Chart Advisor: Weekly Dive with Jay Woods

By Jay Woods, CMT

Your Weekly Roadmap with Jay Woods, CMT

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Your Weekly Roadmap

The fireworks may come early this week as Wednesday will provide a double-feature of potentially market moving events.

The market hasn’t experienced major fireworks in the form of a -2% drawdown in a single trading session in 328 days. This is the third largest streak since 1995.

Given recent breadth divergences and low volume on the upward move, traders are anxious that there’s potential this streak could be broken with a combination of a hot CPI number and a more hawkish Fed.

So let’s focus on Wednesday.

In the morning the Consumer Price Index will be released. The markets have experienced more volatility around surprising CPI numbers than the release of any other economic data point.

This data point comes literally as the Fed will be holding its latest meeting to discuss the path of interest rates. That decision is due at 2:00 and Jerome Powell’s press conference follows at 2:30.

FOMC Meeting. As for that meeting, expectations are for the Fed to remain static. Outside of the Covid crisis, the Jerome Powell Fed has yet to surprise the markets with their decisions. It will be all about the forward looking rhetoric and the release of the latest Dot Plot.

As for the market, the initial reaction to the 2:00 decision usually causes a knee jerk reaction in one direction then eases back to where it was prior to the decision as it awaits Powell’s speech. Then the gyrations get larger as Powell speaks and answers questions from the media.

CPI data will be released the morning of the FOMC’s decision on rates and no one expects this to move the needle when making their decision. However, it sure will be the hot topic at Jerome Powell’s 2:30 press conference.

As for expectations, analysts expect year-over-year numbers to remain stable at 3.4%. As you can see in the chart below things have remained stable – or some may say “sticky” – all year, and it doesn’t appear there should be any major crack this time around.

What those in the rate cutting camp need to see is a dip back towards the 3% level where we bottomed last June. The higher for longer narrative is becoming the “new normal” and if we are ever going to get a rate cut this year, this number needs to decline. The positive side is if things remain stagnant we won’t need to hike.

Apple’s WWDC Event. Next week is Apple’s annual Worldwide Developer Conference and investors are expecting some big news on the Artificial Intelligence front.

It’s been the one area where Apple investors have been waiting for their next major development. While Siri was supposed to be revolutionary, it never had the impact where users of the platform felt like they could live without it.

You know that sinking feeling when you realize things like –

“Oh no! I forgot my phone.”

“Hold on, let me put in my ear buds.”

Or that little sneak to check your watch for the latest text or sports alert.

Was Siri ever that product you couldn’t live without? Clearly the answer is no. In fact, it was more of an annoyance when it accidentally popped up because you said the word seriously oddly.

This week there’s hope that there will be a Siri upgrade with AI interaction. Investors also expect new IOS 18 enhancements. Lastly, look for AI integration in many of their current services like photos, iMessage, notes and music.

So far this year shares are relatively flat, up 2% year-to-date, but still near all-time highs. How will shares react after the big event? Will this be the catalyst to take it to new heights or will the stock continue to lag its other megacap peers?

Nvidia Stock Split. When you look at the price of Nvidia’s stock this morning, do not spit out your coffee; it is not down 90%. Rather shares have officially split 10-for-1. So if you were lucky enough to have 3 little shares, you now have 30. The total value remains the same but it sure sounds much cooler to say you have 10 times as many shares.

Speaking of stock splits, this is Nvidia’s sixth stock split as a public company. They had three 2-for-1 splits (2000, 2001, 2006), a 3-for-2 split (2007) and most recently a 4-for-1 split in 2021. To learn more on the impact of the stock split, I spoke to Benzinga here.

Fun fact – if you bought 10 shares when they went public you would now own 4,800 shares. This will be their largest split in its history, but if you think that sounds cool, just wait until Chipotle (CMG) splits 50-for-1 on June 26th.

Speaking of Nvidia, it also overtook Apple as the second largest company in the world based on market cap as it eclipsed the $3 trillion mark last week. While shares dipped slightly off its highs and it dropped back to third place again, they are poised to hold onto and climb from this spot.

Next up – Microsoft and its record $3.15 trillion valuation.

S&P 500 Additions and Deletions. Watch for rallies in shares of CrowdStrike (CRWD), KKR & Co. (KKR) and GoDaddy (GDDY) as it was announced after the close on Friday that they will be added to the index on Monday, June 24th.

Those stocks will replace Robert Half Inc (RHI), Comerica (CMA), and Illumina (ILMN) which will be simultaneously deleted from the markets most important index.

Earnings. The pickings are slim this week as earnings season has officially ended.

Technically, this feels like a make or break moment for ADBE. The stock gapped lower after last quarter and never recovered. Now it is trading right at a key support area going back to June 2023. Another weak guide and look for a leg down to $400.

A rebound could be met with much resistance as the overall trend remains down. The declining 50-day moving average has been tested twice and shares failed to eclipse that mark. The toughest level for it to break through may just be that $500 level where it gapped to last quarter.

About the author:

Jay Woods, CMT is the Chief Global Strategist for Freedom Capital Markets. Jay spent over 25 years as a Designated Market Maker on the NYSE floor. He started with Spear, Leeds, and Kellogg, then joined Goldman Sachs for 14 years and moved on to IMC after Goldman divested their floor operation. As a DMM, he was responsible for several high-profile IPOs and led trading in some of the most active issues at the NYSE.

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Originally posted on June 10th, 2024