It’s been an interesting week thus far—we’ve seen interest rates take a nice step backward (10-year note is down 16 basis points this week), which has helped the indexes build on last week’s show of support, albeit in a modest way (up 0.5% to 1.5%, in general).
More encouraging to us is that many resilient stocks (those etching higher lows in recent weeks and perched somewhat near their highs) saw solid buying, with many doing well and a few actually moving to new high ground. This contrasts with many rallies that see “only” the worst performers bounce—that’s fine, but rallies are better off with leadership.
Throw in some secondary positives (like the prior oversold readings, lots of pessimism and the fact that growth is outperforming most other areas) and we consider the past week a good first step or two for the market.
That said, nothing has really changed when looking at the intermediate-term picture: The trend of nearly all indexes is still down (you could argue the Nasdaq is neutral), and the same goes for most stocks and sectors, too. Plus, while some potential leaders have definitely perked up, about three-quarters of all stocks are south of their 50-day lines and the number of new highs remains tiny.
To be clear, at this point we see all of this as descriptive, though not necessarily predictive—given all the news and global events right now, your best move is to take things on a day-to-day basis. Right now, the market is in a rally attempt, and if all goes well, it could morph into a sustained upmove, especially if interest rates come down and earnings season pleases investors.
For the here and now, we’re optimistic, but we need to see more before concluding the sellers are out of ammo. We’ll likely leave our Market Monitor at a level 5 come Monday, though we’re not against nudging it up if more leadership emerges.
POTENTIAL BUYS
Duolingo (DUOL) remains very wild (average daily range is about eight points), but it’s also very strong, rallying to new price and relative performance highs earlier this week before starting to pull in. If you don’t own any, we’re OK with a small buy here or on further dips, with a stop in the 152 area (near the 50-day line).
Synopsis (SNPS) is one of the resilient names that’s lifted off to the upside, breaking out and running for a few days. Round number resistance near 500 could be a short-term barrier, but if you didn’t buy any, we’re OK with grabbing some here with a stop near 450—and if you already own some, we’re not opposed to a further nibble here or on dips of a few points.
SUGGESTED SELLS
Partial Sells
If you bought Celestica (CLS), we’d book some partial profits up here and see how it goes with the rest. The group is strong (FN is another), but both are extended.
Diamondback Energy (FANG) has gone wild on the upside of late, partially thanks to the buyout of Pioneer this week, along with higher oil prices. If you own some, book some profit and hold the rest.
Frontline (FRO) has had a quick move as oil prices have rallied and with the new war in the Middle East. It’s not a huge gain, but if you have a 12% to 15% gain in two weeks, book some and hold the rest.
Full Sells
Alpha Metallurgical (AMR) – selling on today’s bounce after yesterday’s sharp dip following a cut in Q3 guidance
Mobileye (MBLY) – The new Middle East war has cracked the chart
SUGGESTED STOPS
Apollo Global (APO) near 85
Blackstone (BX) near 101
Braze (BRZE) near 43.5
Celestica (CLS) near 23
Diamondback Energy (FANG) near 154
Duolingo (DUOL) near 152
Elastic (ESTC) near 72
Fabrinet (FN) near 156
Jabil (JBL) near 119
Neurocrine Biosciences (NBIX) near 106
Novo Nordisk (NVO) near 94
Onto Innovation (ONTO) near 124
PDD Holdings (PDD) near 94
Saia (SAIA) near 388
ServiceNow (NOW) near 540
Synopsis (SNPS) near 450
TechnipFTI (FTI) near 18.9
