After three crazy weeks in a row, things quieted down this week, and we take that as a constructive sign—the S&P 500 and Nasdaq are flat-ish to up a bit this week, while the broader small- and mid-cap indexes are higher by 1% to 2%.
We like the action more because of what we didn’t see—to this point, we haven’t seen another massive wave of rotation out of leading stocks, and we haven’t seen the general hair-raising volatility on a day-to-day basis, despite some news items (follow-up vaccine news, rising COVID case counts, etc.) that have moved the market in recent weeks.
Another piece of encouraging evidence is some renewed peppy action among individual stocks—it’s not a wild bull move and we’re still seeing some selling on strength (or at least stagnation on strength, especially at round number resistance levels), but it’s fair to say growth titles have firmed up after the wobbles from early last week.
Thus, we’re a bit more encouraged than we were a week ago and, if you had a decent cash position, we think putting some of that to work makes sense. When you combine the positive vibes from the overall market (trends are up, very few stocks hitting new lows, etc.) and improved tenor from leading stocks (growth or cyclical), there’s no doubt the evidence has taken a step in the right direction.
That said, we’d still go relatively slow for now—investor sentiment has gotten a bit bubbly (which often coincides with further shakeouts), and let’s not forget that the Nasdaq (which has been the leading index all year) has still yet to exceed its Labor Day high. That’s not bearish, but the point is there are still a lot of crosscurrents out there, so pick your spots carefully and remain flexible.
If we’re starting a sustained run there will be plenty of names to jump on, but it’s best to let the market pull you into a more heavily invested position by continued positive action. This week was a step in the right direction.
Invitae (NVTA) has been tossed around in recent weeks with most growth stocks, but after a shakeout below its 50-day line, shares have bounced back and tightened up. You could start a position around here with a 10%-ish loss limit (42 to 43 area).
Target (TGT) isn’t going to blow your doors off, but the pattern looks enticing—after a great base from November to June, the stock broke out and had a nice run. Now, after a few weeks of meandering (and a successful test of its 50-day line), the stock has come to life thanks in part to another good quarterly report. We’re fine taking a stab at it here or on dips with a stop near 158.
Zillow (Z) was just written about after its earnings pop a couple of weeks ago, and it quickly gave up a chunk of that when growth stocks were hit. But it held its 50-day line a couple of times and found good-volume buying yesterday. If you own it, hang on, but if not, you could try some here with a stop just under the century mark.
If you bought some GrowGeneration (GRWG) a few weeks ago with us, you’ve sat through a tough pullback and seen a moonshot in recent days. Consider taking partial profits here and trailing a stop for what hopefully will morph into a home run.
As for outright sells, we have none today.
Abercrombie (ANF) near 17
Align Technology (ALGN) near 400
Avalara (AVLR) near 145
Brinker Int’l (EAT) near 43.5
Carrier Global (CARR) near 33.5
Deckers Outdoors (DECK) near 235
Exact Sciences (EXAS) near 108
Five9 (FIVN) near 135
Freeport McMoRan (FCX) near 17.9
Freshpet (FRPT) near 118
Gap (GPS) near 20
Invitae (NVTA) near 42.5
JD.com (JD) near 80
Martin Marietta (MLM) near 247
Natera (NTRA) near 72
Qualcomm (QCOM) near 130
Quanta Services (PWR) near 60
Seres Therapeutics (MCRB) near 29.5
Shift4 Payments (FOUR) near 52
Square (SQ) near 167
STMicroelectronics (STM) near 33
Taiwan Semi (TSM) near 87
Target (TGT) near 158