The big events this week were the November inflation report and the Fed’s meeting, and both (especially the latter) were very pleasing to the market—the fact that the Fed is forecasting three rate cuts next year tells us at the very least that the rate hike cycle is almost surely over, which helped stocks and bonds rally nicely. As of this morning, big-cap indexes are up about 2.5% on the week, while small- and mid-cap indexes are up more than 5%.
From an intermediate-term perspective, obviously nothing has changed with the bullish thesis—the trends for nearly all indexes, sectors and stocks are pointed up, and even when seeing the occasional wobble, there’s essentially zero abnormal action. In fact, when looking at some measures, we’re getting close to rare air—nearly 90% of the S&P 1500 are above their 50-day lines, which historically has led to good things. (To be fair, some of these blastoff-type measures haven’t worked great the past couple of years, so we’re not hanging our hat on stuff like this, but it’s a good sign nonetheless.)
Near term, there are a couple of things to keep an eye on. The first is that “the good news is out,” and that’s causing a bit of a rush into stocks from late buyers that trade more on the news than on market action. Is that bad? No. But could it lead to some wobbles? Possibly yes.
On that note, we’d point out that, despite yesterday’s strong broad market performance, we did see some rotation, with many growth leaders up small or down while small-caps and cyclicals did well.
As we’ve said recently, that doesn’t really change our stance at all—we may bump up our Market Monitor another notch come Monday—but just remember to keep your feet on the ground. Trust us, we’re as happy as anyone that, after two challenging years, we’re finally seeing some things really let loose on the upside in our portfolios, but now’s probably not the time to simply chase XYZ stock, instead looking for decent entries in true leaders.
POTENTIAL BUYS
With this week’s ramp coming on top of the prior run, we’re not seeing many pristine entries out there, though we do think some recent growth earnings winners that we’ve written about (Elastic (ESTC), Samsara (IOT), UiPath (PATH)) are providing opportunities here or on further dips.
SUGGESTED SELLS
Partial Sells
Toll Brothers (TOL) – All housing stuff looks great, and we think higher prices are likely down the road … but TOL has accelerated higher after earnings so if you bought with us in early November, taking partial profits makes sense up here.
Zscaler (ZS) – Cybersecurity stocks look great, but if you bought at 200 or less, we think letting some shares go here and holding the rest with a loose stop makes sense.
Full Sells
Comfort Systems (FIX) – Taking a decent profit.
Ely Lilly (LLY) – Tripped stop. We’re not ruling out this being a shakeout, but we have to follow the stop.
Light & Wonder (LNW) – No follow-through on earnings.
SUGGESTED STOPS
Adobe (ADBE) near 571
Autoliv (ALV) near 100.5
Axon Enterprises (AXON) near 228
Braze (BRZE) near 52 – stop just above our cost given the big earnings wobble
Cameco (CCJ) near 42.5
DoorDash (DASH) near 91
Martin Marietta (MLM) near 465
Nutanix (NTNX) near 38
Royal Caribbean (RCL) near 106
SharkNinja (SN) near 44.5
Spotify (SPOT) near 181
Synopsys (SNPS) near 513
Zscaler (ZS) near 188
