First off—we always write this, but I figured I’d put it at the top given the market’s action this week: If you have any questions about any Top Ten stock or the market as a whole, don’t hesitate to reach out to my email above. I usually can get back right away, though if I’m away from my desk, it could take a few hours, but I always strive to get back within a day at the very most. Just a heads up not to be a stranger.
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For the past two months, the market had been pulling back and bouncing around normally, but this week, the post-Fed action has seen selling pressures pick up in a big way—the (more resilient) big-cap indexes have quickly retreated back to their August lows while broad measures have plunged.
All told, the major indexes come into Friday’s trading down in the 2.5% to 3.5% range this week, and more important, a bunch of resilient, decent-looking stocks that were holding up well cracked support under the market’s pressure.
Of course, coming into this week, the market was in the clutches of an overall correction and very few stocks were in sustained uptrends, so this isn’t a sea change in the outlook—but it clearly looks like the selling pressures have picked up as Treasury rates have hit new multi-year highs across the board.
Now, to us, all of the above is descriptive though not necessarily predictive. Late September is historically the worst period of the year for the stock market, the bad news (Fed, interest rates, etc.) is well known and many oversold-type readings are beginning to flash. (Yesterday saw the fewest number of new highs on the Nasdaq on any day this year; the NYSE was just two off; 80% of stocks are south of their 50-day lines.) Moreover, the leading big-cap indexes, while definitely short-term ugly, are currently hanging around their August lows—hardly a big-picture disaster.
In other words, you shouldn’t assume anything. Maybe this is the start of a nose dive lower, but we’re still of the mind an October bottom is possible as the worries of the past months peak.
For now, though, you shouldn’t ignore what’s in front of us: We’ll likely drop our Market Monitor by a notch (to a level 5), which means holding a bit more cash, being very discerning with new buying and, of course, honoring your stops. Eventually, we’re going to get a real, sustained (not six or eight weeks, but four to six months) uptrend with tons of breadth and leadership—but first we have to wait out this selling storm.
POTENTIAL BUYS
We wouldn’t be buying much right now, waiting for the selling to abate, but Bunge (BG) seems to be dancing to its own drummer, simply moving sideways in a very tight range as the 50-day line approaches. If you’re aggressive, you could start a position here and add on a move above 116, all with a tight stop just under 108 or so.
Fabrinet (FN) has pulled back since its big earnings gap in August, but the action has been normal and shares have taken this week’s market plunge in stride. If you don’t own any, a nibble here with a stop near the 50-day line (call it 137-138) could work if the market finds support in the days ahead.
SUGGESTED SELLS
Partial Sells
Celsius (CELH) – If you bought the stock a while ago, this week’s action looks abnormal, though shares aren’t totally broken. Selling some and holding the rest is prudent for now.
Full Sells
Adobe (ADBE) – tripped stop
Arista Networks (ANET) – tripped stop
BridgeBio (BBIO) – tripped stop
Chart Industries (GTLS) – tripped stop
Fastly (FSLY) – tripped stop
Flywire (FLYW) – tripped stop
Group1 Automotive (GPI) – tripped stop
Palo Alto Networks (PANW) – tripped stop
Samsara (IOT) – completely abnormal meltdown after breakout attempt
Seadrill (SDRL) – not a disaster, but weaker than many oil peers
Southern Copper (SCCO) – tripped stop
Splunk (SPLK) – taking our quick profit as the stock got bought out by Cisco. Shares are below the deal price, but the deal is also not expected to close until Q3 of next year—if you want to try to squeeze more juice from the trade, there’s nothing wrong with that, but we’re not M&A players, so we’ll take the one-week 20% gain and move on.
Workday (WDAY) – above loss limit but not a big fan of the gap below the 50-day line
SUGGESTED STOPS
Apollo Global (APO) near 83.5
Argenx (ARGX) near 489
Baker Hughes (BKR) near 34
Bunge (BG) near 107.5
ChampionX (CHX) near 34.5
Duolingo (DUOL) near 140
Elastic (ESTC) near 69.5
Fabrinet (FN) near 138
Jabil (JBL) near 104
Light & Wonder (LNW) near 72
Marathon Petroleum (MPC) near 146
Northern Oil & Gas (NOG) near 37
Onto Innovation (ONTO) near 116.5
PDD Holdings (PDD) near 88
Saia (SAIA) near 380
Veeva (VEEV) near 200
