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June 10, 2022

As we head into the weekend, it’s shaping up to be a red week—just about all of the major indexes are down 2% or so coming into Friday, with growth funds down a touch less.

As we head into the weekend, it’s shaping up to be a red week—just about all of the major indexes are down 2% or so coming into Friday, with growth funds down a touch less.

The market had been holding relatively well for a few sessions after the pre-Memorial Day thrust higher, with a lot of improvement—but no real signals—among our key measures. The intermediate-term trend, for instance, effectively got back to neutral, but never turned up. The number of new lows definitely dried up, though not quite to levels that tell you the sellers have left the building.

And then on Thursday (and this morning) we saw sellers begin to show up again, with the major indexes falling and new lows picking up, along with a select area or two (like shipping stocks) coming under intense pressure.

What does it mean? We’ll let others guess whether we’re starting a new leg down based on all the worries out there (today saw another big inflation reading), or whether the market is simply in a choppy bottom-building phase. For our part, it’s best to just stick with the game plan: If the trend turns up and some stocks lift off, we’ll get more aggressive, probably slowly at first and extending our line if things go higher—but until that happens, a few nibbles are fine, but your best move is to remain defensive and wait for upside confirmation.

One thing we would say is that the environment is ripe for a low—it’s hard to turn on TV or open your web browser and not be inundated with bad news, and even the man on the street realizes interest rates are headed up and a recession is possible. As always, that doesn’t mean a low has to form now, but once defensive, it’s always served us well to keep our mind free of all the negative talk that always shows up after a big market decline.

Thus, we’re keeping our eyes open, but the story remains the same: We need to see more strength to take a more constructive stance. Our Market Monitor remains at a level 3.

Chemours (CC) broke out of a big base in early May after earnings, moved up solidly until a few days ago and is now selling off on light volume. We’re not opposed to a nibble in the 41 area, with a stop just under the 50-day line at 37.

EQT Corp. (EQT) lifted to new highs late last month and has been mostly cool, calm and collected during the past two weeks despite some wild swings in natural gas prices. A dip of a point or two would be tempting, with a stop just under the 50-day line (now approaching 42)

We generally like the way Bumble (BMBL) is acting in recent months (not just weeks), but we do have a decent, quick profit and the stock has started to come off after nearing its declining 40-week line. Partial profits aren’t a bad idea.

Civitas Resources (CIVI) looks great, but it’s had a big run in just three weeks from our recommendation—taking a few chips off the table makes sense.

Outright sells:
Analog Devices (ADI) – Not bad, just not strong either.
Grocery Outlet (GO) – Small profit, don’t want to take a loss.
Star Bulk (SBLK) – Group in trouble, quick loss.
ZIM Shipping (ZIM) – Same as SBLK; these two have broken worse than EGLE or GOGL.

Albemarle (ALB) near 229
Analog Devices (ADI) near 155
Arch Resources (ARCH) near 149
Chart Industries (GTLS) near 164
Chesapeake Energy (CHK) near 90
Consol Energy (CEIX) near 47
Eagle Bulk (EGLE) near 62
Funko (FNKO) near 19.2
Golden Ocean (GOGL) near 13
Halliburton (HAL) near 37
iRhythm Tech (IRTC) near 124
Lantheus (LNTH) near 60
Livent Corp (LTHM) near 26
Marathon Oil (MRO) near 27
New Fortress Energy (NFE) near 41
NexTier Oilfield (NEX) near 10
Occidental Petroleum (OXY) near 60