August 23 Weekly Commentary and Stocks Selection

Dear readers,

So, the Jackson Hole event is over, and the rally continued to move forward besides being range bound. Fed chair Jeremy Powell confirmed that inflation is under control and now interest rate cuts are on cards. Markets are now expecting a 50-basis point cut in September and more in the upcoming months.

This week, the focus will be Nvidia earnings (scheduled for Wednesday Aug 28th). Markets are estimating a 138% increase on YoY basis and 112% increase in revenue. Nvidia earnings will impact the entire Tech sector (mostly the AI universe) and could move Nasdaq and S&P 500 in either direction. Some other tech stocks which will be impacted by Nvidia results are TSM (Taiwan Semi), ANET (Arista Networks) and AVGO (Broadcom). Besides Nvidia, some other important companies reporting earnings this week are Salesforce (CRM), PDD Holdings (PDD) and NetApp (NTAP).

Major Indices:

Meanwhile, markets ended their winning streak for 8 days this week and registered a break for a few days but ended strong on Friday on Fed Chair’s comments.

The recent performance of major Indices is as follows:

Index Friday (8/16) Weekly YTD

S&P 500: +1.15% +1.45% +18.13%

Dow Jones Industrial: +1.14% +1.27% +9.25%

Nasdaq 100: +1.18% +1.05% +17.21%

Russell 2000: +3.19% +3.6% +9.8%

If we look at RSP (S&P 500 Equal Weight ETF), it is trending higher, which shows overall market breadth is strong and it is not just the magnificent seven stocks which are outperforming the rest of the market (as occurred during the first half of year 2024). The market rally is expected to experience some jitters due to the upcoming elections and seasonal effects (weaker period of September till Mid-October) but overall, the long-term trend is likely to remain intact.

Besides Tech stocks, the recent strong areas of markets are Industrial (XLI), Real Estate (XLRE), Discretionary (XLY), Financials (XLF) and the Homebuilders Industry group (XHB).

Important Events next week:

Monday: Durable Goods Orders (MoM)

Tuesday: Consumer Confidence

Thursday: GDP, Initial Jobless Claims, Pending Home Sales

Friday: Core Price Index CPI, Chicago PMI, Consumer Sentiment

Important Earnings this week:

Monday (8/26): PDD Holdings (PDD)

Tuesday (8/27): Kohl’s, Five Below (FIVE)

Wednesday (8/28): Nvidia (NVDA), Salesforce (CRM), CrowdStrike (CRWD), NetApp (NTAP)

Thursday (8/29): Dell (DELL), Ulta Beauty (ULTA), OLLI (Ollie’s Bargain)

Actionable Stocks:

Long-Term View: These stocks were mentioned as long-term holdings in our recent commentaries:

MSFT:

Microsoft could not move beyond its 50-days EMA during the recent bounce back, however, any sustained move above 426.79 will provide another entry for this long-term leader.

NVDA:

As stated earlier, Market is expecting a strong report form Nvidia this week, however investors will be interested in knowing about the future guidance especially amid the reports that next generation AI chips are going to be delayed by a few months which could lead to some impact to revenues and earnings in future. Otherwise, expectations are high and Nvidia’s long-term trend is likely to continue. September is generally a weaker month for Nvidia in the past and a wait till October could result in a better entry.

AAPL:

Apple continues to perform strongly; it is trending above its 50-day EMA, but the next 1-2 months is likely to be range-bound because of seasonal effects. Nevertheless, stock remains a long-term buy.

COST:

Costco remains our favorite (a slow grinding leader) for capital appreciation due to its successful business model. The stock is testing its all-time highs and a breakout beyond 895.50 will take it into 900s.

Medium- and Short-Term Picks:

META:

Meta, the parent company of Facebook, Instagram and WhatsApp, is continuously showing strength amid investments in AI universe. Any breakout above its recent high of 544 could result in a bullish move upward or due to seasonal weakness the stock could move back to 515 (EMA 20) or 503 (EMA 50) for a better entry. In any case, the stock seems poised for long-term appreciation.

PDD:

The Chinese company and parent of TEMU is continuously taking away share from Amazon from the US market. PDD is expected to announce strong earnings on Monday and a breakout above 152.22 could be very bullish. Watch out its price action for a possible entry.

AMZN:

After the recent spike down and a failed test of 200 level, Amazon seems to have settled down just below its 50-day EMA line. Any move above 182.38 will be bullish and will provide an entry for interested investors.

Interesting Stocks for possible action:

ONON:

Mentioned two weeks ago, this stock has increased by more than 10% but still looks good for further advance amid strong earning growth potential. Actionable at current prices.

DHI:

Mentioned last week, DHI increased by 7.74% during the week and continues to show strength. The upward trend is likely to continue, however, it seems a bit extended from its moving averages. Any pullback to its 20-day EMA (160.44) will provide a better entry.

Homebuilders as a group are already performing well and are on the verge of a breakout. On Friday, XHB (Homebuilders ETF) was up by +4.29%, providing a major tailwind to the Russell 2000 index. DHI is among the leading stocks in this industry as well. Besides DHI, Pulte Group (PHM), Lennar (LEN), and Toll Brothers (TOLL) have also performed significantly better during the last month.

ZM:

Zoom has seen tremendous rise during COVID-19 and then a devastating drop which saw it tumbling down to 50s (from a high of 588). However, for the last two years it has been consolidating at these levels and recently seen a move back above its 50-day moving average. Currently at 70, any move above 75 will be very bullish and could lead the stock to test the 100 mark.

ENPH / FSLR:

Both stocks are in Solar Energy space and have been beaten during the last 6 months along with the group. However, interest rate cuts will benefit the smaller stocks and renewal energy group which is also trying to bounce back. Both stocks ENPH (Enphase Energy) and FSLR (First Solar) are likely to benefit from upcoming interest rate cuts and could make quick swings up.

RACE:

Mentioned in recent commentaries, RACE has pressed the pedal and has resulted in a 15% move from a breakout last week. The stock’s long-term trend is likely to continue in future but now it is better to wait for a base to form.

NTRA:

This health care and medical supplies stock has broken out from a recent base and is actionable at its current prices. It also ranks high in its industry group and is likely to continue its long-term trend.

TW:

A Financial / Investment services stock is likely to continue its growth amid interest rate cuts providing a boost to the financial sector. As such, the stock is actionable at its current prices with a tight stop loss around 110 level.

TTD:

Trade Desk, Inc. offers a self-service, cloud-based ad-buying platform, which enables its clients to plan, manage, optimize, and measure data-driven digital advertising campaigns. Actionable at current prices, stock is likely to perform well in future amid good fundamentals. It has recently staged a breakout from 102.40 and could provide upward swings in the near future.

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