It’s been a relatively quiet holiday-shortened week, with the indexes and many individual stocks not making many moves. (A few groups, like energies, financials and even REITs made decent moves, but that was about it.) It’s possible this morning’s jobs report could change that, but all in all we’ll chalk it up as a neutral week—which, coming after three constructive weeks, is fine by us.
There are a few things we’ll be watching closely for next week. The first is a group of “old” winners (TWLO, PINS, ROKU, etc.) from last year, as well as glamour funds like the Ark Innovation Fund (ARKK)—a bunch of these have bounced during the past three weeks but are now bumping into tough resistance (falling 50-day lines, prior price highs, etc.), with many getting nicked yesterday. If this group of stocks as a whole implodes again, it’ll almost surely make a big dent in the nascent rally, though some strong support could help the Nasdaq.
Second is sentiment, which has begun to bubble up again. It’s not mayhem out there, but some measures raised eyebrows this week (the AAII survey showed less than 20% bears, which is extremely complacent), and it’s hard to ignore the return of the Reddit stocks, which indicate that speculators are active again.
On the positive side, we do like that we’re seeing a few names show some real, big-volume power, including a few earnings movers; more of that action would go a long way toward telling us big investors are becoming active on the buy side with growth-oriented stocks. Plus, the fact that the sellers haven’t been able to really step up so far is a plus and a small change of character.
All in all, we remain encouraged, and if you’ve been highly defensive, coming off the sideline with more cash makes sense. But the market still has a lot to prove, so we advise going slow and looking for ongoing strength to pull you into a more heavily invested position. We’ll likely leave our Market Monitor at a level 6, though any improvement from here would cause us to bump that up.
SUGGESTED BUYS
Energy stocks have been the winners this week, and while we wouldn’t chase them higher willy-nilly, many are showing big-volume buying after long rests or quiet pullbacks. Schlumberger (SLB) is one idea, as the stock had a persistent move to new highs last month, a controlled pullback and then some huge upside volume to new highs. Dips of a point or two would be tempting, with a stop in the 30-31 range.
Crocs (CROX) has turned sloppy but hasn’t done anything wrong—it’s still basically sitting on top of its big earnings gap from late April. We’d prefer to see it calm down a bit, but we’re OK starting small here if you don’t own any, with a stop around 92.5.
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