It’s been another mostly sour week, with continued selling in the growth area of the market early on, followed by a big show of support on Wednesday, only for that move to go up in smoke on Thursday. On the week so far, the big-cap indexes are down less than 1%, though broader indexes are down 1% to 2% and growth measures are down much more—and this morning of course looks likely to bring more losses.
Coming into today, the Nasdaq has fallen as much as 9% from top to bottom, while the hottest areas (chip stocks) plunged more than 19% (!) off the top. For growth, then, the intermediate-term trend is still clearly down.
The broad market, of course, has been holding up well, but as is often the case, the selling in the market’s leadership (which had clearly been tech and other growth stocks) is starting to bleed over—while broader indexes haven’t completely given up the ghost, the intermediate-term trend of the broad market is mostly neutral at this point.
Probably more important than the top-down evidence, though, is the action of individual stocks and sectors. Overall, we see relatively few stocks in sustained uptrends, which means it’s very hard to make and keep much money. To be fair, there have been more positive earnings gaps among high relative strength stocks this week (a couple show up in our Partial Sells category below), and if that continues next week, when tons of names will report, we could have something to work with.
But, while we’re taking things on a day-to-day basis and remaining flexible, the bottom line is we still favor a cautious approach right now, holding a good-sized chunk of cash, keeping new positions small and focusing only on names that have shown outsized buying power of late and are at decent risk/reward entry points. This selling wave will create new opportunities eventually, but it’s obvious big investors are still mostly on the sell side, so it’s best to let that play out.
We’ll leave our Market Monitor at a level 6, but that could drop further if the market remains weak.
SUGGESTED BUYS
While they could shake out some, homebuilders continue to act great, with Treasury rates plunging and many recent breakouts not only following through but holding up during the recent broad market selling. D.R. Horton (DHI) still looks like the best play here or on dips (stop near 158, about 10% down from here), and we’d expect to feature more housing-related names going ahead.
SUGGESTED SELLS
Partial Sells
Howmet Aerospace (HWM) is another aerospace-related name that held up well (near its 50-day line) and has popped higher on earnings. It looks great, but in this environment, we favor taking partial profits and trailing a stop for the rest.
If you haven’t yet, we’d book some partial profits in Guidewire (GWRE), which looks great but has rallied into 150 round-number resistance in a tough tape for growth. Sell some here.
Zeta Holdings (ZETA) is another earnings winner, popping Thursday to new highs. Same as HWM, we’d favor booking some profit now, and trailing a stop from here, starting a bit above your cost.
Full Sells
Amkor (AMKR) – melted down on earnings
Cirrus Logic (CRUS) – cracked 50-day line as the chip selloff has spread
Coinbase (COIN) – tripped loss limit
Corning (GLW) – we took partial profits on the upmove but are getting out near even after a negative earnings reaction
Credo Tech (CRDO) – tripped stop and still stuck south of its 50-day line
Hims & Hers Health (HIMS) – tripped stop
Lantheus (LNTH) – the big pop was completely wiped out before and after earnings, tripping our loss limit
Monday.com (MNDY) – couldn’t hold the 50-day line on this retreat
Robinhood (HOOD) – tripped stop, though it bounced back above it at yesterday’s close—if you want to hold with a stop a couple of dimes under 20, you can.
Seagate Tech (STX) – tripped stop after a post-earnings multi-day selloff
Urban Outfitters (URBN) – there is some support near here, but the failed breakout from last month isn’t a good sign.
SUGGESTED STOPS
Agnico Eagle (AEM) near 71
Blackstone (BX) near 130
Burlington Stores (BURL) near 237
Carpenter Tech (CRS) near 115
Guardant Health (GH) near 29
Guidewire Software (GWRE) near 135
Howmet Aerospace (HWM) near 83
Intuitive Surgical (ISRG) near 415
Krystak Biotech (KRYS) near 185
Light & Wonder (LNW) near 100
Ollie’s Bargain Outlet (OLLI) near 94
Zeta Holdings (ZETA) near 20.5
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