Officially, nothing has changed with the market’s story: The intermediate- and long-term trends of the indexes (and the vast majority of stocks and sectors) remain down, hundreds of stocks are hitting new yearly lows every day and very few are doing the opposite. Thus, we continue to advise a defensive posture with cash being your largest position.
That said, yesterday’s action bears watching—the market had slid persistently (six days in a row, taking the indexes down a few percent) into Thursday’s inflation report, which came in hotter than expected and caused another rush to new yearly lows in the morning. But then came a high-volume reversal, with many names perking up.
Moreover, this move comes amidst another round of hugely negative sentiment readings (AAII and Investors Intelligence surveys; NAAIM exposure index; Lipper shows eight straight weeks of outflows from equity funds and ETFs), while also happening after a short-term positive divergence from the broad market—the number of stocks hitting new lows actually peaked during this downleg back on September 23, despite the indexes clearly moving lower after that (especially yesterday morning).
Thus, yesterday’s move has some similarities to many potential low points in the market throughout history—which is enough for us to keep our eyes peeled.
That said, we obviously need to see more than just one (or two or three) up days to think a major turn has occurred. We view it similarly to when after a few hours of storms, the rain starts to let up; that doesn’t mean you’re going to open all your windows and plan a barbecue, but you will keep your eyes on the skies to see if the clouds do part.
Overall, then, we remain defensive—our Market Monitor is still at a level 3—but we’re also flexible, keeping an open mind as we head into earnings season.
SUGGESTED BUYS
If you want to nibble, we suggest looking for Top Ten names that pulled back reasonably of late and really popped this week, especially yesterday. If you still own them and want to hold on, that’s fine, but if you got stopped out, keep an eye on them to see if they can push higher (along with a stronger market).
Biogen (BIIB) pulled back reasonably after its huge gap, and then surged again yesterday on very heavy volume. Frankly, we’d still target pullbacks into the mid-260s, with a stop near 240.
HealthEquity (HQY) still has resistance in the 72 to 75 area (right here), but after an orderly dip to the 50-day line, it’s come alive, snapping right back to its highs on huge volume. If you enter, a stop near 65 makes sense.
Texas Roadhouse (TXRH) has enjoyed three straight above-average volume up days as the stock tests multi-month highs. Such resistance areas have been tough to get through for most stocks this year, so if you want to nibble, aim for a dip to, say, 93, with a stop around 85 or so.
SUGGESTED SELLS
A few names here triggered their stops (which, for Top Ten, are assumed to be at the market, not mental or close-only) only to rebound. If you still own them, you can hold with suggested stops below.
Albemarle (ALB) – plunged to the 200-day line before a good-sized reversal. If you own some and want to hold on, you can with a stop near 250-253. Otherwise, just watch it.
Onsemi (ON) – tripped loss limit before rebounding. Even so, the stock is buried so we’re less interested in it at this time.
Trip.com (TCOM) – same as ON.
WillScot (WSC) – similar story, tripping stop before a big-volume rebound all the way back above its 50-day line. If you still own it, you could use a stop near 39-39.5; if you sold, that’s fine, but keep an eye on it.
Wolfspeed (WOLF) – tripped stop before rebounding nicely yesterday. If you still own it (if you use mental stops, etc.), hold on, if not, keep it on your watch list.
Uber (UBER) – Decisive breakdown on the gig worker regulation news.
SUGGESTED STOPS
Academy Sports (ASO) near 40
Cal-Maine Foods (CALM) near 55
Chesapeake Energy (CHK) near 93
Chord Energy (CHRD) near 135
Consol Energy (CEIX) near 61
First Solar (FSLR) near 117
HealthEquity (HQY) near 65
Interactive Brokers (IBKR) near 65
Iveric Bio (ISEE) near 17.7
Las Vegas Sands (LVS) near 34.5
LPL Financial (LPLA) near 222
Penumbra (PEN) near 173
Regeneron (REGN) near 680