The minor positive vibes from last week were taken out and shot this week, with Tuesday’s inflation report causing a huge selloff, and last night’s FedEx earnings warning throwing fuel on the fire. As of this morning, the major indexes are all down in the 5% to 6% range on the week.
While the news is awful and big, bearish predictions are becoming commonplace, nothing much has changed with our overall viewpoint: We remain cautious, as the intermediate- and longer-term trends are pointed down, the broad market is unhealthy and, to say the least, no real money is being made unless you’re trying to jump in and out of stocks every few days (or hours).
That said, to this point, we continue to see a decent number of stocks (not a ton, but not just one or two) holding up in fine fashion. Of course, the question is whether the market will come back around for these names—going after stuff that has “meat left on the bone.” While we are raising stops somewhat, if you have lots of cash in your portfolio (“lots” is subjective; Cabot Growth Investor’s Model Portfolio is about 65% on the sideline), we’re OK giving any resilient stocks you own a chance to hold up. The longer they can, the greater the chance they can really pop if/when the pressure comes off the market.
Looking ahead, we’re open to anything, whether it’s this being another big leg down for the market, or conversely, that we’re in some sort of final puke stage—sentiment is crystallizing on the bearish side of the fence, so we wouldn’t be shocked to see some sort of successful retest of the June lows (near 365 on SPY) with some potential leaders holding relatively well.
But to be clear, we’re not whistling past any graveyard at this point. The sellers are clearly still in control of most stocks, sectors and indexes, so you should remain cautious and mostly patient as we wait for a sign the market is looking ahead to brighter times. We could nudge our Market Monitor down to a level 3 come Monday, but we’ll see how things look then.
SUGGESTED BUYS:
For the most part you should just be sitting on your hands given the accelerated selling environment out there—but if you’re willing to nibble and use relatively tight stops, there are some decent risk/reward setups out there.
Chart Industries (GTLS) actually hit new highs yesterday before backing off with the market. If you want to nibble in the 200 area, with a stop near 185, you could.
Paylocity (PCTY) is another if you don’t own any—nibbling on this retreat with a stop at its recent low/50-day line (230) seems reasonable.
SUGGESTED SELLS:
Outright Sells
Insulet (PODD) – not awful but chopping around just under resistance and we’re near breakeven
New Fortress Energy (NFE) – melting away the past month, below 50-day line today
Palo Alto Networks (PANW) – group remains iffy and the stock is eating into its earnings gap
RBC Bearings (ROLL) – big-volume selloff below the 50-day line this week
Steel Dynamics (STLD) – broke on peer Nucor’s (NUE) earnings warning
WW Grainger (GWW) – was holding up fine … until the sellers really stepped up the past few days
SUGGESTED STOPS:
Advanced Drainage (WMS) near 126
Albemarle (ALB) near 250
Alnylam Pharmaceuticals (ALNY) near 202
Alliance Res. Partners (ARLP) near 23
Array Tech (ARRY) near 17
Carlisle Cos. (CSL) near 290
Chart Industries (GTLS) near 185
Debury (DEN) near 81
Enphase Energy (ENPH) near 253
EQT Corp. (EQT) near 44
Globalfoundries (GFS) near 56.5
Hyatt (H) near 87.5
Lantheus (LNTH) near 76.5
Neurocrine Bio (NBIX) near 101
Onsemi (ON) near 65
Paylocity (PCTY) near 230
Privia (PRVA) near 38
PTC Therapeutics (PTCT) near 48
Shoals (SHLS) near 22.5
Wingstop (WING) near 119