The holiday-shortened week picked up where last week ended—on the downside—and while yesterday showed a brief bump, the sellers have remained at it since. Following this morning’s inflation report, the major indexes are getting clobbered today, and for the week, are down in the 3% to 4% range.
In Tuesday’s issue, we said that the rally had taken on water but the evidence remained positive, and that’s still somewhat true—but there’s no question things continue to worsen. And in that vein, given how we prefer to move gradually (not all-in or all-out), we’re likely to drop our Market Monitor another notch come Monday to a level 5, from a 6 earlier this week and a 7 before that.
To be fair, to this point, we’re not seeing the “Katy bar the door” signal that popped up when the Fed saber-rattled a couple of times last year. Back then, things broke decisively to the point where even a near-term rally wasn’t meaningful. At this point, we’re seeing many indexes, stocks and indicators lean on the bullish fence … and yes, some are starting to break, but many aren’t. For instance, the intermediate-term trend of most indexes is still up, and even this morning, the number of stocks hitting new lows isn’t abnormal.
Given that we remain in a very news-driven environment (and that the market is clearly discounting some bad news), a few good reports could see many stocks and sectors in good (even buyable) shape. In fact, we still think there are many names that want to head higher if the market allows it.
Overall, there’s no doubt we’re seeing degradation out there after such a positive late December/January; it’s not a decisive break, but certainly, the sellers are making a stand. Thus, you shouldn’t sell wholesale, or assume the market is headed down the chute, but we do think it’s best to pare back on your worst performers and names that are showing no profit or a loss after a few weeks.
Autoliv (ALV) has been not just resilient but very tight, holding its big earnings gap in late January (unlike most recent gaps up). If you don’t own any, you could nibble here with a tight stop (84 to 85) or wait to see if ALV can push above 93 or so (with a stop in the 86 area).
Wynn (WYNN) might continue to fade some, but the decline from its highs (after a mini-earnings gap earlier this month) has been very controlled and on light volume. With the stock touching its 25-day line today, we’re OK with a small buy here (or on dips toward 100) if you don’t own any with a stop in the 95 area.
Starbulk (SBLK) and many shippers got a nice uplift yesterday—we don’t have a huge profit, but given how strength is being sold, we think ringing the register on some shares here makes sense.
Boeing (BA) – not a disaster but like the market keeps losing ground, and it broke its 50-day line this morning.
Boot Barn (BOOT) – disappointing, but the earnings move has evaporated, and it tripped our stop today.
Exact Sciences (EXAS) – normal pullback is starting to see major distribution.
On Holding (ONON) – there is some support near 20, but it tripped our stop today so we’re out.
Academy Sports (ASO) near 51
Airbnb (ABNB) near 112
ASML Inc. (ASML) near 609
Discover Financial (DFS) near 107
Five Below (FIVE) near 184
Hyatt (H) near 106.5
Insulet (PODD) near 284
Mobileye (MBLY) near 36.5
Old Dominion (ODFL) near 321
Pulte (PHM) near 50.5
Reliance Steel (RS) near 223
Smartsheet (SMAR) near 41
Steel Dynamics (STLD) near 111
Toll Brothers (TOL) near 51
United Airlines (UAL) near 46.5