As we’ve been writing, there were many positive vibes building in the market through February and early March, and then the two-and-a-half week rally from there was very encouraging, triggering a blastoff-type measure and turning the intermediate-term trend up. Overall, the rally recouped more than half of the Nasdaq’s correction decline and three-quarters of the S&P’s, which is solid.
That said, the one bugaboo was that there was still lots of selling on strength in individual names (few new highs, with most attempted breakouts falling flat). And as the market has started to pull back, we’ve seen that feed on itself—while a dip wasn’t unexpected, the manner in which the major indexes and many stocks have fallen hasn’t been great, with some abnormal action and the overall intermediate-term green light on the fence. A rush of buying in defensive sectors (XLP, XLU, XLV) isn’t the best look, either.
What does it all mean? On one hand, we don’t think the last few days negates all the good stuff from the prior many weeks, so we’re not advising you to run back into the storm cellar, per se. However, we can say that not much money is being made in the market, with one- or two-week pops in certain stocks or groups usually running into resistance.
Net-net, the action has taken away some, but not all, of the progress that’s been made—for example, our Market Monitor was at a 4 a few weeks ago, made it up to 6, and is now likely headed back to a 5. Small positions and buying on dips is preferred, as is holding a good-sized chunk of cash and making sure losses don’t get away from you on the downside. In terms of sectors, commodities remain the best, but even there it’s become more selective.
Looking ahead, the next week or two should be key—if the market keels over, we will return to a highly defensive stance, but a solid show of support could allow many stocks to consolidate and take another swing at resistance down the road. For now, though, we continue to go slow and play things lightly.
SUGGESTED BUYS
We’re not a huge fan of buying anything near new highs right now, but we have to say, Cameco (CCJ) continues to act in a near picture-perfect manner, with every dip to the 25-day line (now just above 27.5 and rising quickly) finding support—and, yesterday, with a big-volume move to new highs above 30. A dip back into the 29 to 29.5 area would be tempting, with a loss limit of around 3.5 to 4 points.
Halliburton (HAL) has lost a little steam, but it’s done nothing wrong, still holding its 25-day line. We think it’s a decent bet around here or on further dips, with a stop under the 50-day line (now at 34.5).
Steel Dynamics (STLD) broke out decisively after a huge shakeout in January and then went vertical after upping Q4 guidance. The pullback since then could go on further, but so far it’s found support near the 25-day line. If you want in, nibbling on dips toward 80 with a stop near 72 is a solid risk/reward.
SUGGESTED SELLS
Axcelis Tech (ACLS) – decisive breakdown
Globalfoundries (GFS) – failed breakout/breakdown
Sweetgreen (SG) – tripped stop
ZIM Shipping (ZIM) – tripped stop
SUGGESTED STOPS
AGCO Corp (AGCO) near 130
Agnico Eagle (AEM) near 57
Allegheny Tech (ATI) near 24.5
Alpha Metallurgical (AMR) near 110
Barrick Gold (GOLD) near 22.9
CarGurus (CARG) near 37
CF Industries (CF) near 88
Civitas (CIVI) near 54.5
Freeport McMoRan (FCX) near 46
Hilton (HLT) near 139
Intra-Cellular Therapies (ITCI) near 55
Lockheed Martin (LMT) near 425
Marathon Oil (MRO) near 22.3
Nucor (NUE) near 136
Regeneron Pharm. (REGN) near 660
Westlake (WLK) near 110