Skip the "Old" AI Leaders | Cabot Weekly Review — Transcript

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1. 0:00Hi, I'm Mike Santolo, chief analyst of
2. 0:01Kavat Growth Investor and Kabat Momentum
3. 0:03Trader. I'm here with your KBAT weekly
4. 0:05review recording this late Friday
5. 0:06morning around noon time on October
6. 0:0830th. I hope you have a good Halloween
7. 0:10weekend. Although the market is a little
8. 0:12bit spooky today, some bad earnings
9. 0:14reports are really hitting the NASDAQ,
10. 0:16which isn't a huge surprise. We saw, I'd
11. 0:19say, two to three weeks, especially
12. 0:20toward the end of abnormal action and
13. 0:22growth stocks kind of heading into into
14. 0:24the middle of October. We did stabilize
15. 0:27there for a few days, a little bit of a
16. 0:28bounce, you know, like a re-rotation,
17. 0:30but then today really the last couple of
18. 0:32days really has come off pretty
19. 0:33strongly. Now, the broad market is
20. 0:35hanging in there. In fact, some of the
21. 0:37broader indexes are kind of trying to
22. 0:38turn up on an intermediate term basis.
23. 0:41It's just hard to I mean, we always go
24. 0:43with the evidence, but it's hard to
25. 0:44trust as there been so much rotation and
26. 0:47re-rotation and there's just very few
27. 0:49stocks getting away from us. On the
28. 0:51upside, obviously, um we do see some
29. 0:53names that have reacted well to
30. 0:55earnings. There's been some bad ones,
31. 0:56but some good ones, too. And we do see a
32. 0:57decent amount of setups, you know, some
33. 0:59medical, some retail, some turnaround,
34. 1:00like growthy turnarounds that are set up
35. 1:03pretty well heading into the next two or
36. 1:04three weeks. So, if earning season kind
37. 1:06of shifts and turns bullish, I still
38. 1:08think there could be quite a few stocks
39. 1:09that have launched. I I've already seen
40. 1:11quite a few or at least a few that have
41. 1:14done that. But, you know, for the here
42. 1:15and now, you know, for growth stocks
43. 1:17especially, but even for the overall
44. 1:18market, there's not a lot of money being
45. 1:21made. We've really been sitting on our
46. 1:22hands for weeks and weeks and weeks,
47. 1:24even months, which, you know, isn't the
48. 1:26most exciting thing, but it's been the
49. 1:28right thing. It's been at best kind of a
50. 1:29meat grinder environment out there, and
51. 1:32at worst, some of these old AI leaders
52. 1:34really look, frankly, pretty toppy on
53. 1:36the intermediate to longer term charts.
54. 1:37So, we'll see how it plays out. I'm not
55. 1:39super bearish. We've already had two
56. 1:42fivemon corrections now in a span of 12
57. 1:44months. So, it can continue. Obviously,
58. 1:46it can keep going, but there's already
59. 1:47been a lot of selling. a lot of, you
60. 1:49know, negative stuff has been discounted
61. 1:51or is being discounted. So, we're just
62. 1:53staying flexible, but we're also staying
63. 1:55cautious in Cab Growth investors model
64. 1:57portfolio. We're still 62 63% in cash.
65. 2:01Um, you know, which today feels like too
66. 2:02little, but I think it's a pretty good
67. 2:03place to be overall. You know, keeping
68. 2:05more money on the sideline than not. And
69. 2:07let's just stay flexible and see how
70. 2:09earning season goes and see if this sort
71. 2:12of meltdown in some of these AI
72. 2:14technology names spreads to the broader
73. 2:17market. Okay, let's hop into the charts.
74. 2:20As you can see, we're using a program
75. 2:21called Market Surge. It's a product of
76. 2:23Investors Business Daily. You can learn
77. 2:24more at markets surge.com. Um, let's get
78. 2:27out our little doodle here. This is the
79. 2:29NASDAQ. There's not much to say here.
