There remains a lot of news-driven action and crosscurrents, but when looking at the major indexes, the market’s had its second straight constructive week. As we write this, both the S&P 500 and Nasdaq are looking at 1.8%-ish gains in the holiday-shortened week.
Even better is the fact that the intermediate-term trend is on the verge of turning up—if most major indexes hold (or build on) their gains, a green light could be flashed early next week.
That said, it’s not all peaches and cream. Just as meaningful as the bump in the major indexes has been the increasingly sharp rotation taking place under the surface—growth-oriented stocks in general (mostly those that have had big runs this year and are perched near their highs) have stagnated or, in some cases, sold off sharply, while many beaten-down areas (banks, transports, energy, etc.) have been bid up. Don’t get us wrong, many names still look just fine, but more and more are wobbling.
Where does it leave us? Well, first, we’re certainly encouraged by the action of the market, especially when you take into account some secondary indicators like sentiment, which remains horrid by many measures. (That’s a good thing.)
However, we haven’t yet gotten a green light from our intermediate-term model, and we don’t anticipate those things. And while the recent rotation isn’t necessarily a bad thing (it is what it is), we would say it’s called into question what stocks and sectors will lead the way higher should a sustained rally emerge.
Long story short, we’ve become incrementally more constructive on the market, and should the intermediate-term trend turn up, we’ll put some more money to work. We do think the odds are growing that the next major move for this bull market is up, and should the buyers continue to flex their muscle, there should be plenty of opportunities out there.
That said, I wouldn’t be cannonballing back into the pool at this point. It’s still best to be relatively choosy on the buy side, aiming for solid entry points and/or start with smaller-than-normal positions; if you start to make money with your new buys, you can then extend your line. As for stocks you own, honor your stops and loss limits in case the rotation continues.
All told, we’ll likely bump our Market Monitor up a notch or two on Monday, depending on how things look.
BUY IDEAS
Five9 (FIVN) is one of many stocks that broke out on earnings in late July/early August, ran higher for a couple of weeks and has now pulled in normally to its 25-day line. We’re fine snagging some shares around here with a stop near 55.
Twitter (TWTR), which we wrote about on Monday, leapt nicely to multi-month highs yesterday on very good (not amazing) volume. We’re fine pulling the trigger up here if you didn’t buy any, but consider keeping it small to start, with a stop around 40.
Universal Display (OLED) has had a big run this year, so we’ll see if it gets caught up in the rotation that has been taking place. But so far, the buyers remain in control—in fact, yesterday the stock leapt out of a brief five-week rest period on about double its average volume and it’s moving up further today. As with TWTR, you could consider starting small here, and use a stop in the low 200s.
SELL IDEAS
We have four stocks that tripped their stops this week and are now sells:
CrowdStrike (CRWD)
Enphase Energy (ENPH)
Iqvia Holdings (IQV)
Smartsheet (SMAR)
SUGGESTED STOPS
Agnico Eagle (AEM) near 55.5
Anaplan (PLAN) near 50.5
Appian (APPN) near 48
Arrowhead Pharm (ARWR) near 29.5
Avalara (AVLR) near 79
Boston Beer (SAM) near 395
Dexcom (DXCM) near 155
Epam Systems (EPAM) near 183.5
Generac (GNRC) near 72.5
Heico (HEI) near 136
Insulet (PODD) near 134
JD.com (JD) near 28.5
Kirkland Lake Gold (KL) near 44.5
Lattice Semi (LSCC) near 16.9
Lithia Motors (LAD) near 124
Match.com (MTCH) near 78
Okta (OKTA) near 115
Paycom Software (PAYC) near 231
Pinterest (PINS) near 29.9
Sherwin Williams (SHW) near 500
Shopify (SHOP) near 335
SolarEdge (SEDG) near 73
SunPower (SPWR) near 12
Teradyne (TER) near 51
TransUnion (TRU) near 78.5
Twitter (TWTR) near 40.5
Wheaton Precious Metals (WPM) near 26.5