Coming into today, there were many growing positive pieces of evidence out there. For the major indexes, they had quickly recouped about half of their September declines in just a few days—the intermediate-term trend hadn’t yet turned up, but the bounce certainly wasn’t anemic.
Even better was the buoyant action among individual stocks. While it wasn’t a runaway move higher (the number of stocks hitting new highs was still somewhat tame), we’ve seen a bunch of stocks showing big-volume buying for the first time in a couple of months, while many others were setting up beautifully in nice launching pads. Simply put, it seemed like many stocks wanted to get going if the market would allow them.
Then, of course, we have the overnight news that President Trump has contracted the coronavirus, which has the bears out in force this morning. For the market, this should prove to be a revealing test of the recent upmove—obviously, if the market can shake off the news without getting steamrolled and move higher in short order, it would be very bullish. Conversely, a massive plunge to new correction lows would, at the very least, reset the clock on a new rally attempt. (Very early this morning, many leaders are holding firm, but we’ll see how it goes.)
That said, another leg down wouldn’t necessarily be a disaster. Historically, market declines often (not always) come in three waves—the first is met with complacency (buy the dip), the second brings worry (recognition that something is wrong) while the third can bring some panic and often comes on headline-grabbing news. So far, this decline has seen two legs (early and mid-September), and this news has the traits of starting a possible third leg.
Even so, as has been the case for most of 2020, the real key right now is being flexible and sticking with the evidence. Right now, the intermediate-term trend is down, so we’re generally advising a cautious stance, but given the action among leaders, we’re OK nibbling on a strong stock here or there, especially if it’s taking the selling in stride.
Coming into today, we were going to bump up our Market Monitor a notch (possibly two if things really accelerated higher), but we’ll have to see how it goes today and Monday. Overall, a decent cash position makes sense, but there’s enough bullish action among individual stocks to continue testing the waters on the buy side.
SUGGESTED BUYS
Alibaba (BABA) has been tossed around with the market of late, but the weekly chart has looked fine (no big selling volume, holding the 10-week line), and this week we saw a big buying clue as the stock soared on huge volume on Wednesday. Like many stocks, it’s backed off since then and could wiggle around some more, but it’s a sign BABA wants higher in our view. We’re fine buying some around here with a stop in the low/mid-260s (under the 10-week).
Guardant Health (GH) broke out of a base around 100 a couple of weeks ago and, unlike many names, followed through on that move, rallying to about 113 before beginning to pull in. Usually these first pullbacks after successful breakouts are buyable, so we’re OK taking a swing at GH around here, with a stop just under 100.
SUGGESTED SELLS
Encouragingly, we have no recommended sells today—of course, that can always change come Monday, but after pruning quite a bit from the list over the past few weeks, we’re sticking with what we have right now.
SUGGESTED STOPS
Agnico Eagle Mines (AEM) near 73.5
Alibaba (BABA) near 268
Boston Beer (SAM) near 810
Builders Firstsource (BLDR) near 28
Carrier Global (CARR) near 28
Chart Industries (GTLS) near 63
Chipotle Mexican Grill (CMG) near 1170
Digital Turbine (APPS) near 26
Elastic (ESTC) near 97
Exelixis (EXEL) near 22.5
Floor & Décor (FND) near 69
Freeport McMoRan (FCX) near 14.2
Freshpet (FRPT) near 102
Innovative Indus. Prop. (IIPR) near 113
Mosaic (MOS) near 16.5
Nvidia (NVDA) near 465
Peloton (PTON) near 85
Plug Power (PLUG) near 11.5
Qualcomm (QCOM) near 105
Quanta Services (PWR) near 47.5
Roku (ROKU) near 155
Sea Ltd. (SE) near 137
Taiwan Semi (TSM) near 76.5
Tupperware (TUP) near 19.5
Whirlpool (WHR) near 167