80. 2:31You know, we tried to break out um at
81. 2:34the beginning of the month. Uh, and
82. 2:36growth stocks look good. Like I said,
83. 2:37there was a pretty good setup, but since
84. 2:38then, it's been all down. I don't know
85. 2:39how far off the high we are. We're down
86. 2:41about two and a half% as I record this,
87. 2:43but you can see we're at the lowest
88. 2:45level really since um the very start,
89. 2:47the late July, early August move up for
90. 2:50three or four days. So, call it
91. 2:52three-month lows, you know, on the
92. 2:54NASDAQ. Um and kind of taking a maybe
93. 2:56taking aim at this 200 day line. Not
94. 2:58that that's, you know, the beall end
95. 3:00all, but just something to watch. Okay.
96. 3:03Um just running through the indexes so
97. 3:05you can kind of see the mixed result out
98. 3:07there. This is the S&P [clears throat]
99. 3:09500. Um obviously today not not great
100. 3:12but still in this kind of whatever 300
101. 3:16point range so call it from 75 to 78 you
102. 3:19know using easy numbers um you know
103. 3:22toward kind of toward the lower end
104. 3:23here. So we'll see you know is this the
105. 3:24start of things unraveling hey it's a
106. 3:27some sort of big correction or small
107. 3:29barefoot or whatever you want to call it
108. 3:31tech stocks lead the way down. It's
109. 3:33always possible. I mean there's
110. 3:34definitely been some yellow flags out
111. 3:35there but we'll see how it goes. right
112. 3:38now uh the New York excuse me the S&P
113. 3:40500 is you know still mostly neutral
114. 3:42when you look at the broader indexes
115. 3:44don't get me wrong this is the New York
116. 3:45composite down today but you know this
117. 3:49sort of on an intermediate term basis
118. 3:51turned up here the 25day line you know
119. 3:54after this correction two-month
120. 3:55correction here turned up so it's still
121. 3:57you know don't get me wrong it's not the
122. 3:59most inspiring chart I can find you know
123. 4:01out there of all time but it's looking
124. 4:03okay and then same thing kind of if you
125. 4:05look at small capsu uh this is the IGR,
126. 4:08which is the 600 small cap. It's hard to
127. 4:11see, but the 25day line has kind of
128. 4:13nosed higher. Uh, today is ugly. So,
129. 4:15again, it's hard to have a ton of
130. 4:16confidence, but my point in looking at,
131. 4:19you know, this is the midcaps. Um, not
132. 4:21quite as good there, but still trying to
133. 4:23bottom out. But like the equal weight
134. 4:24S&P 500, this is RSP again, kind of like
135. 4:27the New York composite, you know, it
136. 4:29sort of turned positive on an
137. 4:30intermediate basis here. And today is
138. 4:33ugly, but still nothing uh abnormal. So
139. 4:36the broad market actually like I said is
140. 4:37sort of turning up a little bit and I
141. 4:39would say like I said in the outset
142. 4:41there's some retail there's some
143. 4:43medicals look pretty good there's some
144. 4:45turnaround there's some you know you
145. 4:46know this that and the other thing are
146. 4:47either set up well or we have actually
147. 4:49seen some pretty good earnings reactions
148. 4:50this week from a few of them but you
149. 4:52just need to see that build and when
150. 4:54there's so many cross currents the risk
151. 4:56of a re- rotation uh even if it's for a
152. 4:59few days can kind of hit some things so
153. 5:00it's it's it's tough sledding out there
154. 5:03um to me moreover beyond that is just I
155. 5:06I can't do this. I was asking chat GBT
156. 5:08today, so I'm trying to find a way. But
157. 5:10if I could strip out defensive sectors
158. 5:12from quote unquote the market, what
159. 5:15would the market look like? It's just
160. 5:17it's hard to say, but really when you
161. 5:18look at anything sort of growthy, this
162. 5:20is obviously the momentum fund. Uh new
163. 5:23lows below the 200 day line as I record
164. 5:26this. It's not where you want to be.
