Stock Trends

Introducing The S&B 20

Good morning,

Amid the crazy volatility of the past week, my only intention for today’s report was to show the current technicals for all the most important stocks.

But that got me thinking, what are the most important stocks? We’ve all learned first hand what the most important stock are to the S&P 500… But are those actually the most important stocks?

For the most part I would say yes, but it got me thinking about how I would build an index.

So, I decided to create my own.

Of course the top tech names are in there, but I also wanted bellwether stocks that represent very particular parts of the economy and market.

By the time I was done, I had a basket of 20 stocks:

• 8 top tech names

• 6 cyclicals

• 6 defensives

I also put these stocks into a geometrically-weighted custom index (playfully named the S&B 20) and created baskets of the three groups that we can review for risk-on/risk-off behavior.

For today’s report we will focus on the reason for each stock’s inclusion as well as their current technical set-up.

Let’s get into it!

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8 Top Tech Names

Why they’re on the list: I’m not going to go one-by-one here, we all know these stocks. They’re all top 20 holdings in the S&P 500, 7 of 8 are in the top 10 and combined account for more than 31% of the index. The only potential quibble is the stock that doesn’t appear: Tesla. I have nothing against Tesla and this isn’t a call on the stock. But it is still down more than 50% from its all-time high and operates in a very narrow market segment.

Finally, we’re dismissing the updated GICS classifications that spun-off certain ones into communications and discretionary. They’re all tech stocks here.

AAPL: Apple

Apple’s rallies keep failing at the 50-DMA. Until we can reclaim that, the base case is (at least) a retest of support at $198.

AMZN: Amazon

Amazon has tried and failed twice to recapture its 200-DMA after gapping lower last Friday. Hard to get long if we’re below that level. Key support points are the Monday low ($151) followed by $145.

AVGO: Broadcom

Broadcom keeps stair-stepping lower and it appears yesterday could be the beginning of another lower high. We need to see that pattern change before buying in but it’s worth putting on your watch list as we enter this range of support. A test of $120 would be a 34% drawdown.

GOOGL: Alphabet

Alphabet has a ton of support here at $151 and is now deeply oversold (RSI-14 of 28). Still, the move off Monday’s low has been far from impressive so without broad market stabilization, I no longer think holding $151 is a given.

META: Meta Platforms

META may be the most important chart to watch right now. On one hand, it’s down the least (-10%) from its highs of any of our 8 tech stocks. On the other, it’s basically flat since February. This could be a healthy base or a big top. If it’s a top, a break of its July lows ($442) and the 200-DMA will be our first tell.

MSFT: Microsoft

Ugly reversal for Microsoft on Wednesday, failing at previous support ($405) and the 200-DMA. We bounced once at $385, we’ll see if bulls can pull it off again.

NFLX: Netflix

Netflix isn’t part of the official Mag 7, but the stock has been magnificent since May 2022. However, the market sell-off is coming right as Netflix was trying to push through its all-time highs. The bounce the past two days hasn’t been great but it deserves the benefit of the doubt above the rising 200-DMA and that long-term uptrend line.

NVDA: Nvidia

Nvidia fell 5% yesterday in an ugly reversal that engulfed Tuesday’s action. $97 and the Monday low ($90) are short-term support levels to watch but this stock isn’t out of the woods yet.

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6 Cyclicals