The evidence continues to improve in the market, as the selling pressures slowly fade and the buyers step up, albeit in fits and starts. For the indexes, this week is shaping up to be a great one, with the big-cap indexes up more than 3% as of this morning, while the broader indexes (small- and mid-caps) are up 4% to 5%.
This strength has been enough to flip our intermediate-term trend model back to the bullish side of the fence. It’s not a runaway market move; frankly, the big-cap indexes still look sluggish and have a decent amount of resistance from early September to chew through. But we just go with the evidence, and trend-wise, the path of least resistance is now up.
As has been the case for weeks, more encouraging has been the action of leading stocks. Slowly but surely, more and more have perked up, have held their gains, and many are now pushing to new highs—165 stocks hit new highs on the Nasdaq yesterday, the highest since the Nasdaq’s peak in early September.
With all that said, there are still a decent number of headwinds out there. One of those is rotation, which remains prevalent, which means there’s still a fair amount of selling on strength being seen; this week has seen some growth stocks stagnate while other areas rally.
That’s not necessarily a negative thing, but our point is that this is less of a “blastoff” feel and more of gradual improvement in the tone, albeit with some hiccups along the way. And that makes sense: Given that we’re “only” six weeks off the peak, the market could still be in a “setting-up” phase after the prior five-month advance.
Still, we don’t want to get too smart for our own good. It’s not an A+ environment, but the evidence has improved, the intermediate-term trend has rejoined the longer-term trend on the upside and a lot of stocks are acting well enough. We’ll likely nudge our Market Monitor up to a level 7 in Monday’s issue.
SUGGESTED BUYS
Penn National Gaming (PENN) has chopped around for three weeks, partly due to a share offering, and it’s sagged this week on light volume to its 25-day line. It could ease further, and earnings are coming up soon (October 29), but we’re OK taking a stab at it here or (preferably) on further dips toward the 50-day line (now nearing 59 and rising).
Quanta Services (PWR) is finally following through to the upside after a breakout from a multi-year base in early August and a shakeout in mid-September. Keep a lookout for dips of a couple of points—if it happens, it should prove buyable.
Taiwan Semi (TSM) has reemerged after a two-plus-month rest and one failed breakout attempt. It doesn’t hurt that semiconductor stocks are ramping up, either. Earnings are likely out in a couple of weeks, but the monthly revenue reports remain strong. We’re OK taking a swing at TSM here with a stop near 79.
SUGGESTED SELLS
We’re going to take our relatively quick profit in 10x Genomics (TXG), as shares are extended to the upside and have been running for months without a correction.
We’re also going to quickly cut our loss in Exelixis (EXEL)—it has bounced a bit, but the straight-down action after testing new highs is a negative. At the very least it’s not performing as well as other medical names.
SUGGESTED STOPS
AGCO Corp. (AGCO) near 72
Agnico Eagle Mines (AEM) near 74
Alibaba (BABA) near 273
Boston Beer (SAM) near 825
Builders Firstsource (BLDR) near 29
Carrier Global (CARR) near 28.5
Chipotle Mexican Grill (CMG) near 1175
Digital Turbine (APPS) near 28.5
DraftKings (DKNG) near 48
Elastic (ESTC) near 101
Exelixis (EXEL) near 23
Floor & Décor (FND) near 71
Freeport McMoRan (FCX) near 14.7
Freshpet (FRPT) near 105
Guardant Health (GH) near 101
Innovative Indus. Prop. (IIPR) near 116
Mosaic (MOS) near 17.2
Nvidia (NVDA) near 475
Peloton (PTON) near 92
Plug Power (PLUG) near 13.5
Qualcomm (QCOM) near 110
Quanta Services (PWR) near 50
Roku (ROKU) near 170
Sea Ltd. (SE) near 144
Taiwan Semi (TSM) near 79
Tupperware (TUP) near 20
Whirlpool (WHR) near 180