165. 5:28Okay? It doesn't mean it's going to go
166. 5:29down 50%, but it's just not where you
167. 5:31want to be. Okay? um you know the ARC
168. 5:33fund ARK
169. 5:35uh this one not as bad but you can see
170. 5:37it was looking pretty good here from you
171. 5:39know late July kind of right into like I
172. 5:42said things were set up pretty well here
173. 5:43into early October and since then it's
174. 5:45really taken it on the chin it's down
175. 5:47about 15% during that time um the
176. 5:49semiconductors which I watch because
177. 5:51that was really the leading group of the
178. 5:54last few years right in terms of the AI
179. 5:56move and all that um and you know
180. 5:58frankly this looks you know again it's
181. 6:00kind of a double top with a big move
182. 6:01down after the second top. I think I
183. 6:04mentioned that on last week's video.
184. 6:05That's kind of a sell signal, you know.
185. 6:07So, we'll see. I'm not we we're not
186. 6:09predicting things, you know, we come in
187. 6:10the next couple weeks, big volume up,
188. 6:11this turns out to be a shakeout. I've
189. 6:13seen it before. It's definitely
190. 6:14possible, but just going with the here
191. 6:16and now, it's definitely tricky. Okay,
192. 6:18XLK, which is just sort of your broader
193. 6:21tech index, same thing. Kind of looks
194. 6:22like the NASDAQ. Um, moreover, just
195. 6:24individual stocks, I I would I would
196. 6:26just be careful of these old leaders.
197. 6:29Yes, they're down a lot in the last
198. 6:31three or four weeks. Um, but they're
199. 6:33also up, a lot of these are still up
200. 6:35like 400% this year or something. This
201. 6:37is SanDisk. They reported earnings last
202. 6:39night. The numbers are insane. They made
203. 6:4150 bucks a share and as of now, earnings
204. 6:44estimates for next year or let's see,
205. 6:46no, for the coming year is $225 a share
206. 6:50and the stock's at 1,200 bucks. Okay,
207. 6:52117 bucks. Um, but it's below the 200
208. 6:55day line getting hit. you know, we'll
209. 6:57see what happens, but these things are
210. 6:58just more and more sort of joining the
211. 7:00parade on the downside, no matter what
212. 7:02they report on earnings. Okay. U Marvel
213. 7:04now, there was some I think rumor, I
214. 7:06don't think it was news. I thought it
215. 7:07was a rumor they might buy momentum. But
216. 7:09this had sort of a semi-encouraging
217. 7:11comeback um to the 300 level. They had a
218. 7:14great analyst day, big long-term
219. 7:16forecast, and since then, the stock has
220. 7:18lost a third of its value. Um just to
221. 7:20not to go on uh education time, but you
222. 7:23know when you do get these stocks that a
223. 7:25have a big run uh either in the last
224. 7:28couple months or year or whatever and
225. 7:30then you finally get a correction where
226. 7:32the stock is down like 40 or 45% at a
227. 7:35time when the market's not getting
228. 7:36killed. If it's the market's down 25 and
229. 7:38these stocks are down 45, that's kind of
230. 7:39normal. Um, but if the market's down
231. 7:41eight and like this time that the
232. 7:43NASDAQ's down 8% or whatever and these
233. 7:45are down 50,
234. 7:47that's that's a warning sign that the
235. 7:49stock could be sort of done for for a
236. 7:51while anyway. And that's kind of what
237. 7:52we're seeing with these things. Okay.
238. 7:54Um, Bloom Energy is just another one.
