United Rentals?

Right now, the industrial bellwether from our S&B 20 Cyclicals basket deserves the benefit of the doubt. But a break of $980 would be a real warning sign.

GE Vernova falls 8% following earnings

Lower high in relative strength and, at least the potential for, a double-top. All eyes turn to $856 where the 200-day will try to help the trough hold. The bull case here is probably a long sideways consolidation.

A few other examples:

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Good morning,

Mailtime came early this month, but you all didn’t let it throw you off schedule.

We got great questions and timely chart requests, so thanks to everyone for the strong participation.

Let’s see what your fellow readers are watching!

Questions

What are your views on big banks vs. regional banks?

Both look good, and charts suggest the potential for gains in the second half of the year and continued recent outperformance vs. the S&P 500. At the beginning of this month, I wanted to increase financials exposure, and both were under consideration. Ultimately, we went with KBWB (KBW Bank Index ETF) because of the chart below:

Above a rising 200-DMA, the relative trend simply favors the big banks.

It’s great that the advance-decline lines are making new highs but semis (now 20% of S&P 500) are looking tired. Time for digestion in the weak seasonal period? What would get you more bearish overall?

I certainly wouldn’t be surprised, and the past two Monday Morning Playbooks have called out semis as one of the primary risks to the index. One, from a math perspective, they’ve grown to be so large that they drag on the cap-weighted index if downside action continues. And two, there’s the risk of contagion that could, at some point, cause unrelated stocks to fall (though, importantly, we haven’t seen any signs of that yet).

The seasonals are a headwind until the election, a dollar breakout is a top risk I’m watching, and I would like to see more leadership from cyclicals over defensives.

So don’t think I’m seeing things through rose-colored glasses.

But I also want to pump the brakes on being outright bearish. Participation is hitting multi-year highs, and every major index is above a rising 200-DMA. I would need to see trends break and turn lower before I would want to consider myself outright bearish and make the case for underweighting equities relative to benchmarks.

What are your thoughts on USD/JPY and investment implications for Japanese stocks?

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I don’t have any grand takeaways going into this week, but a few things about last week have my attention.

The first is that despite inflation data coming in far softer than expected, the market ex-technology failed to rally. That includes financials, which were the primary earnings reporters last week.

The reaction wasn’t bearish, to be sure. But, increasingly, I hear so many people talking about how strong S&P 500 earnings are coming in, so it’s not necessarily surprising to me that the market would have priced that in before the actual reports.

The second big story is the complete breakdown in the memory trade, something we’ve been tracking since mid-May. We saw some signs of downside exhaustion and a bullish reversal on Friday, and I want to be clear that I’m open to (though not betting on) a bounce of any magnitude for this group.

But, I do not believe the lows are in here, as sellers just took control of the tape and investors are still pouring money into the DRAM ETF, as opposed to the sentiment flush we would expect to see at a major bottom.

This week’s report will review:

• The key support level to watch for technology stocks

• Major index technicals

• Breadth

• Risk-taking ratios

• Semiconductors

• Oil and energy

• and more!

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Good morning,

Today’s Stock Trends is going to look a little different, and it’s a bit of a throwback to our original title: The good, the bad, and the ugly.

We aren’t going to organize things like that, but today I’m taking a look at the biggest, most important, and frankly just most talked-about stocks and sorting them into hard calls based on how I see the charts.

Sometimes, the technicals don’t give you a strong read, but we’re going to take a look at all the Mag 7 stocks, memory names, and much more, and bucket them into:

• Buys right now

• Bullish bias - stay long if you own it

• No reason to own it - not a short or outright sell, but I don’t see a compelling reason to own the stock

• Outright sells

We’ll start with our tactical buys and also end with a few Hot List updates.

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Buys right now

JPM: JPMorgan Chase

JPM reported earnings on Tuesday and has broken out to new all-time highs. This base measures to $396, and the stock is breaking out in relative terms as well.

GS: Goldman Sachs

Goldman also reported earnings Tuesday morning and is breaking out of a base-on-base. It’s at 52-week relative highs and printing a daily MACD buy signal.

HOOD: Robinhood

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Good morning,

Today, we’re taking industrials into Overtime. The sector has been at the forefront of the market rotation in recent weeks, and the third-best performing sector since June started, trailing only financials and healthcare.

It’s also the third-best performing sector YTD, and has been a quiet driver of this bull market, as the only sector besides technology to outperform the S&P 500 over the trailing two years.

