For the first time in a while, it’s actually been a relatively quiet week—the major indexes are hovering around breakeven on the week, though broader indexes are up 1%-ish and the lagging growth areas have gotten off their knees, with many of those funds up 2% to 3% or so. It’s just a start, but that’s good to see.
All told, the bounce off the January 24 market lows continues, and to this point, it’s been decent—not amazing, but not pathetic, either. The S&P 500, for instance, has recouped as much as 60% of its November-January decline, though it gets worse from there, with the Nasdaq taking back 45% of its lost ground and stuff like small caps getting less than 40% back.
We consider it a solid start, but not enough to really change our thinking—the intermediate-term trends of the major indexes and growth funds are still pointing down, most stocks are in the same boat (59% of NYSE and 78% of Nasdaq titles are below their 200-day lines) and we’re still seeing hundreds of stocks hitting new lows on most days.
That doesn’t mean we’re expecting horrid things. Actually, we’re encouraged by more than a few things of late, including a good number of positive earnings gaps in growth land (few are buyable, but at least big investors are stepping in and drawling lines in the sand for some of them). Also, as students of the market, it’s hard not to “like” the bad news surrounding inflation, with many sentiment surveys pointing to increasing worry (though not panic yet).
All in all, we continue to think the best course is to stand back for the most part and let everyone else fight it out on a day-to-day basis, reacting to Fed predictions and inflation and economic reports. Right now, the odds favor we’re in the midst of a bottoming process that will eventually lead to another upleg, so a little trading or small buying here and there is fine, especially in names that have launched on earnings—but in terms of major commitments, we’d hold off until we see some major trends turn up and some legitimate setups among potential leaders.
We’ll likely keep our Market Monitor at a level 4, though it could be nudged one way or another depending on how things go.
Suggested Buys
Frankly, we don’t see a lot of good setups out there beyond our recent ideas—many names have either run up decently (look fine, but not great for new entries) or have otherwise bounced into resistance.
We do, however, like the look of many of this week’s recommendations, with stuff like ATI (on dips), EXPE (if today’s mini-earnings gap holds), CTRA, MOS and SF (again, both preferably on a bit of weakness) looking good. If you want to nibble, we’d probably look at those names. Next Monday should feature a handful of more earnings gappers, though we haven’t run our screens yet, so we’ll have to see.
Suggested Sells
If you bought ZIM Shipping (ZIM) with us a few weeks back, we’d consider taking some partial profits here—the stock looks great, but it’s been straight up for a few weeks, and in this environment that raises risk. Consider selling a chunk and holding the rest.
As for outright sells:
Comerica (CMA) – looks OK, but taking a modest profit as it doesn’t look like a major leader
SUGGESTED STOPS
CF Industries (CF) near 66.5
Charles Schwab (SCHW) near 86
Chesapeake Energy (CHK) near 61
Deere (DE) near 368
Diamondback Energy (FANG) near 115
Eastman Chemical (EMN) near 117
Hewlett Packard Ent. (HPE) near 16
Huntsman (HUN) near 34.5
KBR Inc. (KBR) near 42
Regeneron Pharm. (REGN) near 585
Teck Resources (TECK) near 32