It’s been a decent week for the market, though nothing amazing—just about all major indexes are up 0.5% or less after hitting or approaching new highs in recent days. That keeps the intermediate- and longer-term trends pointed up, and the rest of the action has been similar to what we’ve seen in recent weeks as well, with cyclical stocks generally leading the way while growth stocks are a bit hit or miss.
Overall, we are growing more encouraged that a sustained advance for the general market could be underway, with the major indexes enjoying a relatively persistent advance for the past week and, so far, avoiding any major selling pressure. As for individual stocks, the picture is brightening a bit, though we’re still seeing lots of crosscurrents and stocks blowing up, too.
Thus, we remain optimistic, thinking the path of least resistance for the market and (most) stocks is pointed up. But we’re also taking it slow and being choosy on the buy side given the numerous eggshells out there.
Looking ahead, we think the next week or two should be a good test for the market. We’re now seeing many near-term signs of complacency and “overbought-ness,” and while we don’t usually trade on that, the fact is the past few times we’ve seen these types of readings this year, the market has sagged for a few weeks.
If the market and leading stocks can hang in there (modest pullbacks or continued advances), it would be a great sign of a bullish character change, adding to the evidence that the tedious five months of ups and downs are behind us. If not, it wouldn’t be the end of the world, but would be a sign to keep going slow and to stay on your toes.
We’ll be watching, but as usual, we just go with the evidence in front of us. And right now, while it’s not a raging bull market, the trends are up and the market’s leadership ranks are expanding. So we continue to lean bullish, looking for opportunities to put money to work. We’ll likely leave our Market Monitor at a level 7, though we could nudge it up another notch if the action continues to be bullish.
BUY IDEAS
Acadia Pharmaceuticals (ACAD) has chopped around in a tight range after earnings, but it could be playing possum—we still think a breakout above 44-45 would be tempting, and with the quarterly report out of the way, nibbling here and buying more on a breakout could work. On the downside, a stop near 38.5 makes sense.
Quanta Services (PWR) has enjoyed a very persistent uptrend since the early-October market low and reacted well to earnings last week, too. It’s starting to pull back a bit—a dip toward 42 would be tempting, with a stop around 39.
Similar to Quanta, Taiwan Semi (TSM) has been in a fantastic uptrend (broke out to around 45 in September and rallied to 55 this week) and, just today, is beginning to retreat a bit. A dip to 51 or 52 would probably mark a solid entry point, with a stop around 47-48 (near the 50-day line).
SELL IDEAS
First off, don’t forget to ring the register with some of your shares if you’ve landed a nice, quick profit. Given that we’re still seeing some crosscurrents (though not as many as a month ago), there’s nothing wrong with booking some partial profits on the way up and then riding the rest for what will hopefully turn into a much larger winner.
As for outright sells, we have five today, and we’ve added some stops on a few others. The sells are:
Chipotle Mexican Grill (CMG)
Meritage (MTH)
Martin Marietta (MLM)
Trex (TREX)
Weight Watchers (WW)
SUGGESTED STOPS
Acadia Pharm (ACAD) near 38.5
AJ Gallagher (AJG) near 88.5
Apollo Global (APO) near 39
Boot Barn (BOOT) near 34.5
Burlington Stores (BURL) near 192
Casey’s General Stores (CASY) near 163
Edwards Lifesciences (EW) near 224
Entegris (ENTG) near 46
Generac (GNRC) near 85
Insulet (PODD) near 150
JB Hunt (JBHT) near 112
Lennar (LEN) near 56
KB Home (KBH) near 32
KLA Corp. (KLAC) near 157
Lam Research (LRCX) near 247
Lululemon (LULU) near 192
MasTec (MTZ) near 65
Medicines Co. (MDCO) near 49.5
New Oriental Education (EDU) near 112
RH (RH) near 165
Sherwin Williams (SHW) near 542
Temper Sealy (TPX) near 80
Teradyne (TER) near 58
Target (TGT) near 104.5
ZTO Express (ZTO) near 21