Most relevant to us now, though, is that the sector broke out last month and is now retesting that breakout. As long as it holds, investors should expect more gains in the second half.

Today’s report will review:

• Top-down technicals

• ETF sub-groups

• and top single-stock plays

Let’s get into it!

Top-down technicals

XLI is retesting its recent breakout

As noted in yesterday’s Playbook, $179 is first support, and ideally, XLI holds here. If it can’t, the broken downtrend line and 50-DMA come into play near $176. The current measured target for XLI is $200.

Neutral relative strength

Trend-following any relative strength in industrials has been a tough bet recently, and the XLI:SPY ratio currently sits in the middle of a six-year trading range. At face value, that would suggest this is a sector investors are best off market-weighting relative to their benchmarks.

Both our ETF portfolios are about 1% overweight the sector following last week’s trades, a small overweight as we diversify exposure away from technology and the Mag 7.

Industrials have been stronger in equal-weight terms

Have is the key word here. On an equally-weighted basis, industrials have been a consistent source of leadership. But that may be changing as the slope of the 200-DMA (a less-noisy measure of trend) has rolled over for the first time since 2022.

There’s a similar trend for small-cap industrials relative to the Russell 2000👇

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We’ve had a couple of nice, quiet weeks on the catalyst calendar, but that’s one trend that ends today.

This week is jam-packed with potential market-moving events, including June CPI on Tuesday, PPI on Wednesday, and retail sales on Thursday.

If three top-tier economic reports weren’t enough, Q2 earnings season kicks off with all the big banks, semiconductor reports from ASML and Taiwan Semi, and even a Mag 7 name with Netflix on Thursday.

Charts don’t predict the future or tell us how investors will react to all these events, but the list of positives for bulls continues to build.

Breadth has been on the up-and-up for weeks, but it was the Mag 7 that led last week with a 4% gain following the prior week’s move back above the 200-day moving average.

That helped the S&P 500 chew through short-term resistance, ultimately closing at the week’s highs.

That doesn’t mean there aren’t potential bumps in the road, and we’ll review three this week.

But I think the most important technical story right now is financials, and XLF is the feature of this week’s level to watch. Despite a strong move since the March lows, financials are basically unchanged year-to-date. If bulls can break them out, the cyclical move could just be getting started.

This week’s report will review:

• S&P 500 technicals

• Oil and interest rates

• ETF movers

• Tech check

• Potential road bumps in the third quarter

• and more!

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Good morning,

The title of this week’s Monday Morning Playbook was “Opportunities abound”, so it only makes sense that today, we look at some of those abounding opportunities.

I’ve started to regularly include the “first ones out”, or stocks that just missed the Hot List, at the end of each official monthly update, so we’ll start by providing a bit more context to some of the charts featured last week.

We’ll also review:

• Real estate

• Healthcare

• Industrials

• Hot List updates

• and more!

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Comments on “The first ones out”

ANET: Arista Networks

Can’t win them all. It’s always nitpicking when it gets down to the final round of cuts, and my discomfort with the AI/semi trade was enough to keep ANET off. But the stock broke out yesterday with an 8.8% gain, and the chart says the move could just be getting started.

MTCH: Match Group

Match Group is on the verge of completing a two-and-a-half-year bottoming pattern. A close above $40 targets $53.

TFX: Teleflex

A big bottoming base in the healthcare sector, a breakout above $140 targets $180.

TOST: Toast

I mentioned an affinity for Toast’s business in our recent Mailtime report, and I do think this chart is bottoming. But, a stock below the 200-DMA is never going to be the higher probability bet and that’s why it was filtered out. The stock is finding the 200-day and H&S neckline as resistance this week; watch to see if $28 can hold today, otherwise a trip back to the 50-DMA could be in store.

Share Brown Technical Insights

Real estate

Welltower and Simon Property Group are two relative strength leaders

Welltower has been going straight up and to the right for nearly four years.

SPG (our REIT representative for the S&B 20 Cyclicals basket) isn’t far behind, hitting its first all-time high since 2016 on Tuesday 👇

Now, that’s a big base.

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Quick reminder that the next Trade Report for August will be published one week early, on July 28.

Good morning,

June was a mixed to neutral month for our ETF models, with Ultra-Growth slightly outperforming its benchmark since our last trades, and the Balanced portfolio slightly underperforming its 60/40 benchmark.

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I hope everyone had a great Fourth of July weekend.

