It’s been another relatively quiet week for the major indexes, with most up in the 0.5% range, though the Nasdaq has outperformed, rising around 1.7% on the week as of this morning.
Overall, we don’t have many new thoughts: We think the market is slowly repairing itself, especially on the growth side of the fence, with stocks extending their launching pads (many have now rested for three to six months), and some are showing good volume at key points (sign of accumulation) and even some tightness (often constructive, especially after a few months of wild swings). Overall, the evidence for growth stocks is probably as good as it’s been since the top in mid-February.
However, to be fair, part of that is because of easy comparisons—we’re still not seeing a ton of power, with breakouts few and far between. Plus, importantly, there remains a lot of washing machine-type action, meaning some stocks/groups do well for a week or two while others sag … and then things reverse, with those names that had developed strength selling off while the “lagging” areas perk up. That makes it hard to make much money unless you’re flipping stuff every couple of weeks.
Outside of growth stocks, we are finally seeing some changes, with sectors like transports (testing its 50-day line), financials (some very early signs of abnormal action—nothing conclusive yet) and agriculture (big players like DE and AGCO below 50-day lines) showing some wear and tear. (Some housing stuff looks worse for wear as well.) We see a lot of cyclical/broad market type of names that have pulled in to key support—the next few days should be key for them.
All in all, we’re likely to nudge up our Market Monitor a notch to a level 7 given that there’s now been about a month of improved action. As always, if the sellers reemerge in a big way, we’ll respond quickly, but just going with the evidence, the continued improvement is encouraging.
SUGGESTED BUYS
Callaway Golf (ELY) had a great-looking breakout in early May and ran up to 37.5, and the eight-day rest since then has nearly brought it in touch with its rising 25-day line (now at 34.9 and rising). If you don’t own any, you could start a position here or on further dips, with a stop around 31.5.
Cleveland-Cliffs (CLF) has been something of a laggard among metals stocks, but it’s never done anything “wrong” and this week it staged a monstrous volume clue, which pushed the stock up from its 50-day line (just above 19) to the 23 area. Expect volatility, but this could be a change in character after a long period of ups and downs—we’re OK buying here, but we advise a loose stop near 20 or so.
SUGGESTED SELLS
If you have been able to ride some stuff higher, don’t forget to take a few chips off the table here and there. Academy Sports (ASO) continues to look great, though it’s moved a touch out of trend on the upside—nothing crazy, but if you’re up 30% or so from our initial recommendation, you could take a little profit and hold the rest.
As for outright sells, we have four today, but we’ve tightened many stops below:
Celanese (CE)
Goodyear Tire (GT)
LGI Homes (LGIH)
Nexstar Media (NXST)
SUGGESTED STOPS
Acuity Brands (AYI) near 176
Adient (ADNT) near 46
ArcelorMittal (MT) near 30
ASML Holding (ASML) near 635
Boot Barn (BOOT) near 70
Callon Petroleum (CPE) near 39.5
Cimarex Energy (XEC) near 66
Cleveland Cliffs (CLF) near 20
Crocs (CROX) near 93.5
Funko (FNKO) near 21
Goldman Sachs (GS) near 354
KBR Inc. (KBR) near 38
Leggett & Platt (LEG) near 52
Nucor (NUE) near 92
Owens Corning (OC) near 97.5
Snap On (SNA) near 236
Steel Dynamics (STLD) near 58
Summit Materials (SUM) near 31
Toll Brothers (TOL) near 58
Vale (VALE) near 20.2
Westrock (WRK) near 55
Yeti (YETI) near 81