Despite the holiday trading action on Monday and no trading on Tuesday, things have been a bit dicey this week, with the major indexes (especially the broader indexes) down as the market’s old bugaboo—interest rates—spike toward new multi-year highs. Moreover, this week, we saw some leading stocks take hits as well, as some of the laggard areas of the market (like financial stocks) took the selling in stride.
What does it all mean? To this point, not much. If you just stick with the evidence, nothing has changed: The intermediate-term trend of the major indexes is up, the number of new lows on the NYSE is well contained, defensive stocks (while picking up a little relative strength) aren’t picking up lots of steam and, while leading stocks have taken on some water, there’s been very little abnormal action (breaks of 50-day lines, etc.) so far—indeed, it’s not easy to find many Top Ten stocks that really look sick.
Thus, just going with what we see, the odds favor this being part of a continuing correction/rest period/shake-the-tree situation following a heady run, serving to raise the fear and discomfort level before another leg up.
What does stick out, of course, is interest rates—it’s not a coincidence that the market bottomed last October nearly in concert with the peak in rates, and market-based rates (as opposed to the Fed) have held steady in the months since. Thus, if rates are starting a big new upleg, that’s almost certainly going to be a persistent headwind.
That said, (a) we wouldn’t say the trend is clearly up yet, and (b) rising rates aren’t that unusual a couple of months into a new bull trend. Big picture, we’ll see how it plays out—it’s not something to ignore, but it doesn’t outweigh the primary evidence, which remains positive.
We’re going to keep our Market Monitor at a level 8 today—we do think the selling could continue near term, and if we start to see some leaders crack, we’ll take things down a notch or two. But until proven otherwise, nibbling on dips is fine by us.
POTENTIAL BUYS
Apollo Global (APO) has hacked around for three weeks and finally tagged its 25-day line. Like the market, further near-term dips are possible, but if you don’t own any, we’re OK grabbing some here or on dips of another point or two, with a stop near 70.
Trade Desk (TTD) accelerated higher at the start of June and has basically gone straight sideways since in a very tight range centered on 76 or so. We’re OK nibbling here with a tight stop near 72.
SUGGESTED SELLS
Partial Sells
None this week
Full Sells
Lululemon (LULU) – a few wiggles post-earnings was fine but it’s flopping around so much it’s hard to say the buyers are in control.
Zillow (Z) – after finally breaking free on the upside, Z immediately fell back into its base. Nothing wrong with using a stop in the 45-46 area but the failed breakout has us cutting and looking elsewhere.
SUGGESTED STOPS
Once again, we’ll likely prune the list a bit more come Monday, but for now, we’ll stick to a growing number of stops.
Apellis Pharmaceuticals (APLS) near 84.5
Builders FirstSource (BLDR) near 118
Cameco (CCJ) near 29
DraftKings (DKNG) near 22.5
GFL Environmental (GFL) near 37
GXO Logistics (GXO) near 58
HubSpot (HUBS) near 473
KBR Inc. (KBR) near 61
Lam Research (LRCX) near 585
Li Auto (LI) near 31.5
Penumbra (PEN) near 312
Procore Technologies (PCOR) near 61.5
Rambus (RMBS) near 58.5
Shopify (SHOP) near 59.5
Spotify (SPOT) near 147
Trade Desk (TTD) near 72
Unity Software (U) near 37
