After cracking last week, the market has shown encouraging support in recent days, and what’s interesting is that it wasn’t all on “good” news—the market actually found some support yesterday after META and NOW gapped lower on earnings, and long-term rates are still marching higher, with the 10-year Treasury yield tagging six-plus-month highs and rising about 40 basis points on the week.
Up is good, as we like to say, so the action is welcome. That said, it hasn’t changed the market’s positioning. The intermediate-term trend is mostly neutral at this point (not up), with growth indexes lagging others for the most part, and most stocks are in the same boat—not bad, but having cracked last week, and now running into areas of resistance.
While we watch everything, we think the tale will likely be told by earnings season and by interest rates: On the first, because of the market’s churning action that began in February, there are lots of stocks that have been resting/correcting for six, eight, even 10 weeks at this point, so a series of gaps to the upside could kick the market back into gear (and provide some buyable opportunities). As for interest rates, that’s self-explanatory—we might not need to see rates plunge, but if they kite higher by 0.25% a week, it’s likely to be an issue.
Just going with the facts, this week has been a plus and sort of backs up our overall view that (a) the market is working through a correction that could go longer, but (b) the odds favor this being a correction within a bull trend. Given that most indexes, sectors and individual stocks are still south of intermediate-term resistance, we continue to favor being cautious and letting the market and leaders prove themselves on the upside before getting more aggressive.
We’ll leave our Market Monitor at a level 6.
POTENTIAL BUYS
As mentioned above, a lot will come down to earnings season in the next two or three weeks—if we see positive reactions, some of the stocks that have pulled back could be buyable.
Examples if you don’t already own some: Crocs (CROX) up through 130, with a stop near 119.5 (earnings are due May 7);
Beacon Roofing (BECN) above 100 or so, with a stop near 92 (earnings due May 2);
And Howmet Aerospace (HWM) up through 68 or 69, with a stop near 63 (earnings due May 2).
SUGGESTED SELLS
Partial Sells
None this week
Full Sells
Medpace (MEDP) – tripped stop
Meta (META) – cracked on earnings
Steel Dynamics (STLD) – tripped stop on very wild post-earnings action.
SUGGESTED STOPS
Atkore (ATKR) near 169
Beacon Roofing (BECN) near 92
Cava Group (CAVA) near 56
CNX Resources (CNX) near 22.6
Coinbase (COIN) near 195
Crocs (CROX) near 119.5
Dexcom (DXCM) near 127
Howmet Aerospace (HWM) near 62
KKR & Co (KKR) near 92
Micron Technology (MU) near 105
Natera (NTRA) near 84
Novo Nordisk (NVO) near 122
Quanta (PWR) near 240
Robinhood (HOOD) near 15.9
Southern Copper (SCCO) near 101
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