Note: Our offices will begin shutting down tomorrow afternoon and of course we’ll be off Friday as we prepare for Mr. Claus’ arrival. As a reminder, there will be no Top Ten next Monday (December 27) as it’s one of our two scheduled weeks off during the year—though we’ll likely have a Movers/Shakers ahead of New Year’s to keep in touch. For those that celebrate, have a very Merry Christmas!
The market seems to have found some support after its latest nasty leg down—Monday morning saw most indexes in free fall while many stocks dipped below early-December lows, but the snapback since then has been encouraging. Ideally the Monday morning drop was a shakeout that paves the way for something more than a one-or two-day bounce.
Beyond just the rebound, we have seen a couple rays of light, and one surprisingly came from the broad market—as the Nasdaq retested its early-December low last Friday and this Monday, we saw the maximum stocks hitting new lows shrink from 700-plus back then to 430-ish now.
Moreover, we also saw growth stocks—which have suffered the biggest selling of late—begin to resist the selling, with many holding their prior lows and bouncing nicely. Throw in worsening sentiment (21-day equity put-call ratio near its highest level since October 2020) and we’re open to a “real” rally unfolding here.
Those are all reasons for encouragement, but most of the primary evidence is still negative—the intermediate-term trend of the major indexes and most stocks is still down, and at day’s end, there’s no real money being made, with things whipping up and down (mostly down).
Thus, in total, our thoughts haven’t changed much: The overall bull market (longer-term trend) is still intact, but few stocks are in good shape and the number of solid setups is tiny. We’re not opposed to some nibbling here or there in some resilient stocks (trying to start positions in some potential new leaders has some risk, but the payoff can be big if/when the market finally finds its footing), but overall we still favor a cautious stance, with plenty of cash and patience as we wait for proof that the sellers have left the building.
Suggested Buy
Dollar Tree (DLTR) has been very calm, cool and collected after its huge October/November rally, finding support in the 135 area a few times this month. If you’re not yet in, it looks like a solid risk/reward situation around here, with a stop in the 125 area.
It’s hard to ignore the resilience of Palo Alto Networks (PANW), which has not only held its 50-day line during the growth stock massacre, but today is rallying toward new closing highs! With the 50-day still close to the stock, we’re OK with a small buy around here and a stop near 515.
Suggested Sells
None this week, though we’ll update you next week in a Movers & Shakers update if that changes.
Suggested Stops
Capri (CPRI) near 58
Diamondback Energy (FANG) near 96
Ferrari (RACE) near 244
Ford Motor (F) near 18.4
KLA Corp. (KLAC) near 388
Knight Swift (KNX) near 55
MP Materials (MP) near 40
ON Semi (ON) near 57.5
Palo Alto Networks (PANW) near 515
Pure Storage (PSTG) near 29
Silicon Labs (SLAB) near 182
TopBuild (BLD) near 248
Trex (TREX) near 122.5
Trupanion (TRUP) near 113
WillScot (WSC) near 36.5