HOUSEKEEPING: First, as a reminder, our offices will be closed alongside the stock market tomorrow for Good Friday—which is why we’re sending out this update a day early. Second, I’m taking a light work week next week—Top Ten will come regularly on Monday, though Friday’s Movers & Shakers will likely be a bit condensed. Have a great long weekend and Happy Easter to those who celebrate.
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After a huge turnaround last week, as investors bought the plunge, stocks sold off modestly in this holiday-shortened week. As of this morning, the big-cap indexes are down in the 1% to 2% range on the week, though some broader indexes are actually up.
Our general view right now (always subject to change) is that the market likely hit a low last week that it can work off of for a while.
The main reason for that thought is that we saw a preponderance of secondary indicators having truly extreme readings at the recent low—from the VIX leaping over 50, to less than 5% of the NYSE above their 50-day lines, to more than 1,000 new lows on both the NYSE and Nasdaq for two straight days, there was clearly panic in the air, and that tends to happen near low areas in the market.
Also helping the near-term view is that we’re seeing more (not tons, but more) stocks flash relative strength, many of which have been written about in the past couple of issues. Plus, while we never put too much weight in one day of trading, we’d say that the big rally last Wednesday (when the tariff delay was announced) brought with it historically lopsided breadth figures (especially when it comes to volume, which was more than 60-to-1 up vs. down), a mini-buying thrust of sorts.
Thus, there are definitely some rays of light out there that are worth paying attention to—things that often occur near market low points and, when looking nine or 12 months down the road, have a good history of resulting in solid gains.
However, the primary evidence still has work to do—the major indexes continue to live below intermediate- and longer-term moving averages, as do the vast majority of stocks, with more than three-quarters of S&P 1500 stocks (large, mid and small caps) south of their 200-day lines, with more than 80% below their 50-day lines. Moreover, just time-wise, six and a half weeks down seems a bit brief for everyone to sell all the shares they want to—moves in the market often take more time.
To us, the ideal scenario here is that the market has begun a repair phase, which will feature a lot of hectic, news-driven moves over many weeks but will also allow the next wave of leadership to take pole position; we think we may be starting to see that among some growth-oriented names. While there’s always a chance for a V bottom, most often you see some sort of bottoming process, which could include a retest of the lows, or even a lower low while future leadership holds up.
Of course, that’s just a guess—as always, we’re taking it day to day, week to week and will be ready for anything. We’re OK with a few nibbles in resilient names if you have tons of cash on the sideline, but our main advice continues to be to play defense—it’s not the most exciting thing to do, but it’s better to let everyone else battle it out on a day-to-day basis while we keep our capital and confidence intact while preparing for the next major upmove, where the big money will be made. We’ll keep our Market Monitor at level 3.
SUGGESTED BUYS
We don’t have any brand new ideas at this point—though many names from the last two or three issues are still holding up well, so if you want to nibble, you can probe stuff like TTWO, TGTX, MRX and LOAR (on this dip).
SUGGESTED SELLS
Partial Sells
None this week
Full Sells
We’ll ring the register on Wheaton Precious Metals (WPM) after a nice run—it looks fine, and if you want to trail a stop (possibly a bit below the 25-day line, currently near 77), you can, but we see some other gold/metal names that are acting better. Plus, in this market, we’re OK taking some profits when they appear.
SUGGESTED STOPS
We’re still not using many in-the-market stops given the wild volatility, but the stocks below have some levels they should hold above if they want to be part of the leadership parade of the next bull phase.
Expand Energy (EXE) near 98
Insulet (PODD) near 230
MP Materials (MP) near 23.5
Waystar (WAY) near 33
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