Let’s get right to our thoughts regarding the market.
First of all, as we mentioned in this morning’s bulletin, today’s drop is ugly, but the bigger picture isn’t a complete horror show—the S&P is hovering within its April-June trading range (about 2,030 to 2,120). Some indexes look a little worse (Nasdaq), while others look a bit better (small- and mid-caps). But net-net, the S&P is only down about 0.6% this week. Not exactly a disaster.
Also, so far today, the damage among individual stocks doesn’t look bad. Everything is down, of course, but few stocks are ripping through key support levels.
All that said, we’re not trying to make today into a minor event—the indexes are still down more than 2.5% and last night’s vote results dumped another pile of uncertainties on investors. Sure, given the already-horrid sentiment among investors coming into today, it’s possible this morning’s plunge will mark a meaningful low. But it’s just as likely there will be reverberations from last night in the way of economic and political uncertainties
Thus, instead of predicting, the important question is how much has changed. The answer: Some, but not that much.
In terms of the market, if the major indexes remain at current levels when we publish, we’ll probably knock our Market Monitor down another notch or two. That means a relatively neutral stance is appropriate—maybe 30% to 50% in cash (depending how you run your ship). On the buy side, we’re not against all new buying, but you should keep purchases small until the market stabilizes. And you should generally hold any strong, profitable stocks you have.
The bottom line is that the Brexit results have thrown a monkey wrench into the market, but it’s best to take it as it comes—right now, the outlook has worsened in the sense that the market has been smacked back into its trading range. It’s best to respect that evidence, but only to move back into a more neutral stance. Thus, you should pare back, especially if some of your stocks break support, but we’re not advising any wholesale changes in your stance today.
Buy Ideas
Again, we’re not advising a ton of new buying this second, but if you want to make a couple of small purchases, here are a few ideas:
AMN Healthcare (AHS 39) continues to act fine, with the stock finding support near its 50-day line. Plus, this business (healthcare staffing) shouldn’t be affected by anything going on across the pond. We’re OK with a nibble here if you don’t own any, and a stop at 37.
Many retail stocks are holding up decently today, so if you didn’t buy Dave & Buster’s (PLAY 46) a couple of weeks ago, we think you can take a stab at it during the current modest pullback with a stop near 41.
Both Martin Marietta (MLM 189) and Vulcan Materials (VMC 120) bounced immediately off support following the open today; VMC actually briefly tagged new high ground! because both stocks have been consolidating for a month or so, a small buy here with a tight stop (175 for MLM, 110 for VMC) could work well.
Monster Beverage (MNST 155) found support near its 25-day line and remains in good shape. There still resistance to chew through up to 160 or so, but buying a little around here with a stop near 147 seems like a decent risk-reward trade.
While oil prices are down a few percent today, many leading oil stocks are acting just fine. RSP Permian (RSPP 38) is one, as it holds nicely above its 25-day line and remains in a firm uptrend. You could buy some here, with a stop just below the 50-day line, around 32.5.
Sell Ideas
This morning’s downmove was caused a few stocks to trip their stops before bouncing back. We’re going to follow the “rules” and sell anything that traded at or below its stop level. That includes Adobe Systems (ADBE 94), Cynosure (CYNO 47), EBIX Inc. (EBIX 47), National Storage (NSA 21) and Steel Dynamics (STLD 24).
Of those, ADBE and NSA has bounced back nicely—if you happen to still own them, you can hold with a tight stop near 92 for ADBE and 19.5 for NSA. If you did sell, that’s fine, just hold the cash.
We also think Global Payments (GPN 72) and Emergent Biosciences (EBS 30) are sells.
Suggested Stops
Abiomed (ABMD 103) near 97
Agnico Eagle Mines (AEM 51) near 46
AMN Healthcare (AHS 39) near 37
Barrick Gold (ABX 20) near 17.5
Berry Plastics (BERY 37) near 36
Boardwalk Pipeline (BWP 18) near 16.5
Broadcom (AVGO 153) near 151
Credicorp (BAP 147) near 140
CyrusOne (CONE 52) near 48
DCP Midstream (DPM 35) near 32
Diamondback Energy (FANG 89) near 85.5
Facebook (FB 113) near 110
Fidelity Information (FIS 72) near 69.5
HD Supply (HDS 34) near 32
Huntsman (HUN 15) near 14.5
MasTec (MTZ 23) near 22
Newmont Mining (NEM 37) near 33
Nvidia (NVDA 46) near 42.5
Oneok Partners (OKS 40) near 36
Reliance Steel (RS 76) near 72.5
Salesforce.com (CRM 80) near 77
Silver Wheaton (SLW 21) near 19.5
Tallgrass Energy (TEP 45) near 43
Texas Roadhouse (TXRH 46) near 43.5
Weibo (WB 27) near 24.5
Wynn Resorts (WYNN 96) near 95
As always, don’t hesitate to email me (mike@cabot.net) with any questions or comments on these or other Top Ten stocks.