It’s been another sour week on the whole, with the major indexes down 3% to 4% even after what looks like a solid open today, with growth-oriented funds down even more. Obviously, the trends of just about everything remain down, so we’re sticking with our defensive stance.
Outside of the price action, we’re starting to see more and more extremes when it comes to sentiment and (especially) breadth. For sentiment, we now have the Investors Intelligence survey at its most bearish since 2016, while the equity put-call ratio is at its highest since the pandemic began and our Real Money Index (measures the five-week sum of money flows into/out of equity funds and ETFs) at its lowest since July 2020.
But that pales in comparison to what we’re seeing with breadth—coming into Thursday, just 7% of Nasdaq stocks were above their 50-day line (matching the worst levels seen in the past 20 years save 2008 and 2020), and more important, the average of that indicator over the past 200 days (i.e., what percent of Nasdaq stocks have been north of their 50-day lines over the past 9 months?) is now around 33%, matching what was seen in early 2009. Beyond that, an average of 31% of all Nasdaq-listed stocks have hit new 52-week lows each of the past four days, which is nearing what was seen in 2008.
Throw in the huge declines seen in the average stock—in the S&P 500, the average maximum drawdown among its members from their 52-week highs is 28%; for the Nasdaq and Russell 2000, it’s 49% to 50%!—and there is certainly enough worry, panic and capitulation to put in a meaningful low that the market can work off of for a while. (Hat tip to Liz Ann Sonders (@LizAnnSonders on Twitter) of Charles Schwab for the data.)
However, we still need to see buyers actually do something with this for it to matter. Maybe yesterday afternoon and this morning is the start of something, but we’ll have to wait and see. Right now, the story remains the same: You should continue to hold lots of cash, with just small new commitments (on pullbacks into support) and lots of patience as we wait to see the selling exhaust itself. Our Market Monitor remains at a level 2.
SUGGESTED BUYS
Antero Resources (AR) has been one of, if not the, leading natural gas stock and after a moonshot in March and April, shares have finally pulled into their 50-day line for the first time. Sure, it’s a roll of the dice, but we’re OK nibbling here with a stop in the 29 area.
Lantheus (LNTH) remains about the only growth stock in great shape, and after tagging its 50-day line, shares are bouncing nicely. A nibble in the 61-62 area and a stop in the 54 range is a decent risk-reward.
SUGGESTED SELLS
Box Inc. (BOX)
Corteva (CTVA)
Golar LNG (GLNG)
Range Resources (RRC)
SSR Mining (SSRM)
United Airlines (UAL)
SUGGESTED STOPS
Cal-Maine (CALM) near 50
Comstock Resources (CRK) near 13.5
Delta Air Lines (DAL) near 36.5
Halliburton (HAL) near 33.5
Marathon Oil (MRO) near 24
Occidental Petroleum (OXY) near 53.5
Westrock (WRK) near 46.5