It’s been a very impressive week for the market from a few angles. First, of course, was the snapback of the major indexes—the big-cap indexes, which never got taken apart, have recouped something like 80% of their pullbacks, and while the broader indexes haven’t bounced as much, (a) they did gain back more than half their declines, and (b) they actually perked above their 50-day lines earlier this week (the overall intermediate-term trend remains down, but bears watching).
Moreover, the under-the-surface action has brought a couple of encouraging signs. One involves volume—last Thursday, this Monday and this Tuesday all saw at least 80% of all NYSE volume flow into stocks that rose on the day. That’s not an official blastoff indicator, but it’s a good initial thrust that could indicate the panic phase of the decline is over.
We’re also encouraged that the number of new lows, which had been massive, has dried up nicely the past three days—far from conclusive, but a good start.
All in all, it’s a bit of an on the one hand, on the other hand-type of situation. On the one hand, we can’t conclude the decline is over; a bounce was expected, after all, and even after the rally, many charts remain shattered, especially among growth stocks. The odds favor further reverberations going ahead.
On the other hand, though, the news-driven puke action and sharp, broad snapback rally is a combination that’s been seen a few times in recent years, usually leading to good things over time (though, again, with lots of short-term wild action).
All in all, we may bump up our Market Monitor up a notch depending on what things look like Monday; if you have a ton of cash, nibbling on a name or two that’s (a) held up decently during the retreat and (b) showed some good-volume buying on the bounce could probably work. But for the most part, we advise remaining close to shore—ideally, this was just a brief, news-driven panic (virus, Fed tapering, etc.), but we certainly need to see more bullish action before concluding that.
Suggested Buys
Goodyear Tire (GT) took a bigger hit than we’d prefer, briefly dipping below its 50-day line early last week, but it’s actually been up seven days in a row since then, recouping a good chunk of its gains. Another dip is certainly possible, but the risk/reward around here seems reasonable—we’re OK entering here with a stop in the 20 area.
KLA Corp. (KLAC) continues to hold up very well, nearly tagging new closing highs on Wednesday. Starting a position here with a stop under the lows from Monday (under 390) seems like a decent play.
Sticking with the risk-reward theme is SAIA Inc. (SAIA), which dipped to near 310 in early December before bouncing decently this week. With the 50-day line at 305 and rising, you can consider starting a position here with a stop near that line.
Suggested Sells
After a rash of breakdowns the prior two weeks, we have no sells today—but we may kick out some weaker performers come Monday.
Suggested Stops
Albemarle (ALB) near 245
Camping World (CWH) near 39.5
Enphase Energy (ENPH) near 206
Goodyear Tire (GT) near 20
KLA Corp. (KLAC) near 384
Livent (LTHM) near 26
Palo Alto Networks (PANW) near 505
Pioneer Natural Resources (PXD) near 172
Pure Storage (PSTG) near 28
SAIA Inc. (SAIA) near 305
Tesla (TSLA) near 950