The big event this week was yesterday’s tamer-than-expected inflation report, which caused a huge jump in the indexes. While this doesn’t cure all the market’s sins, it adds to the modest positive evidence that’s been emerging in recent weeks.
First off, the broad market low came back in late September, with a peak in new lows two to three weeks ahead of the indexes. Second, the market has withstood a few events (Fed hikes, implosions in many sacred cows, and this week’s crypto shenanigans) nicely, and third, we saw some strength in broader indexes (small caps, mid-caps) to the point that the overall intermediate-term trend was actually on the fence.
And now we have yesterday’s booming advance, which turned the intermediate-term trend up for the entire market. It’s a solid step in the right direction.
To be clear, though, we’re not concluding the bear market is over: The long-term trend is down, growth stocks in general are still underperforming, the number of stocks hitting new lows remains elevated (though we’ll see if that changes after yesterday), and we’re still not seeing stocks really moving through resistance (and there were still many big breaks lower this week).
Overall, then, we’ve seen enough to extend your line—the intermediate-term green light combined with horrid sentiment and many stocks that etched higher lows of late (ultimate lows in the spring, but held up at higher levels during the August-October leg down) are legitimate good signs.
As usual, we’ll take it from here and use the market’s action as feedback going forward: If things get going, we’ll continue to extend our line, but if the rally fails, we’ll quickly pare back. We’ll lift our Market Monitor to level 5.
SUGGESTED BUYS
Fluor (FLR) isn’t your fastest horse, but it’s been acting well for weeks and just reacted strongly to earnings. Dips into the 32 area would be tempting, with a stop in the 28 area.
MedPace (MEDP) hasn’t followed through since its earnings gap, but we don’t see anything unusual in the action—if you haven’t bought any, we think you can buy some around here with a stop in the 190 range (near the rising 25-day line).
Steel Dynamics (STLD) has a similar pattern, with a strong run toward the end of last month after earnings, and now a couple of weeks of chopping sideways. Dips toward 93 would be better, but we like the action and think nibbling here with a stop in the 83 range makes sense.
SUGGESTED SELLS
Chart Industries (GTLS) – the market gave management an enormous thumbs down
HealthEquity (HQY) – nailed as rate expectations faded, which was going to drive the bottom line
Iveric Bio (ISEE) – tripped stop
Progyny (PGNY) – tried to get going last month but has failed and hasn’t been able to get out of its way after earnings
Xometry (XMTR) – cracked after earnings yesterday
SUGGESTED STOPS
Academy Sports (ASO) near 40
Arch Resources (ARCH) near 142
Calix Networks (CALX) near 62
Chesapeake Energy (CHK) near 94
Chord Energy (CHRD) near 143
Interactive Brokers (IBKR) near 71
LPL Financial (LPLA) near 236
Regeneron (REGN) near 690
