Following last week’s vicious rotation, this week has been refreshingly quiet. As of Friday morning, both the S&P 500 and Nasdaq are nearly unchanged on the week (up a smidge). Considering we’ve had some worrisome headlines (especially the Saudi oil attacks), we take this calm action as a good thing.
In fact, from a top-down perspective, most of the evidence continues to look good—the intermediate- and longer-term trends of the indexes are pointing up, sentiment is tame (if not still skeptical) and some other secondary measures (the number of stocks hitting new lows has dried up beautifully) look good.
Thus, we continue to think the next major move for the major indexes is up, albeit with the usual batch of wiggles and news-driven movement.
Individual stocks are another matter. It’s not that the action is awful, but more that little money is being made—most of the big winners from this year have decisively broken down and look like sells on near-term rallies, and while we’re seeing some other names setting up, most are doing more chopping than trending.
Indeed, while the number of stocks hitting new lows has nearly vanished (thanks to the rotation in recent weeks), the number hitting new highs is also fairly low—most stocks approaching virgin turf see buying pressures dry up.
All in all, then we’re still tilted to the bull camp because most of the evidence out there is positive, and the fact that it’s a bull market shouldn’t be forgotten. But few stocks are running away on the upside and there remain plenty of crosscurrents, so we’re favoring holding some cash and being choosy on the buy side.
If and when the market really kicks into gear, we think it will be mostly obvious to see, but right now, stepping carefully makes more sense than buying hand over fist. Our Market Monitor is likely to remain at a level 6.
BUY IDEAS
Keysight (KEYS) continues to act well followings its earnings gap to new highs in mid-August—it was yanked down initially but has marched back to its highs this week. As we wrote above, most stocks near their highs are attracting some sellers (or seeing a lack of buyers), so dips into the 97 to 98 area would be wise to target for entry. A stop around 89 makes sense if you enter.
Target (TGT) gapped out of a huge base on earnings in mid-August, ran as high as 111 and is now two weeks into a modest pullback as its 25-day line (now around 103.5) catches up. Dips of a couple of points from here would be tempting if you don’t own any, with a stop around 96.
Neurocrine Bioseciences (NBIX) enjoyed persistent strength into the end of August, through a quick shakeout to its 50-day line last week during the market’s rotation, and the stock’s solid-volume push to new recovery highs since. There’s still overhead to chew through, but dips of a couple of points could be bought with a stop in the 92.5 range.
SELL IDEAS
We have two stocks that tripped our stops this week: Roku (ROKU) and Wheaton Precious Metals (WPM).
SUGGESTED STOPS
Agnico Eagle (AEM) near 55.5
Carvana (CVNA) near 68
Casey’s General Stores (CASY) near 157
Fastly (FSLY) near 23.9
Generac (GNRC) near 74
Insulet (PODD) near 136
JD.com (JD) near 29.4
Lattice Semi (LSCC) near 18.2
Lithia Motors (LAD) near 125
LivePerson (LPSN) near 36
Neurocrine Bio (NBIX) near 92.5
New Oriental Education (EDU) near 102.5
Novocure (NVCR) near 72.5
PagSeguro (PAGS) near 44
Sherwin Williams (SHW) near 510
Synopsys (SNPS) near 132.5
Take-Two Interactive (TTWO) near 123
Teradyne (TER) near 52.5
TransDigm (TDG) near 500
Twitter (TWTR) near 40.5