The market’s downtrend has generally continued this week—even including the pre-market rally in the futures, the S&P 500 and Nasdaq are off in the 2%-plus range, though things like small and mid-caps, as well as growth-oriented funds, are close to unchanged.
In fact, that was really the theme this week: Some high-profile blowups (like Target and Walmart) and weakness in popular names (Apple, etc.) had the big-cap indexes nearly retest last week’s lows, while most of the rest of the market hung in there. Indeed, the number of stocks hitting new lows, while still elevated, never came close (less than half) to what was seen last week even as the Dow scraped new low ground.
The other big thing of note this week (partly due to the retail apocalypse seen) was the rush out of defensive stocks—coming into today, the consumer staples fund (XLP) was down more than 8% on the week and decisively cracked longer-term moving averages. You can always latch onto reasons why, but the fact is this follows some weakness in other defensive areas (XLU, XLV) and is certainly a contrast to the near-unchanged performance from growth funds.
Thus, despite the blowups, we think this week was a baby step in the right direction, which we’re happy to see. But what does it mean big picture? Not much, at least at this point—given the bearish action of the past few weeks, we’ll need to see much more than a couple rays of light to put much money to work.
All in all, then, we continue to advise a defensive stance, with just small new positions, plenty of cash on the sideline and a focus on building a watch list; there’s simply far more bad than good out there. We’re not sticking our heads in the sand, as the environment is ripe for a turn, but we need to see it happen before wading too far into the market’s waters.
SUGGESTED BUYS
Coterra Energy (CTRA) has been up and down of late, keeping with its volatile nature, but the overall trend of higher highs and higher lows is intact. If you want in, a nibble here or on dips under 30 with a tight stop between 27 and 28 seems like a decent risk-reward.
Occidental Petroleum (OXY) was one of the very few stocks that moved to new highs this week, and it did so on solid volume, too. It’s pulled back a bit since, but if you’re not in, we’re not opposed to starting a position here with a stop near 56.5.
SUGGESTED SELLS
Boot Barn (BOOT)—actually hung in there after earnings, but the Target/retail weakness cracked the stock
Mastercard (MA)
Ulta Beauty (ULTA) – retail meltdown
SUGGESTED STOPS
Arch Resources (ARCH) near 150
Autonation (AN) near 107
|CH Robinson (CHRW) near 97
Comstock Resources (CRK) near 13.9
Halliburton (HAL) near 33.5
Lantheus (LNTH) near 56.5
Louisiana Pacific (LPX) near 65
Marathon Oil (MRO) near 24
Occidental Petroleum (OXY) near 56.5