For the major indexes, it hasn’t been a bad week—the big-cap indexes are down a bit, while some of the broader indexes are up a tad—but the story of the week has been under the surface, where growth stocks were taken apart (ARKK down 9% through Thursday) while even some leading areas (XME down 6.5%) also took hits.
Stepping back, we still think the market as a whole has a halfway decent setup, believe it or not: The peak in selling pressures was back in January, and many indexes and stocks have been attempting to build a bottom since then. Throw in horrid sentiment that’s hitting nearly every measure at this point (we’ve even seen huge outflows from equity mutual funds and ETFs the past two weeks), and a few good days from here could kick off something meaningful.
But, while setups are nice, the primary evidence remains bearish—at best, the intermediate-term trend of the major indexes is neutral, while growth-heavy funds are bearish, and the majority of individual stocks (81% of Nasdaq stocks and 58% of NYSE stocks are south of their 200-day lines) are still in downtrends.
Plus, as mentioned above, we’re starting to see some of the previously solid groups get hit while defensive sectors ramp. We wouldn’t call those areas broken at this point; most are still north of intermediate-term support and some look just fine (in fact, we’re not opposed to nibbling on a name or two as they approach support—see a couple of ideas below). Still, for the first time in months, some have cracked, so we’re watching closely to see if this is a start of a rotation. We’ve been pruning some commodity names in recent weeks and have a couple more sells today.
Overall, the gist of our stance hasn’t changed: We think it’s best to be cautious, hold a good amount of cash and play things close to the vest on the buy side. Given the massive amount of bearishness out there, we still have our antennae up should the buyers show up—but until that happens, it’s best to stay close to shore. Given the weakening of the evidence, we’ll likely knock our Market Monitor down another notch (to a level 4) come Monday.
SUGGESTED BUYS
Cleveland-Cliffs (CLF) had a huge run for most of March and has been resting nicely for three weeks, and while it took a modest hit yesterday, it’s bouncing back this morning after a stellar Q1 report. If it can hold this morning’s gain, it looks like a decent entry around here, with a stop in the 28 area.
Nutrien (NTR) has pulled in with commodity stocks, but the damage has been limited, with this week’s drop only bringing shares down to the 25-day line. We’re OK with a nibble here and a stop near 97.
Pioneer Natural Resources (PXD) has mostly corrected through time (moving sideways) as the 50-day line has caught up. It looks like a solid risk/reward here, with a stop just under 230.
SUGGESTED SELLS
Baker Hughes (BKR) – breakdown after earnings
CarGurus (CARG) – tripped stop
Gold Fields (GFI) – cracked support
Intra-Cellular Therapies (ITCI) – tripped stop
Newmont Mining (NEM) – cracked support
Quanta Services (PWR) – abnormal action.
SolarEdge (SEDG) – tripped stop
Westlake (WLK) – taking a modest profit
SUGGESTED STOPS
Allegheny Tech (ATI) near 25.5
Alpha Metallurgical (AMR) near 129
Cameco (CCJ) near 26
CF Industries (CF) near 92
Civitas (CIVI) near 57.5
CrowdStrike (CRWD) near 202
Fluor (FLR) near 26.5
Helmrich & Payne (HP) near 42
Hilton (HLT) near 150
Inspire Medical (INSP) near 229
LPL Financial (LPLA) near 188
Marathon Oil (MRO) near 23.3
Oasis Petroleum (OAS) near 140
Paychex (PAYX) near 129
Pioneer Natural Resources (PXD) near 229
ShockWave (SWAV) near 170
Tesla (TSLA) near 970
Wolfspeed (WOLF) near 100