Note: We’re sending this out a day early as our offices will be closed for Good Friday. Have a great long weekend, and we’ll be back at it on Monday.
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After an ugly couple of weeks, the major indexes got off to a poor start on Monday, but have since stabilized as we cruise into the holiday weekend. Coming into today, the S&P 500 and Nasdaq are down less than 1%, while the broader indexes are actually up 1% or so.
By the letter of the law, the intermediate-term trend of the market did turn down earlier this week, though yesterday’s bounce has brought most of the indexes to within shouting range (just above, just below) of their moving averages. Either way, at this point, the trend isn’t up, and of course most stocks are still stuck below longer-term moving averages.
More important to us, though, is that for months now we’ve seen growth stocks rejected as they approach new highs or multi-month resistance—yes, there are a few exceptions, but for the most part rallies have been capped in a few days or couple of weeks as big investors have sold on strength. That can always change (we’re always looking for it), but until it does, it’s best to remain cautious.
Commodity-related stocks, of course, remain a different story, with most still acting well—though we have seen a few chinks in the armor, such as shipping stocks cracking. We still see some opportunities in that area, but even there, it’s been best to nibble on the occasional shakeout or pullback toward support, as opposed to chasing things higher.
Thus, overall, we don’t have any big change in stance from a week ago—the latest decline has erased some (but not all) of the good vibes from the previous month. With not a lot of money being made, we think it’s best to keep a good amount of powder dry and stick with mostly small positions.
All of that said, we did want to end on a more optimistic note: During the past two and a half months, we’ve seen the Fed hike rates and jawbone investors to expect rapid rate increases (50 bps hike in May is in the bag) and a quick runoff of the balance sheet; we’ve seen a war in Europe that’s crimped commodity supplies and led to sanctions and uncertainty; we’ve seen an inverted yield curve and falling economic expectations; and we’ve seen actual interest rates rise (10-year note up 1% since early March, mortgage rates now at 5%, etc.).
And yet … the major indexes and even some fast-moving growth funds haven’t gone down during this time! That doesn’t guarantee anything, of course, but the point is to keep your eyes open and your head up as we patiently wait for the turn to come. We’ll likely be leaving our Market Monitor at a level 5.
SUGGESTED BUYS
CrowdStrike (CRWD) is one of few growth stocks that’s showing at least some power—there’s still old overhead, but it’s leapt to 4.5-month highs on very solid volume (thanks in part to a big upgrade earlier this week). We’re not in the mood to chase things, but dips toward 230 would be interesting, with a stop in the mid-200s.
Fluor (FLR) exploded out of a long range in early March, got as high as 30 and has since gone straight sideways as the 25-day line has caught up. It’s not the most exciting name, but it looks like a solid setup—you could start a position here with a stop around 26, or wait for a leap above 30.5 (and use a stop near 27).
Hilton (HLT) has been up and down for months, and the March rally that brought the stock near its old highs led to a sharp dip (much like we’ve seen with the overall market). But yesterday was certainly interesting, with a big advance (albeit on average volume) that recouped nearly its entire dip. If you don’t own any, a nibble here with a stop around 142 seems like a solid risk-reward situation.
SUGGESTED SELLS
If you haven’t taken any partial profits in some natural gas names—Antero Resources (AR) looks like the strongest one—definitely get on that, booking some profit and raising your stop on the rest.
Same goes with Helmrich & Payne (HP) and Patterson UTI (PTEN), both of which look great but have brought us quick profits in the past two to four weeks.
We have just one outright sell right now—Dutch Bros. (BROS), which has been lagging—but we may have another couple come Monday depending on how things look.
SUGGESTED STOPS
AGCO Corp (AGCO)
near 131
Agnico Eagle (AEM) near 59.5
Allegheny Tech (ATI) near 24.9
Alpha Metallurgical (AMR) near 123
CarGurus (CARG) near 37.5
CF Industries (CF) near 91
Civitas (CIVI) near 56.5
Helmrich & Payne (HP) near 40
Hilton (HLT) near 142
Intra-Cellular Therapies (ITCI) near 56
Lockheed Martin (LMT) near 433
Marathon Oil (MRO) near 22.8
Nucor (NUE) near 140
SolarEdge (SEDG) near 287
Tesla (TSLA) near 950
Westlake (WLK) near 111