The major indexes hit a low on March 13 and bounced for eight days through Tuesday, though that bounce has run into another wave of selling, with the major indexes retrenching the past three days. Overall, the major indexes are about flat on the week after this morning’s modest down opening.
We view the short term as basically a toss-up at this point. Frankly, we’re thinking there’s a decent chance this short-term bounce could continue—usually these relief rallies last longer than eight days, and at this point the major indexes are still well above their lows from a couple of weeks ago. We’d also say that sentiment remains negative, with a spike in put-call ratios, for instance, during the selling of the past two days (a small positive).
That said, of course, it’s possible the selling since Tuesday accelerates, especially as the tariff D-day approaches next week. For now, though, we see some of the damage starting to be repaired.
Intermediate term, though, the evidence remains clear: The trend of most indexes and stocks is still pointed down, with far more stocks hitting new lows than new highs and with defensive areas outperforming growth areas. Thus, we remain defensive here, holding plenty of cash, keeping any new buying small and focusing on monitoring potential leadership for the next uptrend.
Bigger picture, our main thought right now is that the market needs some time—after a fierce three-week decline in the major indexes (10% on the S&P 500, 14% on the Nasdaq) that saw many leaders decisively crack, the odds favor time being needed for big investors to re-position their portfolios, for new leadership to shape up and, of course, for some of the macro-uncertainties (tariffs, rates, war, etc.) to be fleshed out, enticing big investors back into the pool.
Could a V-bottom emerge if all goes well? It’s always possible, and in the market, it’s the unusual action that you need to respect—so if it happens, it would be very bullish in our view. But it’s more likely that a bottom will need to be built over a period of time, providing a sturdier foundation for the next sustained advance.
That coming advance will feature plenty of stocks to sink our teeth into, and frankly, a bottom-building effort should make it easier to see what stocks/sectors are taking the leadership baton ahead of time. That’ll be the next big payoff, but in the meantime, the market demands some patience as the correction continues. We’ll likely keep our Market Monitor at a level 4 come Monday, though we could nudge it lower if the recent selling accelerates.
SUGGESTED BUYS
Life Time Holdings (LTH) had a big dip to just below its 50-day line near the end of the market decline, but then it rebounded back close to its high before a little selling late this week. A nibble here with a stop near 28.5 is fine by us.
SUGGESTED SELLS
Partial Sells
Wheaton Precious Metals (WPM) looks good, but with a double-digit gain in a tough environment, we favor booking a little profit on strength and then holding the rest for what ideally becomes a lasting move.
Full Sells
Bloom Energy (BE) – nice setup and it even tested resistance, but the stock quickly cracked afterwards. There is support near 20 if you want to hold above there, but we’re honoring the loss limit.
Royal Gold (RGLD) – looks fine, but not as strong as many other gold/silver plays, so we’ll book our small profit.
Royalty Pharma (RPRX) – good stocks can go bad in a hurry in a bad market, and RPRX, while not a complete disaster, definitely broke support on huge volume this week.
SUGGESTED STOPS
Alkermes (ALKS) near 32.5
Axsome Therapeutics (AXSM) near 116
Futu Holdings (FUTU) near 101
GeneDX (WGS) near 83
Life Time Holdings (LTH) near 28.5
Range Resources (RRC) near 35.5
Sea Ltd (SE) near 121
Take-Two Interactive (TTWO) near 198.5
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