I, like I’m sure a lot of you, had a great weekend filled with sun, beer, hot dogs, pools, and fireworks.

Unlike a lot of you, however, I had a report to do over the weekend. So I was drooling on Wednesday night at the prospect of covering a short, quiet week in the market, where almost nothing happened, ahead of another week with almost no earnings and no major events on the economic calendar.

Whether or not Thursday delivered depends on how your portfolio was positioned.

If you’re still overweight tech and semiconductors, it didn’t feel quiet. After falling 10% on Wednesday, DRAM (the memory ETF) fell another 7.9% Thursday, and broader semi ETFs like SOXX weren’t much better, registering two straight negative alert days to start July, after four in June.

These stocks remain vulnerable, and I wouldn’t dismiss the possibility of broader volatility if the downside action continues. DRAM heads into this week just above critical support, which is featured as our “level to watch”.

However, the good news for investors is that opportunities abound. The memory ETF peaked two weeks ago and many individual names peaked before that. But since then, breadth in both the S&P 500 and Russell 2000 has been getting better, not worse.

The S&P 500 ex-Technology ETF, the Vanguard Extended Market ETF, midcaps, and small caps all hit all-time highs late last week, and I can tell you that anecdotally, going through hundreds of charts for the Hot List last week, there are good charts everywhere.

It doesn’t mean we couldn’t have a pullback. Earnings start next week, and current bullish seasonals fade the week after that. But investors should rest assured that any weakness would be coming from a place of strength, and that suggests it would be buyable.

This week’s report will review:

• Key support on DRAM, the S&P 500, and technology

• Improving breadth

• Rotation into healthcare and financials

• One sector investors shouldn’t give up on

• 1st half performance

• and more!

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Good morning,

June was a strong month for the Blue Chip Hot List. Of the nine stocks we held for the full month, seven were positive and outperformed the S&P 500’s 1.3% decline since our last update on June 4. In fact, all seven of those outperformers gained at least 8%, and the average return of all nine was over 10%.

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Good morning,

It’s the last Tuesday of the month, which means Overtime becomes Mailtime.

No questions this month, but we got some really timely chart requests. I’ve also added our new “AI says” fundamental summary for each stock in the footnotes1, so check it out if you’re interested.

Thanks to everybody who participated. Let’s get into it!

Chart Requests

ANET: Arista Networks

Despite being semiconductor/data-center-adjacent, ANET is basically unchanged since last October. Still, the chart is generally constructive above a rising 200-DMA, so the base case should be that the marked triangle resolves higher.

AVGO: Broadcom

As I mentioned in our last Stock Trends, Broadcom has been one of the weakest semis out there, measured by relative strength. I see no case for being long, but if you are, we’re at critical support. A break of the 200-DMA and marked horizontal line, and it could be a quick trip to $300.

BITW: Bitwise 10 Crypto Index Fund

This fund is basically Bitcoin plus a sprinkle of some other cryptocurrencies, so it looks just like Bitcoin. My view in yesterday’s Playbook was to continue to avoid, but short-term traders could play a countertrend rally if BITW is able to recapture the February lows (~$40.70).

CEG: Constellation Energy

There’s real technical deterioration here for a stock that was one of the best ways to play the AI boom from 2022 until October of last year. The trend has fully rolled over and relative strength just hit a 52-week low. Support at $240 has to hold or this has risk to $170. It should be off the table for buys until the red downtrend line is broken.

COST: Costco

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Two big stories while we were away.

The first, is that the Fed held its first meeting under Kevin Warsh. In sharp contrast to the reason he was appointed, the meeting seemed to further solidify that a hike is the next move, and everything from September forward is live.

Ironically, over the past two weeks, oil completed its round trip from where the spike started at the beginning of March, and yields have seen a similar decline. The combination of a tighter Fed and already lower inflation expectations broke the dollar out of its 14-month range, a potentially bearish development for most risk assets.

The second story, is that everyone has now woken up to the lagging Mag 7 and the dominance of small caps. This does mean that trend is over, but I think it’s important to recognize it’s no longer a secret.

The two most important questions going forward tie the two stories together.

1. Can the rest of the market continue to work with a stronger dollar?

2. How much downside could the S&P 500 have if semiconductors join the current trend of technology deterioration?

This week’s report will review:

• The most important charts while we were away

• Winners and losers from the move down in oil and rates

• More cracks in the memory trade

• Changes to the Dow

• Healthcare and biotech

• July seasonality

• and more!

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