It’s been another constructive week for the market in our view. The major indexes have perked up, with all five that we track back above their 50-day lines. That’s not the be-all, end-all, but there’s been improvement.
Better yet, growth stocks have had another good week—glamour funds like the ARK Innovation Fund (ARKK) are up nicely (though still way, way off their highs), and we’re seeing more solid action, meaning big-volume moves and some positive reactions to earnings. Moreover, we’re seeing encouraging support in names after they’ve made moves; the past couple of months have seen a lot of one- or two-day wonders (big moves up for a day or two, followed by straight-down action), but recently the sellers seem to have lost some power.
And third, we continue to see sentiment backing off, with various surveys and other indicators showing more apprehension.
Now, to be clear, none of the above is truly decisive—the indexes aren’t blasting off, individual stocks are still mixed (many of the extended cyclical and turnaround stocks have stalled out for the time being) and, for sentiment, it’s not like we’re seeing all-out fear in the market (which is usually a good contrary indication). A bad two or three days could put the rally at risk.
Still, we always go with what we see, and barring some sort of blastoff (which was incredibly unlikely at the time), the past three weeks have been about as good as we could have hoped. Simply put, we’d say it’s encouraging, though not decisive.
We’ll likely leave our Market Monitor at a level 6 come Monday, though that could change in the days ahead if the positive vibes continue. All in all, if you’re heavily in cash, we do think you can extend your line a bit, though it’s best to do so gradually—again, a few bad days could really dent the rally, but we’re seeing reasons for hope.
SUGGESTED BUYS
Most energy stocks (those that haven’t made acquisitions anyway) have been calmly consolidating for three weeks now and could be ready to get moving. Matador Resources (MTDR) looks like one of the most resilient ones, with the stock a stone’s throw from new highs. If you want in, you can start a position here with a stop around 26.
Wesco (WCC) has traded tightly since its solid earnings gap earlier this month. Could it fail? Sure, it’s possible, but it looks like a good risk-reward situation if you don’t own any—you can enter here with a stop near 94.
SUGGESTED SELLS
If you bought Scientific Games (SGMS) with us a few weeks back, it’s probably not a bad idea to book partial profits—we like the strength, but it’s had a big run and is extended, so consider booking some and holding the rest.
Fortinet (FTNT)
Jabil Circuit (JBL)
Under Armour (UAA)
United Therapeutics (UTHR)
SUGGESTED STOPS
ArcelorMittal (MT) near 29
ASML Holding (ASML) near 615
Autonation (AN) near 96
Bloomin’ Brands (BLMN) near 27.5
Boot Barn (BOOT) near 68
Callon Petroleum (CPE) near 33.5
Chart Industries (GTLS) near 142
Cimarex Energy (XEC) near 62.5
Cleveland Cliffs (CLF) near 18
Crocs (CROX) near 92
Fortune Brand Home (FBHS) near 100
Goldman Sachs (GS) near 339
Goodyear Tire (GT) near 18.2
Nexstar Media (NXST) near 145
Nucor (NUE) near 89
Sally Beauty (SBH) near 21
Steel Dynamics (STLD) near 57
Summit Materials (SUM) near 30.5
Willams Sonoma (WSM) near 162
Yeti (YETI) near 80