Market Minute

Commentary and clips about what's moving the markets - stocks, options, economic data, futures, cryptocurrencies, and more

First Solar (FSLR) was the best performing stock in the S&P 500 two days in a row this week, now pacing to close out the week as the second-best performer within the index behind Moderna (MRNA). A driving force of this upside momentum is the collective belief that First Solar could be a major A.I. play, with heightened A.I.-driven electricity demand and capacity expansion already underway.

It’s no secret A.I. is going to require some power restructuring, with energy-burning data centers surging in demand to support the necessary A.I. functions. Microsoft (MSFT) recently published that its carbon emissions last year were almost 30% higher than in 2020, hugely due to its investments in data centers that are being utilized to run A.I. functions. Microsoft is just one of many tech names pushing carbon neutrality, with other big players including Amazon (AMZN) and Apple (AAPL).

UBS earlier this week said First Solar stands to benefit, especially if it can continue to build on its market share in the U.S. These analysts see A.I. spend and tax credits affiliated with the Inflation Reduction Act advancing First Solar’s earnings to nearly $37/share by 2027 (vs. $7.74 in FY23).

Another factor contributing to the solar sector’s recent strength is fresh tariffs. President Joe Biden announced increased tariffs on Chinese imports, with the administration planning to impose a 50% tariff on Chinese solar cells this year. That would be double the previous 25%. This is an attempt to limit the influx of subsidized Chinese products pouring into the global market. Following this news, Enphase Energy (ENPH), SolarEdge (SEDG), and SunPower (SPWR) all rose on the session. The Invesco Solar ETF (TAN) is pacing to gain about 7.7% this week, adding to its 14% rally so far this month. However, this pales in comparison to First Solar’s nearly 35% spike just this week.

market minute
24 May 20242 min read

Russell 2000 futures are lagging behind their other counterparts among the major equity index futures contracts, with the small-caps falling just over -1% yesterday. The S&P 500 futures and Nasdaq-100 futures, spurred on by a +6% earnings jump from Nvidia (NVDA), are both logging new all-time highs, while the Dow and Russell futures have actually declined on the week.

The /RTY contract saw some noteworthy technical developments yesterday. First, it closed below an upward trendline that began with the Apr. 19 lows as well as the short-term 9-day Exponential Moving Average. Additionally, the Relative Strength Index (RSI) also had a matching trendline with price, and it fell below it concurrently with price. Another thing to note is the ParabolicSAR, a study used by traders to help determine trend direction and set stop-losses, shifted from bullish to bearish yesterday, while the MACD is quite close to its own bearish crossover. The Average Directional Index (ADX) also shows quite a low reading below the 15 level, which suggests there is not a particularly strong trend in play in either direction, despite the recent rally since mid-April.

Despite these technical changes, things are largely still geared toward the upside. Price is only about 3.2% below the yearly highs, and still remains above most of the commonly followed moving averages, many of which are still trending upward. The RSI is still above the 50-midline, which means momentum is still favoring the bulls.

Still, the /RTY is up in early trading and looks poised for a green day today. If the bulls keep pushing to the upside, the broken trendline starting from the Apr. 19 lows could be a place to look for resistance around 2,115. There’s another downward sloping trendline starting with the yearly highs that comes in quite close to the uptrend line as well, and beyond that there’s the relative highs of 2,132.50 from May 15. To the downside, watch the 21-day Exponential Moving Average near 2,074 as one of the first sources of potential support. The yearly Linear Regression Line is not far below, coming in around 2,055, and the 63-day EMA is in the same general region near 2,048.

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