Stocks are bouncing this morning, but overall, it’s been another down week for the market, with the major indexes probing new correction lows as recently as yesterday. That obviously keeps the intermediate-term evidence pointed down, whether you’re looking at the trends of the major indexes, the action of individual stocks (70% of S&P 500 stocks and 80% of the broad market came into today south of their 50-day lines) or broader measures (new lows are swamping new highs each day).
Thus, right here, we’re remaining in our bunker—we’ll likely keep our Market Monitor at a level 3 come Monday.
Now, as we look ahead, we could increase our exposure a bit (not a huge amount, but a notch or two on the Market Monitor) if we see the market embark on a bounce phase—and we are seeing a few near-term rays of light on that front.
Sentiment-wise, one of the granddaddy surveys (Investors Intelligence) is at levels usually associated with market lows (even if it’s a temporary low), while for the broad market, the peak in stocks hitting new lows actually occurred last Tuesday (March 4), so we’re seeing a short-term positive divergence (a sign selling pressures are lessening a bit). Moreover, some of the hardest-hit glamour stocks haven’t fallen further (net-net) during the past two-plus weeks.
Throw in today’s early strength and we could finally be getting close to a bounce phase, but we’ll have to see how it goes—if we can get off our knees, it could provide some near-term opportunities and, more important, should allow for some of the market’s wheat (future leadership) to separate from the chaff.
For the here and now, though, the market has had trouble rallying for more than a few hours—until that changes, we advise staying mostly safe on the sideline and waiting patiently for the buyers to step up.
SUGGESTED BUYS
Good stocks can go bad in a hurry in weak markets, but so far, Alibaba (BABA) is consolidating very nicely after its huge January-February advance. If you don’t own any, we’re OK with a small buy here and a stop near 115.
SUGGESTED SELLS
Partial Sells
None this week
Full Sells
Eli Lilly (LLY) – the complete give-up of the recent move not only is ugly near term, but makes the past few months look toppy.
SUGGESTED STOPS
Given the volatility and the fact we’re mostly on the sideline, we’re not placing hard-and-fast stops on many names right now. When things improve and we extend our line, that will change, but for now, we’re mostly monitoring stocks and sectors for potential future leadership.
Akero Therapeutics (AKRO) near 41
Alamos Gold (AGI) near 22.5
Alkermes (ALKS) near 31.5
Axsome Therapeutics (AXSM) near 114
Life Time Holdings (LTH) near 27
Take-Two Interactive (TTWO) near 195
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