It’s been another mostly sour week in the market, with the Nasdaq stumbling again and small- and mid-caps lagging even more. At this point, the overall intermediate-term trend for the market is basically on the fence, while the Nasdaq remains mired in a correction.
Digging deeper, it remains mostly a split tape, though some resilient areas have gotten caught up in the selling (oils last week, metals this week). We’re actually seeing a lot of “old” growth leaders already testing their early-March lows (well ahead of the major indexes) in a sign of weakness, while even growth stocks that are showing relative strength are still mostly in no-man’s land.
Meanwhile, industrials, financials and transports continue to look fairly solid, though the action remains choppy and challenging. The rebound in these areas yesterday helped many major indexes bounce off their 50-day lines, which is a good thing.
In the near-term, we don’t have a strong opinion on what comes next—another leg down, a retest of the lows or some more bouncing around wouldn’t surprise us. But until proven otherwise, our major thought remains unchanged: Making (and keeping) much money has become very difficult, with even the strongest areas swinging around wildly while many stocks bite the dust.
Thus, we think it’s best to remain cautious, keeping new buys on the small side and holding a good amount of cash—basically letting others fight it out every day while we patiently wait for a sustained, well-structured uptrend to get moving.
To be clear, we’re not passing judgment on when that uptrend will start—we are seeing more potential setups (another week or two of seasoning could provide entries) now that the correction has gone on a few weeks, so a few powerful few up days from here could change the market’s tune. Plus, longer-term, the odds strongly favor this being a correction/consolidation/rotational phase within a larger bull market. So we’re keeping an open mind.
But right now, the environment is more of a meat grinder, so until that changes, we suggest keeping it light and remaining patient for higher-odds opportunities.
SUGGESTED BUYS
Amkor (AMKR) has been tossed around by the market and is very volatile on a week-to-week basis, but it again found support near its 50-day line this week (as it did earlier this month), and big picture, it’s refused to give back much of its monstrous early-February advance. Yes, it could fail, but from a risk-reward standpoint, it looks like a good bet around here—a small position in this area with a stop near 20 (nearly a point under the 50-day line and this week’s low) makes sense.
Applied Materials (AMAT) actually tried to break out on Wednesday before being yanked back into its base—the dip isn’t surprising, as most breakout attempts fail in weak markets, but the relative strength is impressive. Moreover, the stock “just” got going from a multi-year base back in November, so it’s not some later-stage situation. We’re OK nibbling here with a stop around 107 if you don’t own any.
Goldman Sachs (GS) is now five months into its intermediate-term run, so it’s possible it (and other financials) may need a longer, more painful retreat. But the past two weeks represent a second dip toward its 10-week line, which is often a buyable point. If you don’t own any, you could take aim on further weakness into the 325 area, with a stop around 300.
SUGGESTED SELLS
On the partial profit side, taking a few chips off the table in Nucor (NUE) makes sense on today’s gap up. Looks great, but might as well ring the register a bit and hold the rest.
As for outright sells, we have a few, mostly due to stop violations:
Canada Goose (GOOS)
Dynatrace (DT)
Groupon (GRPN)
Freeport McMoRan (FCX)
Macy’s (M)
—tripped loss limit
Teck Resources (TECK)
Twitter (TWTR)
Wix.com (WIX)
SUGGESTED STOPS
Ameriprise Financial (AMP) near 213
Amkor (AMKR) near 20
Applied Materials (AMAT) near 107
Bausch Health (BHC) near 29.5
Cimarex Energy (XEC) near 54
Dycom (DY) near 84.5
Enterprise Product Partners (EPD) near 21.5
General Motors (GM) near 52
HubSpot (HUBS) near 420
Inari Medical (NARI) near 98
Johnson Controls (JCI) near 56
Kukicke & Soffa (KLIC) near 42.5
LPL Financial (LPLA) near 126
Magna Int’l (MGA) near 80
Marriott Vacations (VAC) near 157
PDC Energy (PDCE) near 29
Shake Shack (SHAK) near 109
Sonos (SONO) near 34
Summit Materials (SUM) near 25
Thor Industries (THO) near 123
Valmont Industries (VMI) near 221