It was Fed and jobs week in the market, which implied a lot of volatility—and that’s just what we’ve seen, with a big drop after the Fed said no cuts were likely in March, a nice rebound yesterday, and this morning is looking more mixed, as some big tech earnings are helping the Nasdaq but the rest of the market is suffering as a strong jobs report has rates spiking.
Just looking at the evidence, not that much has changed at this point—the trend of the major indexes is pointed up while the action of leading stocks is still solid, with very few “real” breakdowns and even sloppy earnings reactions still holding above key support (like the 50-day line, etc.). Plus, we’re still seeing a good amount of stocks not just gap up on their reports, but do so on tremendous volume (biggest volume seen in two years or more), which is a good sign big investors are still interested.
That said, we’re now seeing more than a few things to watch. First, the broad market has done nothing since the start of the year, and now we see small- and mid-cap indexes testing their 50-day lines. No problem so far, but if this morning’s weakness gains steam, it would be an eyebrow-raiser.
Second, we’re seeing last year’s bugaboo—regional bank worries regarding their balance sheets and bad loans—pop up again, with the Regional Bank Fund (KRE) down about 9% this week (as of this morning’s open).
Third, maybe because of regional banks, we’re starting to see defensive stocks move, with our Aggression Index (which is the relative performance line of safe consumer staples vs. the growth-oriented Nasdaq) again at key levels.
Of course, all of these are storm clouds—but there hasn’t been any rain yet. Thus, (a) we’re keeping our Market Monitor at a level 8 given that the primary evidence is still bullish, though (b) we continue to think being discerning on the buy side, aiming to buy dips (except for very powerful situations), makes sense; and (c) we’re keeping a close eye on the above factors, for if any of them flip, we’ll likely take a couple of steps closer to shore.
In sum, we’re still bullish, but the market is starting to throw us more curveballs, so have your plan in place for stocks you own (stops, partial profits, etc.) and look for only the best names on the buy side.
POTENTIAL BUYS
It’s not the most exciting name, but Martin Marietta (MLM) continues to act well and, after dipping somewhat sharply to its 25-day line yesterday, found big-volume support. Earnings are out February 13, but we’re OK nibbling here or on dips with a tight percentage stop in the low 480s.
SUGGESTED SELLS
Partial Sells
Nvidia (NVDA) looks great and is being helped by the big tech push this morning, but if you bought with us recently (we wrote the stock up January 8), we think letting a few shares go up here makes sense, while holding the rest.
Same goes for Vertiv (VRT)—it depends where you bought it, but if you have a solid profit (north of 15% to 20%), we’d let some of it go on the back-to-back gaps the past two days with a stop near 50.
Full Sells
Affirm Holdings (AFRM) – nice setup but dip below the 50-day line was too much for us—we’re out
Atlassian (TEAM) – poor reaction to earnings today
Applovin (APP) – maybe it eventually gets going on earnings in a couple of weeks, but we entered APP looking for a breakout—and that breakout attempt failed yet again earlier this week, so we’ll get out a bit above breakeven.
SUGGESTED STOPS
Advanced Micro (AMD) near 155
Ascendis Pharmaceuticals (ASND) near 130
Cameco (CCJ) near 45
Datadog (DDOG) near 117
Dave & Buster’s (PLAY) near 48
Gitlab (GTLB) near 60
GoDaddy (GDDY) near 101
Intra-Cellular Therapies (ITCI) near 64
Lennar (LEN) near 140
Martin Marietta (MLM) near 482
Nutanix (NTNX) near 44
Nvidia (NVDA) near 530
Pinterest (PINS) near 35
Royal Caribbean (RCL) near 119.5
Snap (SNAP) near 15.6
Spotify (SPOT) near 200
Toll Brothers (TOL) near 95
United Rentals (URI) near 560
Vertiv Holdings (VRT) near 50
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