June 16 Weekly Commentary

Hello readers,

Let us first start with a recap of last week’s market performance. S&P 500 rose by 1.58% last week, Nasdaq Composite and Nasdaq 100 both rose approximately b/w 3.24-3.47% while both Dow Jones Industrial (-0.54%) and small stocks Russell 2000 (-1.01%) were laggards. The weakness in DOW in particular was caused by the Transport sector and the 20Transport Index was down by -1.43%. Energy and banks continued to underperform and registered negative growth.

These mixed signals give an indication that a slowdown could be ahead. So far, indices have been riding on the AI wave (Tech stocks in general) and any correction and/or profit taking could cause the indices to take a sharp leap downwards. Therefore, we need to continue to be nimble and very selective in our picks going forward.

The energy sector by far was hard hit due to falling crude oil prices last week and its ETF XLE dropped by 3.44%. It is noticeable that energy was the only negative sector in the S&P 500 in May.

Small stocks index (Russell 2000) also retreated by 2.22% last week showing that Stock Market rally is buoyed by Tech stocks and Nasdaq related stocks while small stocks are taking a beating.

Important Events next week:

Tuesday: Core Retail Sales

Wednesday: Holiday - Juneteenth

Thursday: Initial Jobless Claims

Friday: S&P Global Manufacturing and Services PMI report

Important Earnings this week:

Lennar: 6/17

KB Home: 6/18

Darden Restaurants, Kroger: 6/20

Actionable Stocks:

Long-Term View: These stocks were mentioned for long-term holdings in our last commentary:

MSFT:

Mr. "Softie" is continuing to perform well and registered an all-time high causing a breakout on Friday. As such, Microsoft is actionable at current prices for further addition to portfolio being a leader in Technology / Software.

NVDA:

It looks like Nvidia is unstoppable. Even after a 10-to-1 split, the stock is continuing its marvelous run pushing the S&P 500 and Nasdaq to new highs. Its contribution to S&P this year is astonishing. The seven magnificent stocks so far have accounted for 53.2% of S&P 500's total return of 11.3% this year out of which Nvidia has contributed 32.26% alone. Will it continue its run? Who knows, but we still think that Nvidia is extended at its current level and will wait for a pullback to its EMA 20 or EMA 50 days moving average lines to get onboard.

AAPL:

As mentioned in last two-week commentaries, Apple was expected to unveil its AI strategy last in its annual Worldwide Developers Conference. Investors were waiting patiently for Apple to join AI bandwagon and pushed its stocks higher to all-time highs past 200 causing a 15.60% spike. Will its steak continue? Most likely anxious investors will not let Apple fall below 200 level (it will be another buy if comes down and test the 200 level). Apple remains on our long-term buy list.

AVGO

As mentioned last week, California based company was expected to report a sales boost. A 43% jump in 1st Quarter sales was boosted by AI revenue which could exceed $10 billion in 2024. A stock split for 10-to-1 was also announced. These factors caused a spike in its price which was 23% up for the week.

Broadcom remains on our long-term buy list and like Nvidia we'll wait for the price to come down and test the gap that occurred on Wednesday at 1647 to provide a better entry point.

Medium and Short Term Picks:

For these stocks we suggest that profits should be taken at 15-20% levels from the buying price or at least 25-50% of the position should be taken off the table to ensure profitable trades. For the rest of the holding, a further assessment will be required at that time to assess future potential.

NVO

NVO consolidated last week at the upper side of its current trading range. It could be a pause before the stock turns again to continue its upward run. The stock is actionable at its current price levels.

New Interesting Stocks for Watchlist:

PDD

PDD is an Ireland based provider of 3rd party mobile e-commerce platforms for buyers with merchandise shopping experiences. It generally beats S&P 500 during the months of June and August. Currently actionable at this price with a suggested stop loss of 8%. 12 out of 13 analysts covering this stock have a strong buy rating and the stock is likely to continue its current bullish trend in the near future.

GOOGL

The alphabet continues to form a tight consolidation and is likely to break out riding the AI growth wave. It is very close to its all-time highs and its first ever dividend and a $70 billion buyback program boosted the stock after its recent first quarter earnings announcement. With its historical bullish trend behind it, the stock is actionable at current prices and could generate a decent return in the long run.

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