After a couple of good weeks, the sellers reappeared after Labor Day and have driven the market (especially the broad market) lower. Coming into Friday, big-cap indexes were down 1.5% to 2%, while small- and mid-caps were off more than 3%.
Thus, the follow-through we wrote about on Tuesday hasn’t happened, and that means much of the rubber-meets-the-road evidence never turned up—the intermediate-term trend is neutral-to-down, the number of new lows is picking up (yesterday saw more NYSE new lows than at any time since late May) and 70% of S&P 1500 stocks (big, mid and small caps) are south of their 50-day lines.
Translation: The correction that began in late July and early August is still intact as the market tries to work through a variety of unknowns and worries like the Fed, Treasury rates, the economy and the like.
Now, with that said, there are some continued positives out there. Growth stocks, which led the way down during this correction (due to an avalanche of horrible earnings reactions), have begun to show some resilience—many of the names that showed strength during the past week or two are holding firm this week.
Moreover, even with the retreat the past three days, growth-oriented funds are mostly holding their own, both in absolute terms and when compared to defensive areas, which continue to perform poorly.
The bottom line is there are a growing number of names that are rounding into form, but at this point, there’s not much in the way of sustained uptrends out there and the indexes are having trouble getting out of their own way. If you plowed back into a bunch of stocks during the recent rally, definitely throw up some mental stops should the selling continue.
For our part, we “only” bumped our Market Monitor up to a level 6, so we’ll keep it there today—we could obviously pull it lower if things unravel, but at this point, we’re comfortable with a good-sized cash position but also a nibble here or there in resilient names.
POTENTIAL BUYS
It’s clearly had a giant run so this isn’t a pristine risk/reward situation, but Nvidia (NVDA) is an obvious leader and it’s spent the past few weeks gyrating up and down—with this week’s low-volume dip bringing it to the 50-day line and an area of support. If you want in, a small position here and a reasonable (10% loss limit?) stop makes sense.
Pure Storage (PSTG) boomed in June, tightened up for many weeks and then shook out hard after earnings last week—but turned around and lifted to new highs on big volume earlier this week! Shares have been pulled down by the market since, but if you don’t own any, a small buy here with a stop near 36 seems like a decent bet.
SUGGESTED SELLS
Partial Sells
If you bought Fastly (FSLY) recently, you’re probably up north of 20% pretty quickly—and the stock does still look resilient. That said, we would consider ringing the register on some of it just in case the market’s wobbles worsen, while using a stop just above breakeven on the rest.
Marathon Petroleum (MPC) is a slower mover, but it too has stretched its legs—selling a piece and holding the rest makes sense.
Full Sells
Boot Barn (BOOT) – tripped stop
Natera (NTRA) – after tagging multi-month highs the stock immediately plunged on what was a fairly modest share offering
SUGGESTED STOPS
Adobe (ADBE) near 520
Apollo Global (APO) near 80.5
ATI Inc. (ATI) near 43.5
Argenx (ARGX) near 482
BridgeBio (BBIO) near 27
Carrier (CARR) near 54.5
ChampionX (CHX) near 34
Chart Industries (GTLS) near 164
Fastly (FSLY) near 19.4
Group1 Automotive (GPI) near 252
Marathon Petroleum (MPC) near 138
New Oriental Education (EDU) near 50
Pure Storage (PSTG) near 36
Southern Copper (SCCO) near 77.5
Zillow (Z) near 49.5
