The big-cap indexes continue to hang in there, with this morning’s bounce bringing both the S&P and Nasdaq up to around breakeven on the week. That said, there’s little doubt the damage to the broader market has been severe—indexes like the S&P 600, S&P 400 and NYSE Composite are not just down on the week but sitting below their 50-day lines. All in all, then, the intermediate-term trend is down.
That said, the story hasn’t been with the indexes as much as the broad market: Even after yesterday’s bounce, more than half of all NYSE stocks and more than 70% of all Nasdaq stocks are below their longer-term 200-day lines. Moreover, we’re seeing hundreds of stocks hitting fresh 52-week lows every day, which is a tell-tale sign of intense selling pressures.
And, of course, we’ve seen a ton of leading stocks go over the falls, cracking near- or intermediate-term support as the market has wobbled. Many stocks that looked great and appeared in Top Ten just recently have completely given up the ghost.
Now, to be fair, all of this is descriptive and not necessarily predictive. Given the elevated sentiment coming into November and the high-profile headline bad news (virus, new restrictions, possible Fed tapering, etc.), we’re not ruling out that this will prove to be a big shakeout that could turn around later this month or early next year.
Indeed, some of the aforementioned stats (new lows, etc.) are the most extreme since the pandemic crash of March 2020—that’s bad right now, but if/when it clears up, it should lead to good things. Thus, we’re not sticking our heads in the sand and are open to all possibilities.
However, at day’s end, we always go with what the evidence says, and right now the intermediate-term trend of the major indexes and most stocks is pointed down, the broad market is unhealthy and even the best-looking stocks are simply holding their ground. Right now, then, we advise staying close to shore, holding plenty of cash and keeping new buys on the small side as we look for the selling storm to pass and for some higher-odds setups to show.
Our Market Monitor will likely remain at a level 5, though we’ll see what things look like at Monday’s close.
Suggested Buys
We still think the lithium names are holding up well, taking on a little water but nothing abnormal. Albemarle (ALB) is the most liquid of the group, and its 30-point pullback still leaves it nicely above its 50-day line (near 250). We’re OK starting a small position on this dip with a stop in the 245 range.
Enphase (ENPH) has pulled back somewhat sharply, and solar stocks are a mixed bag. But we think it acts fine overall, still holding most of its earnings gap-and-go move from the prior few weeks. If you don’t own any, we’re OK starting small here with a stop near 205.
Suggested Sells
We always follow our stop levels, so the names below (almost all of which tripped stops) will be listed as sells in Monday’s issue. That said, if you still have any that have bounced back, we’re OK holding some or all of the position with a stop under this week’s low.
Acuity Brands (AYI)
Applovin’ (APP) – tripping loss limit on recent weakness plus today’s share offering
CF Industries (CF)
Canada Goose (GOOS) – total breakdown
Confluent (CFLT) – if still own, can consider a stop near 70
Datadog (DDOG) – same as above, but 158 would be a “new” stop level
Dexcom (DXCM)
EOG Resources (EOG)
JB Hunt (JBHT) – 184 or 185 a possible stop if you’re still in
Marathon Oil (MRO)
Medpace (MEDP) – something near 202 if you’re still in
Netflix (NFLX)
Snowflake (SNOW) – very impressive earnings bounce after a complete meltdown. If you still own some, a stop near 330 makes sense
ZoomInfo (ZI)
Suggested Stops
Coinbase (COIN) near 272
Enphase Energy (ENPH) near 205
Goodyear Tire (GT) near 19
Palo Alto Networks (PANW) near 505
Pioneer Natural Resources (PXD) near 171
Pure Storage (PSTG) near 27
Zscaler (ZS) near 310