After two weeks of mini-crash action, the indexes have snapped back well this week—the big-cap indexes are up in the 3% to 4% range coming into today (and this morning should open decently higher), with growth-oriented funds doing even better and even the broader indexes up a couple of percent.
Now, following such a meltdown—the S&P 500 dropped more than 5% each of the prior two weeks—a few good days isn’t enough to turn the overall trend up. By our measures, the intermediate-term trend is still down for the major indexes, and there remain tons of potholes in the broad market, with hundreds of stocks hitting new 52-week lows on a daily basis.
That said, we actually have been encouraged by some of the action, and not just because stocks have gone up for a few days. First, we were interested to see many growth areas—which of course have been the hardest hit during this bear phase—hold up above their May lows during the past two weeks of selling, while the indexes didn’t. And now some of those are actually close to turning up on a near-term basis; the chart of the Renaissance IPO Fund (IPO) is a good example:
Second, and more important, we’re finding it easier (not easy, but easier) to find stocks that have etched higher lows during the past few weeks or months—that doesn’t mean they’re out of the woods, but let’s just say there are more names acting resiliently than we have seen in a long time.
What does all of it mean? Not much at this point—we are bumping our Market Monitor up to a level 3 to respect what we just wrote, but we’re not forgetting that the vast majority of indexes and potential leaders are still stuck south of key moving averages and resistance. There are still many potholes out there, with many stocks hitting major air pockets out of nowhere.
All in all, we’ll say that we’re seeing some rays of light from growth stocks, which has our antennae up—it’s a nice first step, and we’re not opposed to extending your line a bit if you’re highly defensive. That said, it’s still not the time for any major buying until we see a bunch more positive action.
SUGGESTED BUYS:
Bumble (BMBL) has been etching a bottoming area for months with higher lows (15 in March, nearly 18 in May and 26 last week) and is threatening to leap above resistance in the 34-35 area (prior high and 200-day line). As always, it could fail, but we’re not opposed to a small buy here (stop near 27) if you want to start a position.
Enphase Energy (ENPH) remains crazy volatile, but it has a similar pattern as Bumble, with higher lows going back to January and some resistance (near 220) that’s it’s gunning for. Nothing wrong with waiting, but a nibble here with a loose stop (170 or so) is fine if you want to start a position.
Funko (FNKO) has actually broken above multi-month resistance on big volume, which is like spotting a Yeti this year. We wouldn’t chase it, but dips under 24 (stop near 21) would be interesting.
SUGGESTED SELLS:
Alpha Metallurgical (AMR) – tripped stop
Civitas (CIVI) – oil stock meltdown
Laredo Petroleum (LPI) – same
World Wrestling (WWE) – failed breakout and weakness even as the market bounces
SUGGESTED STOPS
Electronic Arts (EA) near 125
Funko (FNKO) near 21
Nexstar Media (NXST) near 157