After a tedious five-plus weeks in the market that saw most everything hit the skids, this week has been very encouraging, thanks in large part to the market’s reaction to Wednesday’s inflation report. On the week, the big-cap indexes are up 2% to 3% while the broader measures (which got hit hardest in the past month) are up 4.5% or so.
From a big-picture perspective, nothing has officially changed yet, but it’s getting interesting—the intermediate-term trend of the major indexes still isn’t up, but most things have rallied back into resistance (50-day lines, etc.). It’s a similar story for growth measures, which have perked up nicely, but it’s fair to say the trend is mostly neutral, which is an improvement.
As for individual stocks, they’ve also perked up, though it’s early—not many have pushed out to new highs (in fact, the number of new highs across the market remains relatively low), and we’re still seeing a good amount of selling/stalling on strength in many stocks that approach resistance (such as 50-day lines or prior highs, etc.).
We’d also mention two other things: First, Treasury rates, which have been a big headwind in recent weeks, have backed off nicely this week, with the 10-year yield down about 16 basis points and taking back all of last week’s gains (a good thing). Second, near-term sentiment readings have dipped nicely, which is another secondary positive.
Like we said above, we’re encouraged by the action and will bump up our Market Monitor to a level 6 to respect the fact that the trends have turned neutral. That said, the key will be what happens from here—after five tough weeks, we’ve essentially seen one good day (Wednesday) and a decent morning (today), which is nice, but not enough to conclude the longer-term uptrend is resuming.
Translation: If we start to see indexes and (more important) individual stocks lift on big volume from here, it would be highly bullish; until then, we’re OK with extending your line a bit while we look for further confirmation the buyers are retaking control.
SUGGESTED BUYS
They’re not early stage, per se, but many aerospace stocks spent at least a few weeks correcting and consolidating and are now showing some great action, moving to new highs on solid volume. Howmet (HWM) looks like one of the (if not the) leaders—we’re OK starting a position here with a stop about 10% down from your entry (stop in the 110 to 112 area).
SUGGESTED SELLS
Partial Sells
Not a huge gain, but after surviving a December slump, we’d consider shaving off some shares from MasTec (MTZ), which has rallied nicely and is up double digits from our entry.
Similar story with Antero Resources (AR)—ideally, this is the start of a longer-term move in natural gas stocks, but selling a small portion on the quick gain in just two weeks makes sense, with a loose stop for the rest.
Celestica (CLS) is another partial profit candidate—it’s been less than a month since our latest recommendation and it’s up in the 17% to 20% range. Consider shaving off a few shares with a stop near your cost.
Full Sells
American Airlines (AAL) – looks fine but taking a decent profit on the rally.
Fortinet (FTNT) – doesn’t look awful but has been slipping some and tripped our stop on Tuesday.
SUGGESTED STOPS
Alaska Air (ALK) near 61
Antero Resources (AR) near 34.5
Astera Labs (ALAB) near 116
Broadcom (AVGO) near 211
Celestica (CLS) near 95
Ciena (CIEN) near 79
Credo Tech (CRDO) near 62.5
DoorDash (DASH) near 163
GE Vernova (GEV) near 339
Howmet Aerospace (HWM) near 111
Marvell Technology (MRVL) near 107
MasTec (MTZ) near 140
Reddit (RDDT) near 149
Rubrik (RBRK) near 58
Urban Outfitters (URBN) near 52
Warby Parker (WRBY) near 23
Wix.com (WIX) near 212
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