The market has been a horror show for the most part in recent weeks, but we have felt that if something went right in the world, the many positive secondary factors (breadth, sentiment, etc.) could get the market moving in a hurry. This week, we may be seeing that—following the Fed meeting and this morning’s jobs report, Treasury rates are down about 30 basis points across the board, with some (especially the five-year note) slicing through the 50-day line, which had contained the entire rate advance since mid-May.
In response, the major indexes have had a great week, up in the 6% to 7% range including this morning’s early nudge higher after the jobs figures. Simply put, we’re encouraged given the setup we’ve been talking about and the sharp reaction this week, which (for the first time in a while) has included some great breadth.
However, “encouraged” does not equal “bullish,” at least not yet. Believe it or not, the intermediate-term trend isn’t up at this point despite the sharp rally, though it’s close—if the indexes can hold their ground for a few days (or build on the gains), it could click next week, though we never anticipate these things.
We’d also note that there remain very few stocks hitting new highs—we don’t need those figures to explode to hundreds a day, but at this point, we’re talking a couple dozen.
And, possibly most important of all, we continue to see a large number of stocks that we are currently or were recently watching implode on earnings. We’re not talking about dropping 6%, but 25%, 30%, sometimes 40%. Of course, there are always potholes during earnings season, and to be fair, most of the blowups haven’t been in potential leaders, but even just this week we’ve seen names like RELY, FTNT, FND, BILL, CFLT, PCOR, NARI and others get crushed.
Now, to be clear, those remaining worries are descriptive, not predictive, telling you that there remain many land mines out there and that, despite the move this week, many stocks still face overhead.
Even so, we’re optimistic given the setup and the action of interest rates. We don’t advise going wild, but at the very least you want to make sure your watch list is fine-tuned this weekend, and if you’ve been in a cautious stance like us, we’re OK throwing a couple of lines in the water here.
We’ll start by bumping up our Market Monitor back to a level 5, but if things really catch fire (still a big if), we could quickly move that up. For now, one step at a time.
POTENTIAL BUYS
Neurocrine Biosciences (NBIX) had a tough pullback but has rebounded excellently after earnings this week. It is back in an area of resistance here, but nibbling here or on dips of a couple of points with a stop near 106 seems like a good risk/reward.
Nutanix (NTNX) has acted properly the past two months, as even its tough pullback of late found support near the 50-day line—and now shares are bouncing, albeit on modest volume. If you don’t own any, we’re OK starting a position here or on dips of a point or two, with a stop in the lower 30s.
It’s not for the faint of heart, but Palantir (PLTR) has shown outstanding volume after earnings (yesterday was the fourth-heaviest day this year) and is pushing above some resistance today. We’re not opposed to a small buy here, but if you do, be prepared to use a loose stop (15.5 or so) given the volatility.
SUGGESTED SELLS
Partial Sells
None this week
Full Sells
Elastic (ESTC) – we still don’t think the big-picture chart here is awful, but it tripped the stop we had in place, so we’re out … though we’ll be monitoring if it can snap back or not.
HealthEquity (HQY) – decisive breakdown as rates have dipped.
PDD Holdings (PDD) – tripped stop though has bounced back; if you still own it you can use a stop near 98, though if you’re out, we wouldn’t chase it today.
SUGGESTED STOPS
Autoliv (ALV) near 91
BWX Technologies (BWXT) near 74
CNX Resources (CNX) near 21
Crinetics Pharmaceuticals (CRNX) near 27
Dell Technologies (DELL) near 64
Diamondback Energy (FANG) near 158
Ely Lilly (LLY) near 537
Frontline (FRO) near 20
Neurocrine Biosciences (NBIX) near 108
Nutanix (NTNX) near 33.5
Palantir (PLTR) near 15.5
TechnipFMC (FTI) near 20.5
Williams Sonoma (WSM) near 145
XPO (XPO) near 71
Zscaler (ZS) near 149.5