239. 7:55You could look at pretty much any of
240. 7:56these be I'm not saying I'm not
241. 7:58predicting what happens from here. My
242. 8:00point is that if you own them, you know,
243. 8:03you my advice would be to try to get in
244. 8:06gear with the evidence at some point and
245. 8:08make sure you know some bad situations
246. 8:10don't become really bad. Um, and if you
247. 8:12don't own them, it's fine to watch them,
248. 8:13keep an eye on them just in case they do
249. 8:15turn around. But clearly the onus is on
250. 8:17the bulls. Okay. In terms of things that
251. 8:19are uh working, like it's kind of a
252. 8:21smattering of stuff. So, like here was a
253. 8:24name from our uh momentum trader uh
254. 8:26subscribers are off to a good start for
255. 8:28but this is NASDAQ NDAQ
256. 8:31um as we pull up the weekly chart. Yeah.
257. 8:33So, it's not the most dynamic name but
258. 8:34you know huge margins, steady growth. Um
259. 8:37and despite sort of a obviously a crummy
260. 8:39market environment or at least very
261. 8:40tricky um you can see the stock is
262. 8:42actually trying to break out here from a
263. 8:44whatever that is a year and a half long
264. 8:46base or two-year long base something
265. 8:47like that. So, that's kind of
266. 8:48encouraging you know and sort of a bull
267. 8:50market stock too. Um, I mentioned
268. 8:52medical. Some of this is,
269. 8:54you know, defensive areas. Uh, and let
270. 8:57me show you that first actually, just
271. 8:58because we didn't specifically talk
272. 9:00about it, but, um, you know, XLP, you
273. 9:02know, to me, this is going to be a good
274. 9:04tell on the market. You know, if XLP's
275. 9:07up here, it's it's probably a good bet
276. 9:09that the market's in having issues.
277. 9:12Okay. Um and just others too like you
278. 9:14know XLV is sort of big cap healthcare
279. 9:17you know slow growing steady you know
280. 9:20obviously not super economically
281. 9:21sensitive um obviously the low
282. 9:24volatility fund SPLV we keep an eye on
283. 9:26too you know so these things you'd like
284. 9:28to see them back off doesn't mean they
285. 9:30have to plunge but when they're even
286. 9:32when the broad market is up like a half
287. 9:35a percent on the day the NASDAQ's down
288. 9:37or something these things have been
289. 9:38going up one or two% they're really
290. 9:40leading the way which is always kind of
291. 9:42you a yellow flag. Okay, so some of the
292. 9:45going back to my point, some of this can
293. 9:47be uh in medical stocks can be sort of
294. 9:49defensive flare. Like here's Eli Liy did
295. 9:52gap up nicely on earnings. Okay. Um some
296. 9:56of it is obviously great numbers, good
297. 9:58forecast. That's the main thing. And
298. 10:00this is definitely a growth stock, but
299. 10:01some of it's also liquidity and safety.
300. 10:03Um I am impressed though that there are
301. 10:05more and more sort of smaller biotechs
302. 10:08and some medical device you know medical
303. 10:10companies just in general that are
304. 10:12looking pretty good. This is TG
305. 10:13Therapeutics looks pretty good. Um they
306. 10:16do have earnings coming up like like
307. 10:17most things that haven't reported they
308. 10:19have earnings in the next week or two.
309. 10:20So there is some stuff in the medical
310. 10:21space. Okay. U more on the turnaround
311. 10:24front you have like a Spotify. This
312. 10:26thing used to be a big leader SPOT. Uh
313. 10:29let's just look at the weekly chart real
314. 10:30quick. Uh you can see well you can't
315. 10:33even there let me do this. Boom. You can
316. 10:34see this was really one of the big
317. 10:36leaders here. This is a weekly chart.
318. 10:37This is going over a couple years huge
319. 10:39run but then a big correction obviously
320. 10:41it kind of reset itself bottomed out
321. 10:43blah blah blah. And it's been basically
322. 10:45in this you know kind of bottoming range
323. 10:47let's call it for going back to February
324. 10:50of this year. So you know many months
325. 10:52and now you know reacted well to
326. 10:54earnings recently.
