This week is a good reason why, despite having a few near-term worries during the past month (we thought another wobble was possible), we’ve remained focused on the bigger picture—that the market seemed to be emerging from a bear phase, so near-term wobbles were likely … but were also likely to give way to higher prices.
That’s what happened this week, with the buyers really flooring the accelerator—coming into today, all of the major indexes were up in the 2.5% to 4% range, with not just leading stocks but lots of the broad market soaring higher. In fact, Thursday marked the fifth straight day that NYSE breadth was at least 2-to-1 positive! As far as we know, that’s not some sort of blastoff signal, but it’s obviously a sign of strength.
Now, as we said a month ago, we would say the latest tame inflation report has a lot of people “discovering” the bull case—and usually, when fears of the Fed/economy/inflation/interest rates/whatever have faded, the market has a way of throwing something new to worry about into the mix. Especially with earnings season just getting underway and the possibility that the Fed will remain in play (a hike later this month is baked in, but there are already rumblings of another rate hike in September), we’re certainly not going to rule out further shenanigans for the market as a whole or individual stocks and sectors (rotation, etc.).
But at this point, our main thought is the same as it’s been for many weeks: It looks like the tedious 17-plus-month bear phase (mostly down through last fall, then a multi-month bottoming effort into May of this year) is over, with some sort of new bull phase underway. Whether it lasts six months or three years is anyone’s guess—but it’s not likely to last just two-ish months, which is how far we’ve gone so far.
Thus, remain flexible, and importantly, don’t forget to take the occasional profit or partial profit, especially after the recent run.
That said, overall, you should also remain bullish. Given that the market is again stretched to the upside, we’ll keep our Market Monitor at “only” a level 8, though a little cooling off could have us boosting that further.
Shopify (SHOP) got very close to our stop, but it tagged its 50-day line after what amounted to an eight-week consolidation, and has taken off on the upside. We think buying in the 70 area and a stop near 63 makes for a solid risk/reward trade. (If you want to be tighter, you could use a stop in the 64-65 area, which is below the breakout area of 66-67.)
Datadog (DDOG) has popped out of a tight range and looks great—that said, we’re OK ringing the register on a portion of the position up here.
Spotify (SPOT) has been crawling along its 25-day line for many weeks and is now just accelerating higher—a bit out of its short-term trend. If you haven’t yet, you could shave off a few shares, put some cash in your pocket and hold the rest with a trailing stop.
GFL Environmental (GFL) near 37—tripped stop, taking a small profit
GXO Logistics (GXO) – like most everything, it looks fine, but we want to book a little profit and GXO looks like a solid but not spectacular play
Lam Research (LRCX) – looks fine, but hasn’t really taken off and most chip equipment names are just OK
Trade Desk (TTD) – nothing wrong with holding on, but we’re going to book a quick-ish profit here
Abercrombie & Fitch (ANF) near 31.5
Axcelis Technologies (ACLS) near 160
Builders FirstSource (BLDR) near 122
Cameco (CCJ) near 30
DraftKings (DKNG) near 23
GXO Logistics (GXO) near 60
HubSpot (HUBS) near 483
KBR Inc. (KBR) near 61.5
Lam Research (LRCX) near 595
Li Auto (LI) near 32
Netflix (NFLX) near 403
Palo Alto Networks (PANW) near 226
Penumbra (PEN) near 312
Procore Technologies (PCOR) near 66
Rambus (RMBS) near 59
Shopify (SHOP) near 63
Spotify (SPOT) near 151