The major indexes have acted poorly this week, getting off to a weak start and, after some bounce action, looking like they’ll give up more ground after this morning’s wholesale inflation report. All in all, most indexes are off 2.5% to 4% on the week when factoring in this morning’s expected dip.
For individual stocks, we saw a round of selling in high relative strength names earlier in the week, something that has occurred umpteen times this year—the action basically reaffirming that the sell-on-strength action is still with us or, said another way, many stocks are able to have decent advances for two or three weeks but then give most of it back in just a few days.
Now, with all that said, we’re not looking at this week as any sort of death knell. The intermediate-term trend is still up for the major indexes and, by a hair, for many growth funds. And it’s important to point out that, while many good-looking stocks did take body blows, few really cracked … and many bounced back as the week wore on.
Net-net, nothing has really changed in our book—you should probably cut back if you got heavily invested the past few weeks thinking the bull market had started, and if you’re still in your storm cellar, we think putting a little money to work makes sense.
But if you’ve been somewhere in the middle, we’d basically sit tight here, and we’ll see if the market can steady itself and mount another advance following next week’s big economic happenings (inflation and Fed meeting). We’ll leave our Market Monitor at a level 5.
SUGGESTED BUYS
Catalyst Pharma (CPRX) thrust to new highs near Thanksgiving and hasn’t made much progress since, which is par for the course in this environment—but shares have tightened up nicely as the 25-day line (near 16) has caught up. You could buy a little here with a stop just under 15 or wait for a strong push above 17.5 or so (with a stop near 15.5).
Chip stocks are shaping up some, and Impinj (PI) is one that still acts well, pulling back normally after a brief foray into new high ground last week. The 50-day line is at 103 and rising, so a pullback into the low 110s would be interesting, with a stop near the century mark.
Vulcan Materials (VMC) isn’t a fast mover, but after rallying from 148 to the 180 area, shares have tightened up as the 25-day line (above 178) has caught up. If you don’t own any, starting a position here with a stop near 170 seems like a reasonable risk/reward.
SUGGESTED SELLS
Albemarle (ALB) – Unable to find support after breakout failure
Arch Resources (ARCH) – tripped stop
Frontline (FRO) – tripped stop
United Airlines (UAL) – stalled out and failed mini-breakout
SUGGESTED STOPS
Academy Sports (ASO) near 47
Amylyx Pharma (AMLX) near 33
Arista Networks (ANET) near 122.5
Biogen (BIIB) near 279
Calix Networks (CALX) near 65
Globalfoundries (GFS) near 59
Goldman Sachs (GS) near 345
Neurocrine Bio (NBIX) near 113
Noble Corp. (NE) near 34.5
Onsemi (ON) near 68
Regeneron (REGN) near 715
Schlumberger (SLB) near 48
