Following more than a few yellow flags of late, the market had a down week, with most every index off in the 1% to 2% range coming into today. Despite the move, though, the evidence remains the same: The intermediate-term trend is mostly sideways, with big-cap indexes holding very well but broad measures in worse shape.
Moreover, among individual stocks, we’re still seeing a lot of air pockets out there, including a lot of good-looking leaders and potential leaders getting clocked on earnings. To be fair, though, this week has been a big improvement on that front over last week—then, nearly everything was hammered, while this week, we have seen more than a few positive reactions, too.
We don’t want to keep repeating the same mantra, but the story remains generally the same: Big picture, there are many positives out there, not the least of which is that the market (including all indexes) is holding up relatively well during a rolling bank crisis and a Fed that nearly all pundits think has gone too far.
That said, there’s still a distinct failure to launch, not just with obvious index levels (like 4,200 on the S&P 500, which everyone seems to be watching) but, more important to us, with leading stocks—many names that spent weeks to set up nicely have been taken apart on earnings, and most that have gapped up have quickly been met with selling pressure.
We would say that all of the above is extremely, extremely obvious—any investor that’s been paying attention knows the sell-on-strength action is everywhere, and of course, even the (wo)man-on-the-street knows things are amiss out there, with the economy bad in many places, layoff announcements making headlines most days and the banking crisis doing the same. Usually, the market doesn’t reward the obvious for very long—so if there’s a bullish spark, there’s plenty of bullish dry tinder out there to light.
Thus, our advice remains unchanged: We’re cautious overall, with plenty of cash and a handful of small positions—but we’re also flexible, as we patiently wait for investor perception to improve.
Spotify (SPOT) saw selling on strength after an initial positive earnings reaction—but, importantly, the stock held its 50-day line in the selling and actually moved to new closing highs yesterday. From a risk/reward perspective, nibbling here with a stop just under 130 (and the 50-day line) is attractive.
HubSpot (HUBS) is in a similar spot vis-à-vis its 50-day line—a small buy here if you don’t own any (after the earnings gap) with a stop just under its 50-day line (now at 406) seems like a solid bet.
None this week
Boeing (BA) – tripped stop as it tests the bottom end of its range.
Omnicom (OMC) – tripped stop.
Quanta Services (PWR) – not bad, but very choppy and mild reaction to earnings. We’ll take a minor profit.
Samsara (IOT) – tripped stop and a bad failed breakout attempt.
10x Genomics (TXG) near 49.5
Academy Sports (ASO) near 57
BWX Technologies (BWXT) near 61.5
Denbury (DEN) near 85
DraftKings (DKNG) near 21
Duolingo (DUOL) near 117
Five Below (FIVE) near 192
HubSpot (HUBS) near 402
KB Home (KBH) near 40
Lennar (LEN) near 104.5
Motorola Solutions (MSI) near 273
Penumbra (PEN) near 275
Rambus (RMBS) near 43.5
Spotify (SPOT) near 129
Tractor Supply (TSCO) near 232
Wynn Resorts (WYNN) near 105