After some wild moves last week, including a retest of the late-January lows, the market has quieted down this week, both in terms of net movement (most indexes are plus or minus 1% even after this morning’s slide) and range, though we would point out that growth-oriented funds have generally lagged that tight action.
Overall, nothing has really changed with our thoughts: We’re seeing a few rays of light out there among secondary measures, which are usually early (as we’re seeing now) but generally have good track records over time. For instance, after last week’s solid positive breadth divergence (especially new lows) on the Nasdaq, this week we saw the Investors Intelligence survey (the granddaddy of surveys) come in with more bears than bulls, which is relatively rare, while the NAAIM Exposure Index (tracks exposure levels of some big institutions) fell to just 30%, one of the lower levels of the past decade.
Because of that, we’re optimistic a bottom-building process is probably underway—though we can’t say we’re sure of that for a few reasons. First, of course, the trends remain down; growth funds nearly saw that change this week, but they’ve obviously been unable to sustain any bounces.
Second, we’re still seeing lots of leadership in both defensive areas (such as the Consumer Staples Fund, XLP) and commodity sectors—neither of which is really what sustained upmoves are born from.
And third, and very important to us, is the fact that there is still lots of damage going on among individual names. It’s all well and good if the S&P or Nasdaq holds up decently, but it doesn’t mean as much when we’re seeing former or potential new leaders blow up on the launching pad (usually after earnings).
All told, then, we’re just sticking with our current stance; we’ll likely leave our Market Monitor at a level 5. We’re as ready as anyone for the next sustained upmove, but having been patient for many weeks, it’s best to remain that way until we see a clear sign the bulls are in control.
One last point: If you have been fortunate enough to catch a few winners, don’t forget to ring the register here and there, taking all or some of your profits, especially if your portfolio is getting full of one sector (such as commodity names). Most still look great and can go higher, but some are also extended both short and intermediate term.
Suggested Buys
There’s not a lot that looks great on the buy side here—growth stocks are tenuous, and the strong names (commodity) are generally extended. Thus, we’d be looking for names that have shown recent, big-volume buying in the commodity space, haven’t been running for months and look to play them on dips. Names like this include Occidental Petroleum (OXY), Chesapeake (CHK—this week’s top pick) and Coterra (CTRA), with dips of a few percent likely to offer opportunities.
Suggested Sells
If you bought CF Industries (CF), Mosaic (MOS) and/or Teck Resources (TECK) with us in mid-January, we think now’s a good time to take partial profits and trail a stop—they look great, but all have enjoyed big runs and are extended to the upside while the news in the sector could hardly be better.
Corning (GLW) – tripped stop, as well as gave up a big chunk of its post-earnings move.
MasterCard (MA)– getting caught up in the selling and giving up its earnings move from January.
Planet Fitness (PLNT)– rejected again at resistance in the upper 90s and then got clonked after earnings.
SUGGESTED STOPS
BioCryst Pharm (BCRX) near 15.0
Capri Holding (CPRI) near 60
CF Industries (CF) near 74
Chesapeake Energy (CHK) near 69
Concentrix (CNXC) near 186
Coterra Energy (CTRA) near 22.5
Datadog (DDOG) near 140
Diamondback Energy (FANG) near 121
Expedia (EXPE) near 175
Huntsman (HUN) near 37
Hyatt (H) near 87.5
Inspire Medical (INSP) near 216
Juniper (JNPR) near 32
Regeneron Pharm. (REGN) near 595
Spirit Aerosystems (SPR) near 41.5
Teck Resources (TECK) near 33.5
Titan Int’l (TWI) near 10.4 – looks OK here but massive earnings reversal yesterday is something to watch. Holding with a tight stop.
ZIM Shipping (ZIM) near 63.5