The market’s action has been improving for a few weeks now—nothing dramatic or necessarily decisive, but the “leaders” of the bear phase stopped going down in mid-May; bad news has been absorbed well; and we’ve even seen a few stocks and a couple of sectors poke their heads up as they build bottoms.
And this week was another good week—not only are the major indexes up (down slightly today, but mostly shrugging off a spate of negative earnings reactions), but our intermediate-term trend model has turned up, with all the major indexes (and growth funds) trading above their rising 25-day moving average. (Translation: They’re all higher than they were five weeks ago.) That’s all to the good and a reason to become more constructive toward the market.
That said, we’re not pretending headwinds aren’t still out there: The longer-term trend of just about everything remains down (heck, most indexes are still below their most recent rally high from late May/early June), the broad market hasn’t kicked into gear (the number of new lows on the NYSE has been south of 40 just once during this rally so far), many stocks are still fighting it out with resistance (things approaching resistance usually hesitate or pull back) and, of course, we’re knee-deep in earnings season and the Fed meets next week.
To be clear, all of the above are descriptive and not predictive—many big rallies that went on to great things started slowly and picked up steam, so we’ll just have to see how it goes. The point isn’t to downplay the improved evidence, but simply to say that it’s not 1999 out there.
All in all, we’re nudging our Market Monitor up to a level 4 but will keep our eyes open in the days ahead—if the good vibes continue (especially if we see some potential leaders react well to earnings), we’ll steadily ratchet up our exposure, but if the rally hits a wall, we’ll obviously advise holding dry powder and even cutting back.
For now, though, if you’ve been holding lots of cash, we think it’s prudent to stay in gear with the evidence and look to do a little buying—and then use the action from here as feedback for what to do next.
SUGGESTED BUYS:
Nexstar Media (NXST) has earnings out on August 4, but interestingly, it may be changing character ahead of the report, with shares racing higher on mild volume. If you want in, look for dips into the upper 170s and use a stop in the upper 160s.
Neurocrine Bio (NBIX) continues to have a very nice setup ahead of earnings (August 4). If you’re aggressive, you could nibble here and look to add on a post-earnings move north of 100—or simply wait for the breakout, which ideally would come on strong volume and after earnings.
SUGGESTED SELLS:
Partial profit: If you bought Celsius (CELH) either with us originally (way back in April in the 50s) or more recently (earlier this month in the mid-70s), it’s OK to throw a few shares overboard here while letting most of it run.
Outright sells:
Academy Sports (ASO)—Looks great, but it’s running into resistance. Nothing wrong with holding and trialing a stop, but we’ll take a relatively quick 25% profit.
JinkoSolar (JKS) – Weakening much more than its peers
SolarEdge (SEDG)—We’d rather focus on ENPH for now and see how that stock does on earnings next week.
SUGGESTED STOPS
Argenx (ARGX) near 345
Autonation (AN) near 111
BJ’s Wholesale (BJ) near 65
CrowdStrike (CRWD) near 165
Daqo New Energy (DQ) near 60ft
Dollar Tree (DLTR) near 160
Enphase Energy (ENPH) near 185
Intra-Cellular Therapies (ITCI) near 51
JD.com (JD) near 57.5
Legend Biotech (LEGN) near 46
Nexstar Media (NXST) near 168
Neurocrine Bio (NBIX) near 91
Northrop Grumman (NOC) near 440
Pinduoduo (PDD) near 52
Scorpio Tankers (STNG) near 31
United Therapeutics (UTHR) near 219
Zoom (ZM) near 98