The selling that hit the big-cap indexes last week continued this week—the Nasdaq and growth-oriented measures (like the IBD 50 Index) have decisively moved below their 50-day lines, while the S&P 500 is testing that key trend line. Meanwhile, the broad market, while volatile, mostly held up (small caps are up on the week).
Essentially, we’re seeing a 180 compared to the situation for much of June and early July, with the broad market holding up and even advancing a bit while the mega-caps and popular tech names come under pressure.
On the tech stock side of things, all we can really say is that there have been a growing number of intermediate-term breakdowns along with the Nasdaq itself, with the leading chip area (and other AI-related sectors) taking it on the chin. Indeed, as of yesterday’s low, the Nasdaq itself had lost 8.8% from its peak just 11 trading days ago; ideally this is a washout (similar to what we saw in April), but at this point, the ferocity of the decline after a big, divergent run has us wary of catching any falling knives.
Conversely, the broad market is hanging in there, with small caps in particular looking relatively peppy anytime the Nasdaq stops cratering of late. The longer it can hold up, the better the odds that the big up-thrust seen earlier this month could be the start of a sustained move, especially given the years of no progress. However, we doubt small caps (or much else) are going to kite higher until the Nasdaq can at least find its footing.
Thus, it remains a very tricky situation. There’s some stuff still working, but volatility is high and earnings season has been very unpredictable, with a lot of implosions (we haven’t written about it in some time, but DexCom’s (DXCM) reaction today was an eye opener) though there have been some gaps up as well and many names are still set up nicely ahead of their reports.
Overall, we advise playing things carefully, with so much of the market whipping around; the continued split tape means the risk of another change in character (a general correction? a re-reversal back into tech?) is elevated, so it’s hard to lean too much in one direction.
We’ll likely leave our Market Monitor at a level 6, but as has been the case for months, it depends where you look—for tech-related stuff, the Monitor is probably a 4, but for the broad market, maybe a 7 or possibly higher. For new buying, you want to focus on only the best setups with names that have shown real accumulation of late in the face of the market’s wild action. We’re still seeing some solid risk/reward situations out there.
On the sell side, we’re not advising selling wholesale, and if you have some big winners you can give them (or part of the position) some rope. But we would honor stops (and loss limits) for at least some of your shares, respecting what is clearly intermediate-term abnormal action after big runs. From here, we’ll see how earnings season goes as there are tons of potential leaders reporting in the next two weeks.
SUGGESTED BUYS
Hims & Hers Health (HIMS) has been wild since late June, but it held its 50-day line and has shown some intriguing strength this week, albeit on light volume. A small position in the 22 to 23 area is an idea, with a stop under the 50-day line near 20.
SUGGESTED SELLS
Partial Sells
Carpenter Tech (CRS) has been a very solid performer, and its gap up on earnings this week looks good—but leaves the stock extended. We’re OK taking a few chips off the table here and trailing a stop for the rest.
Full Sells
Arista Networks (ANET) – tripped stop and 50-day line on huge volume.
Carnival (CCL) – looked like a nice pullback resumption but the pothole of the past two days looks abnormal to us. We’ll exit on today’s bounce.
Coherent (COHR) – went from new highs to cracking 50-day line right quick. We’ll sell on today’s bounce.
CyberArk (CYBR) – tripped stop, though the stock has bounced. If you still own some, it’s fine hanging on with a stop under yesterday’s low (call it 248 or so).
HP Enterprise (HPE) – tripped stop and broke down with other tech names.
SharkNinja (SN) – tripped our stop and has been living below its 50-day line for three weeks now.
Teradyne (TER) – disintegrated on earnings; unusual action for an early-stage mover but confirms the weakness among chip titles.
SUGGESTED STOPS
Agnico Eagle (AEM) near 69
Amkor (AMKR) near 37
Blueprint Medicines (BPMC) near 106
Burlington Stores (BURL) near 234
Carpenter Tech (CRS) near 107
Cirrus Logic (CRUS) near 123
Credo Tech (CRDO) near 27.5
Guardant Health (GH) near 28
Hims & Hers Health (HIMS) near 20
Howmet Aerospace (HWM) near 77.5
Light & Wonder (LNW) near 99
Monday.com (MNDY) near 222
Ollie’s Bargain Outlet (OLLI) near 91
Pan American Silver (PAAS) near 20
Robinhood (HOOD) near 20.2
Seagate Tech (STX) near 100.5
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