It’s been a solid week in the market, with the major indexes posting solid gains through Thursday. Interestingly, we came close to a legitimate blastoff signal yesterday (the Three Day Thrust), and if we see another 1% gain in the S&P 500 today, it would be a super bullish signal. That said, the market is indicated to open lower this morning, though the damage doesn’t seem too bad.
To us, all of this continues the encouraging vibes we’ve seen in recent weeks—the way we’d put it is that the market has been laying the foundation for a fresh advance of late, with sentiment getting bearish, positive divergences in breadth (new lows, etc.) and with the indexes refusing to go down much since late January. Even some tertiary things like resilience in small- and mid-cap indexes (they’ve held up better than the big-cap ones) and some weakness in defensive stocks (our Aggression Index, shown here, is testing its 50-day line for the first time since early December) are heading in the right direction.
That means the setup for higher intermediate-term prices is there—but now it’s a matter of seeing this week’s buying pressures continue, turning the intermediate-term trends of the major indexes (and, ideally, growth funds as well) back up, and allowing some stocks to move above resistance (most have been rejected every time they approach any key levels).
That’s really the ball game: We’re encouraged, and we could nudge up our Market Monitor a notch come Monday; extending your line a bit is fine. But in terms of really wading back into the market’s waters, we need to see stuff head higher from here. If so, we’ll get more aggressive; if not, we’ll remain patient.
SUGGESTED BUYS
Commodity stocks have begun their anticipated pullbacks, but so far most look like shakeouts to us—they could carry on a bit but so far, so good. We’re intrigued with CF Industries (CF), which went vertical in February and early March, but has retreated normally of late and isn’t far from its old highs. We’re not opposed to a small position in the low 90s with a stop around 81.
In a similar vein, gold stocks have pulled in with some finding support near their 25-day line. Barrick Gold (GOLD) tagged that moving average on Tuesday before bouncing; a small position in the 23 to 24 area with a stop near 21 makes sense.
Nucor (NUE) lifted to new highs at the end of February, capping off a huge comeback from its January shakeout. Now the stock has gyrated in the 128-140 range for a couple of weeks—you could nibble here with a stop in the low 120s, or look for a powerful breakout above 140 (stop around 127).
Regeneron Pharm (REGN) tested its 200-day line repeatedly around the start of the month, but has now gotten going, with a good-looking move into the upper 600s. A dip toward 670 would be tempting, with a stop around 615.
SUGGESTED SELLS
Just one sell so far this week: Biocryst Pharm (BCRX), which tripped its stop
SUGGESTED STOPS
Barrick Gold (GOLD)
near 21
CF Industries (CF) near 81
Chesapeake Energy (CHK) near 73
Concentrix (CNXC) near 190
Freeport McMoRan (FX) near 43.5
Juniper (JNPR) near 32.5
Lockheed Martin (LMT) near 400
Marathon Oil (MRO) near 20
Regeneron Pharm. (REGN) near 615
SeaWorld (SEAS) near 60
StarBulk (SBLK) near 25.5
Titan Int’l (TWI) near 11.9
ZIM Shipping (ZIM) near 72.5