327. 10:55You know is it up and out? I don't know.
328. 10:57We'll see what the market does, but so
329. 10:59far, you know, it's some of these things
330. 11:00are starting to set up. Okay. And just a
331. 11:02couple more like Urban Outfitters, we've
332. 11:04mentioned before, some retail. The
333. 11:06question is, does the selling spread
334. 11:08from, you know, AI and everything else?
335. 11:10We'll see. But, you know, so far we're
336. 11:12seeing some retail stocks do well. And
337. 11:15then, like I said, some setups into
338. 11:17earnings. We're actually seeing a good
339. 11:18amount of those. So, this is like
340. 11:19Wayfair for one, which everyone, you
341. 11:21know, the furniture store. Um, some
342. 11:25interest rate sensitive stuff there,
343. 11:26right? interest rates come down, more
344. 11:27housing, more furniture buys and all
345. 11:29that. But just looking at the bigger
346. 11:31picture, you have this sort of huge
347. 11:33correction and years of sort of
348. 11:36awful action to be honest with you, but
349. 11:38you know, big rally here and then you've
350. 11:40built this big sort of deep base and now
351. 11:42you have this sort of shallower
352. 11:43consolidation here in the past say three
353. 11:46months. Okay. So the question is they
354. 11:48have earnings it looks like next Tuesday
355. 11:50I want to say sometime next week, five
356. 11:52days from today on Friday. Um, so you
357. 11:54know, do you get a positive gap about
358. 11:56can it hold? That sort of thing. So
359. 11:57there's definitely things to work with.
360. 11:59There are some positive reactions when
361. 12:01you kind of get away from the mag seven
362. 12:04and all that. But the bottom line is
363. 12:05there's just not a lot of money being
364. 12:07made. It's not 2008 out there. I mean,
365. 12:09for some of these areas it is, you know
366. 12:11that I'll say it's maybe 2022 out there
367. 12:14for some of these areas. It's not a
368. 12:15disaster though for the overall market
369. 12:17at this point. In fact, some of the
370. 12:18broader areas, even outside of defensive
371. 12:20sectors, are looking pretty good. But
372. 12:22overall, you know, there's just not many
373. 12:24names running away from the up on the
374. 12:26upside. So, if you do want to play small
375. 12:28positions, partial profits on the way
376. 12:31up, trail a stop. Um, but what I
377. 12:33wouldn't be doing is plunging tight
378. 12:35stops, that could work. I mean, I hope
379. 12:37it works for you, but that's usually a
380. 12:39recipe for getting whipped out. Even if
381. 12:41it's not a turns out to be a top, it
382. 12:43ends up just being re- rotation,
383. 12:45volatility, news driven action. Some
384. 12:47peer said something on earnings that
385. 12:49hits the stock or helps the stock. So
386. 12:51right now stay relatively close to
387. 12:53shore. I know it's been sort of a
388. 12:54patient less you know active time but
389. 12:57like I said we are 10 in my opinion
390. 13:00we're five months into this correction
391. 13:03which came on the heels of a great
392. 13:05two-month stretch but before that was
393. 13:06another fivemonth correction. So a lot
394. 13:08of worry and stuff has is being built
395. 13:11into this. A lot of pessimism is being
396. 13:13built into next year's earnings outlook
397. 13:15especially for some of these tech names.
398. 13:17Um so just stay engaged. The leaders
399. 13:19will start to resist here at some point.
400. 13:21We'll spot them and get on them when
401. 13:23they get going. But again, we want to
402. 13:25wait to see that actually happen. For
403. 13:27now, we'd stay close to shore, holding
404. 13:28plenty of cash, staying relatively safe,
405. 13:31patient, and flexible. Okay, that's all
406. 13:33the time I have for today. As always,
407. 13:35thanks for listening and watching. Be
408. 13:37sure to come by again next week for
409. 13:38another Cabbat Weekly review.