We’ve been writing (and recording in our weekly videos) for the past couple of weeks that, while the longer-term underpinnings of the market look fine, the shorter term was more iffy, with many leaders stalling out and the indexes themselves losing some steam.
That lack of power was exposed this week—starting with growth stock weakness on Monday, and followed by broad market selling starting Wednesday afternoon after the Fed (and exacerbated by yesterday’s tariff news). As we write this, the S&P 500 and Nasdaq are down 3% to 4% on the week.
That move has put the intermediate-term uptrend on the fence; most indexes we track are now at or a bit below their 50-day moving averages. Who knows how the day closes, of course, but any weakness from here would likely flip the current trend to down.
Regardless of the exact levels of the indexes, there’s no question damage has been done, so you should take your cues from individual stocks. If your stock has been pushing higher on good volume and pulled back modestly, we wouldn’t be in a rush to sell. On the flip side, if you bought recently and have a loss, or have seen a winner stall out a bit and come under heavy pressure, it’s probably best to either put in a tight stop or (for winners) take some partial profits and see how it goes in the days ahead.
Longer term, the odds still favor this bull market having a ways to run, so you shouldn’t hide in your bunker. Even among individual stocks that have had good runs this year, we’ve seen little (if any) long-term red flags. Said another way, we still believe most leaders will see higher highs down the road.
But there’s no question the near-term evidence has worsened for many growth stocks (rotation) and the market as a whole, so it’s a good idea to trim your sails by booking a couple of partial profits, keeping your worst performers and biggest losers on tight leashes—or both. We’ll likely knock our Market Monitor down another notch or two come Monday, though a lot will depend on whether the indexes are able to hold support.
BUY IDEAS
Anaplan (PLAN) is holding up great relative to its group (many software stocks have been dinged) and the market. Frankly, we’d like to see a bit more of a dip, especially given the iffy environment, but picking up a small position here or down to 54 or so, with a stop around 49-50, is enticing.
All the precious metals stocks had big shakeouts on Wednesday after the Fed, but rallied on huge volume yesterday following the tariff news. Of course, the group is going to be very news-driven, so if you buy, use loose stops. Agnico Eagle (AEM) looks like the most resilient of the bunch, with a dip as low as 51 yesterday before a huge-volume rebound right back to its highs. Nibbling here or on dips of a point or so could work, with a stop around 48.
Encouragingly, some of the stocks featured in this week’s issue—especially those that recently gapped on earnings—are holding up fine. Meritage (MTH), Sherwin-Williams (SHW) and TransUnion (TRU) are three to either nibble at here or (preferably) on further weakness.
SELL IDEAS
Advanced Micro (AMD)
AGCO (AGCO)
Baozun (BZUN)
Boot Barn (BOOT)
Kratos Defense (KTOS)
Legg Mason (LM)
Penumbra (PEN)
ServiceNow (NOW)
Strategic Education (STRA)
Under Armour (UAA)
Woodward (WWD)
SUGGESTED STOPS
Ally Financial (ALLY) near 30.5
Avalara (AVLR) near 75
Boston Beer (SAM) near 360
Chipotle Mexican Grill (CMG) near 670
Ciena (CIEN) near 42
Copart (CPRT) near 72.5
CornerStone OnDemand (CSOD) near 5
Dexcom (DXCM) near 143
Disney (DIS) near 135
First Solar (FSLR) near 62.5
Generac (GNRC) near 66
Guardant Health (GH) near 84
Heico (HEI) near 125
Insulet (PODD) near 113
Match.com (MTCH) near 69.5
MercadoLibre (MELI) near 575
Mirati Therapeutics (MRTX) near 90
Paycom Software (PAYC) near 219
Planet Fitness (PLNT) near 70
Rapid7 (RPD) near 56.5
Sea Ltd. (SE) near 31.5
Shopify (SHOP) near 296
Sunrun (RUN) near 17.9
Trade Desk (TTD) near 230
Veeva Systems (VEEV) near 156
Yeti (YETI) near 30
Zscaler (ZS) near 73.5