HEADS UP: I’m finishing up a soiree with the kiddos so this week’s M&S update will be on the briefer side. I’ll be back at my desk Monday for another Top Ten issue.
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After a tough slide Monday, the market has been very impressive this week, with three straight solid and broad-based gains. Heading into Friday, the S&P is up nearly 4% while the Nasdaq is up more than 5%.
Despite the gains, most of the primary evidence is still pointed south—the intermediate-term trend remains down, as most indexes have only poked above their 25-day lines while remaining below where they were five weeks ago. Same goes with most stocks, with 70%-plus of them below their key 50-day and 200-day lines.
Of course, the situation has improved, and another week like this would likely change the trend back up. But we always go with what’s in front of us, and the fact that the trend is still down should be keeping you relatively defensive.
However, “relatively” is a key word there. We are encouraged by what we’ve seen this week for a couple of reasons. The first is what we’ve written about a few times—that many secondary pieces of evidence, such as sentiment and panic-related indicators, reached extremes during the six-week, tariff-induced meltdown.
And now we’ve seen one key blastoff indicator we follow—something that flashes rarely but almost always leads to great results six to 12 months down the road—has turned green. It’s a simple one: Dubbed the Three Day Thrust, it occurs when the S&P 500 rallies at least 1.5% in three straight sessions.
Historically, it doesn’t preclude some near-term wobbles in the weeks ahead, but longer-term, the market is up 20%-plus a year later, and most signals occurred either at great take-off points or during bottoming processes after tough bear phases.
That does have us thinking more optimistically … though we’re not going to ignore the trends, and we’re also keeping in mind tons of names are reporting earnings in the next couple of weeks, which makes buying tricky. All told, we’re going to nudge up our Market Monitor to a 4 today, but we could raise it further come Monday and, if the trend turns up and many stocks start to break out, we won’t hesitate to quickly ratchet it higher.
SUGGESTED BUYS
While breakouts are not high-odds plays until the market truly kicks into gear, both Netflix (NFLX) and Take-Two Interactive (TTWO) have staged solid-looking breakouts this week. Loar (LOAR), CrowdStrike (CRWD) and Penumbra (PEN) are three others that have moved nicely above resistance though still have some overhead left to deal with.
SUGGESTED SELLS
Partial Sells
None this week
Full Sells
Anglogold (AU) – we’ll book our profit in AU as gold stocks were hit this week
MP Materials (MP) – got whacked out of it earlier this week as it tripped our stop
Ollie’s Bargain Outlet (OLLI) – the soppy action this month along with a selloff this week while the market popped isn’t a good look.
SUGGESTED STOPS
We’re still not using many in-the-market stops given the wild volatility, but the blown-up stocks have some levels they should hold above if they want to be part of the leadership parade of the next bull phase.
Ascend Pharma (ASND) near 149
Expand Energy (EXE) near 99
Harmony Gold (HMY) near 15
Insulet (PODD) near 235
Monster Beverage (MNST) near 54.5
Primo Brands (PRMB) near 30.5
Waystar (WAY) near 33.5
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