Given last week’s intermediate-term green light was running into a bunch of headline events—a slate of mega-cap earnings reports, the Fed’s decision, GDP, etc.—we’d have to say this was one of the more encouraging weeks all year: The S&P and Nasdaq are both up more than 3% including this morning’s pop, while everything else is up a bit more.
The fact that the market acted well after showing some strength—that is, followed through a little bit on the upside—is clearly a good thing. And there were some other subtle positives, too; the number of new highs, for instance, hit the highest level since mid-April on the Nasdaq, and a few short-term, thrust-type measures have flashed. Yesterday, for instance, more than 55% of S&P 500 stocks hit new 20-day highs, the largest since June 2020, and historically that’s led to pretty solid (up 12.5% nine months later in the S&P) and consistent (90%-plus of instances brought a gain nine months later) returns.
To be clear, we’re not giant fans of short-term breadth thrusts, as (a) they do an OK job of highlighting decent odds looking out many months, but (b) there’s usually a good amount of failures and even when they “work” they can result in some pretty tedious near-term selling. But our point is that the evidence continues to slowly improve—we’ll see how it goes, but we could nudge up our Market Monitor another notch come Monday.
Even so, while the good vibes are good to see, this is still a one-step-at-a-time proposition—while new highs are picking up, there are very few of them (especially among names with any real trading volume), the vast majority of stocks are still below long-term moving averages and the sell-on-strength action remains real. To be fair, we aren’t seeing many implosions, but resistance is still causing some selling to appear, while the number of outright breakouts is low.
As we’ve written of late, that’s not a negative thing, but coming out of a huge bear phase is a process, not a one-week thing, so we’ll be looking for more names to set up and get going down the road. As it stands now, we’re encouraged and are cautiously optimistic the sellers are losing control—but, as always, we’ll just take it one day at a time. We continue to think putting a little money to work makes sense, but don’t go wild just yet.
SUGGESTED BUYS:
Argenx (ARGX) tried to break out after its earnings report yesterday but, as is still common, found resistance. Even so, we like the risk-reward—you could nibble here with a stop at 350, with the idea of adding more on a push above 385 or so.
BioMarin (BMRN) had a nice thrust off its lows from mid-June to early July, and has since caught its breath in fine fashion, with a modest dip into its 25-day line. There’s still overhead in the low 90s and earnings are out next Wednesday, so you could nibble here and buy more on a positive reaction—or just wait for a decisive breakout if it comes after the report.
SUGGESTED SELLS:
Partial Profits: Alliance Resource (ARLP) looks fine but some coal stocks have wobbled on earnings and ARLP has its report next week. Consider shaving off a few shares for a solid profit and then seeing what happens after the report.
Outright sells:
Autonation (AN) – tripped stop. You can hold with a stop near 110 if you still have some, but we’re out.
Baidu (BIDU)—Cracked support this morning
Daqo New Energy (DQ) – tripped stop
Dollar Tree (DLTR) – tripped stop on the WMT news this week
Legend Biotech (LEGN) – tripped stop on share offering. If you happen to still own it, you can consider holding with a stop near 45, though there are better looking names out there for sure.
Li Auto (LI) – Another breakout rejection and steady bleed since
Northrop Grumman (NOC) – tripped stop
Xpeng (XPEV) – broke down
SUGGESTED STOPS
Agilon Health (AGL) near 23
Argenx (ARGX) near 350
CrowdStrike (CRWD) near 169
Enphase Energy (ENPH) near 210
Fortinet (FTNT) near 55
Intra-Cellular Therapies (ITCI) near 51
JD.com (JD) near 58.5
Nexstar Media (NXST) near 176
Neurocrine Bio (NBIX) near 91.5
Ollie’s Bargain Outlet (OLLI) near 57
Royalty Pharma (RPRX) near 41.5
Scorpio Tankers (STNG) near 32.5
Trip.com (TCOM) near 23.5
United Therapeutics (UTHR) near 219
Vertex Pharm (VRTX) near 270
Zoom (ZM) near 98