Late September is usually the weakest part of the year for the stock market, and when you throw in a still-aggressive Fed, you have the result you see this week, with the major indexes effectively giving up the ghost, falling another 4% to 5% on the week (as of early this morning), which obviously keeps the intermediate-term (and longer-term) trends pointed down.
Probably just as important, though, is that after the Fed’s latest rate hike and another round of hawkish talk, the collection of resilient stocks have begun to go down with the ship—many are still holding support, but there’s no doubt the sellers feel emboldened to come around for stocks that had been holding up relatively well.
Moreover, under the surface, we’re keeping an eye on some broad market measures to see what will happen as the indexes appear set to retest their June lows. Yesterday, for instance, we saw 726 new lows on the NYSE (the peak was 1,092 in June) and 929 on the Nasdaq (vs. a peak of 1,710 in May)—any positive divergences would be a minor plus should the indexes hold support.
All in all, though, with the bear still in effect and with more stocks joining the downside party, you should be in a defensive stance—we’ll almost surely knock our Market Monitor down a notch or two come Monday.
Stepping back, there’s little doubt the environment is ripe for a bounce if not something more—anecdotally, you can cut the pessimism with a knife, many sentiment measures show the same and there are more and more basic overbought/oversold (such as the sheer number of stocks hitting new lows; this morning, just 10% of NYSE stocks were above their 50-day lines, etc.).
That doesn’t mean you should step in front of the selling freight train right now, or ignore your stops if they’re hit—we’re trend followers first and foremost, and that’s a big reason we’ve been cautious all year. But the environment right now is very much the opposite of, say, February 2021, when meme stocks were tripling overnight and the average Joe was in the market; instead, everyone fears recession, inflation and something breaking in the financial system.
All of this is to say: Be defensive, focus on capital preservation, but also realize there’s plenty of dry tinder out there should anything go right in the world, so keep your head up and watch list up to date.
SUGGESTED BUYS:
As we said last week, we’re mostly game for sitting on your hands given the straight-down action; we’re not big into catching falling knives. That said, we’re OK considering a nibble or two on some (a) recently resilient names that (b) are testing/above support.
Albemarle (ALB) has pulled back sharply, but it’s testing its 50-day line this morning and well above its prior low near 250. If you want to start a position here with a stop near that prior low, you could.
LPL Financial (LPLA) is actually a beneficiary of higher rates, so the stock has only come in a little, is still in its multi-week range and tested the 50-day line this morning. If you enter, use a stop in the 205-208 area.
Regeneron Pharm (REGN) continues to hold up very well—it’s a higher priced name, but a small buy here with a stop under 650 is an option.
Wingstop (WING) has a very similar chart, with a higher high this month and a higher low, and today the stock is testing its 50-day line.
SUGGESTED SELLS:
Outright Sells
We have a lot of sells this week as the sellers came around for everything; thankfully, many stops we had in place got us out at higher prices than now.
Advanced Drainage (WMS)
Alnylam Pharmaceuticals (ALNY)
Alliance Res. Partners (ARLP)
Array Tech (ARRY)
Celsius (CELH)
Chart Industries (GTLS)
Comstock Res (CRK)
EQT Corp. (EQT)
Globalfoundries (GFS)
Hyatt (H)
Lantheus (LNTH)
Onsemi (ON)
Plug Power (PLUG)
Privia (PRVA)
Shoals (SHLS)
TripAdvisor (TRIP)
SUGGESTED STOPS:
Albemarle (ALB) near 250
Alteryx (AYX) near 57
Celsius (CELH) near 25
Chipotle Mex Grill (CMG) near 1500
Enphase Energy (ENPH) near 253
Evolent Health (EVH) near 33
Karuna Therapeutics (KRTX) near 214
Neurocrine Bio (NBIX) near 101
Paylocity (PCTY) near 230
Pinduoduo (PDD) near 57
PTC Therapeutics (PTCT) near 48
Stem Inc. (STEM) near 13.4
WillScot (WSC) near 38
Wingstop (WING) near 120
Wolfspeed (WOLF) near 99