The market’s sharp downmove has continued this week, with all of the major indexes sporting sharp losses in the 3% to 4.5% range and growth-heavy measures down another 6%. We are seeing a small bounce this morning following the jobs report (mostly in line) and some positive quarterly reports, but nothing that changes the overall picture.
Indeed, the intermediate-term evidence remains firmly negative, whether looking at trends of indexes (most everything well south of 50-day lines), the broad market (number of stocks hitting new lows is obviously elevated) or individual stocks (former leaders have clearly broken down). And key growth measures, which had been leading, have effectively had a mini-crash of late—the Nasdaq is off more than 10% during the past two and a half weeks, while things like the Renaissance IPO Fund (IPO) and ARK Innovation Fund (ARKK) are off 17% to 23% … all without being able to bounce much at all to this point.
Put it together and we’re remaining defensive—we’ll likely pull our Market Monitor down to a level 3 come Monday, which means plenty of cash on the sideline and, if you do buy, only small (half or less your normal position size) positions.
Now, with all that said, we’re not sticking our heads in the sand for a few reasons. The first is that, short term, things are getting pretty emotional, which means a near-term bounce/snapback is growing more likely. Second, there are still a decent number of early-stage (either just got going in the past two or three months or re-set their advances late last year), growth-oriented stocks that are holding up well—and could at least etch an initial bottom if the market can find support.
And third is that some bigger-picture factors are growing more encouraging: Treasury rates have come down and Fed rate cut bets have picked up of late, both of which should be positives down the road; some select sentiment measures (some surveys, some breadth readings) are nosing toward extreme levels; and equal-weight indexes have been “outperforming” (falling less) than the popular big-cap measures.
Long story short, we do think such a swift round of damage after a prolonged run will probably take some time to repair—but we also don’t think this is the end of the world, and we’ll be looking for future leadership to show itself if/when the market can finally get off its knees. Stay safe for now, but also stay alert.
SUGGESTED BUYS
Once again, we’re not in a hurry to do much buying as long as the market is skidding, but we do think it’s OK to target a small buy if we get a shakeout in some of the resilient names—things like AXSM or RPRX come to mind, possibly down 3% to 5% from here.
SUGGESTED SELLS
Partial Sells
It’s not quite there as we write this, but given the environment, we’re OK taking smaller partial profits—say, if a stock quickly hands you a double-digit gain. Alamos Gold (AGI) is around that profit level depending on where you entered two and a half weeks ago, so consider ringing the register with some and holding the rest.
Full Sells
Capital One (COF) – financials fell out of bed this week, with COF going along for the slide.
Deere (DE) – tripped stop mid-week … before snapping back. If you happen to still own some, we’re OK with a stop near 460.
DoorDash (DASH) – was pulling back normally, but the late-week selling was too much to ignore.
Doximity (DOCS) – tripped stop as the post-earnings decline has gotten excessive; the overall chart isn’t bad, so we’ll be monitoring it for a strong rebound if/when the market can bounce.
Dutch Bros (BROS) – similar to DOCS, the post-earnings decline has gotten sloppy, so we’re getting out—though big picture, it’s “only” down to its 50-day line, so a strong rebound would do wonders.
Kyndryl (KD) – far from the worst thing out there, but it cracked support this week.
Netflix (NFLX) – tripped stop yesterday on huge-volume break of 50-day line.
Silicon Labs (SLAB) – fell out of bed with chip stocks this week.
SUGGESTED STOPS
Akero Therapeutics (AKRO) near 41
Axsome Therapeutics (AXSM) near 114
Expedia (EXPE) near 178
Penumbra (PEN) near 265
Qifu Technology (QFIN) near 38
Take-Two Interactive (TTWO) near 195
TD Synnex (SNX) near 128
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