We think we’re at a very interesting juncture in the market.
The major market top came in mid-November—that’s when most leading growth stocks keeled over, though some of the market hung in there while defensive and cyclical stocks remained in gear. January, of course, brought with it a broader selloff, with just about everything plunging into the late-January low six weeks ago.
Since that time, we’ve seen a lot of bad news, led by the Russian invasion and the accompanying sanctions, along with all the uncertainties that flow from that leading to a surge in many commodity prices and some haywire movements among currencies—not to mention fears of military escalation and another new high in the inflation rate yesterday. Today we even saw news that Blackrock has been hit with a $17 billion loss on Russian investments.
Yet despite all of that, the market has basically hacked around since that January low; yes, some indexes have briefly probed new lows, but (a) they’ve quickly snapped back and (b) fewer stocks have participated in the downside, with the number of names hitting new lows drying up nicely. And now, this morning, we see a little rally on some dovish reports from Europe.
It looks like a bottoming process has been underway, with more stocks drawing lines in the sand, even as more and more investors throw in the towel or lose hope for a fresh upturn. It’s encouraging.
Now, you know us—being encouraged is one thing, but being bullish requires something more. In this case, we need to see buyers step up for more than just a day or two and wrest control from the sellers. Right now, the best we can really say is that more stocks, indexes and funds have stopped going down—that’s good, but we need to see more.
When it comes to our stance, we’ve been patient throughout the recent mess, so we’re not going to rush it. Right now, we’re not making any changes: Playing defense makes sense, though trying to snag a few shares of certain commodity-related stocks on weakness is fine by us.
But keep your eyes open: If we see some persistent buying from here, we could get some intermediate-term green lights within a few days. But we have to see it first before taking action.
SUGGESTED BUYS
Cyclical names have begun to wobble a bit, but most are still intact. We continue to like the look of Matson (MATX), which was written about two weeks ago—the stock has pulled back a bit this month and could pull in a bit further (the 25-day line is at 98.5 and rising). But we think it’s a solid entry on dips toward 103 with a stop in the 95 area.
As for other buying opportunities, we don’t see many today, but we’re hunting for some strong commodity names (MRO, PXD, CHK, OXY, RS) on pullbacks of another few percent (6% to 8% type of thing), with loss limits 12% or so below that.
SUGGESTED SELLS
Again, if you recently bought some commodity names and they’ve handed you quick profits, consider shaving off a few shares and trailing a stop on the rest. Newmont Mining (NEM) isn’t the fastest mover, but it has popped 20% in the past month and is extended to the upside—partial profits makes sense, and then try to play the rest out for a larger gain.
Datadog (DDOG) – tripped stop
Huntsman (HUN) – tripped stop
Hyatt (H) – tripped stop
SUGGESTED STOPS
Atkore (ATKR)
near 95
Biocryst Pharm (BCRX) near 15.5
CF Industries (CF) near 80
Chesapeake Energy (CHK) near 72.5
Concentrix (CNXC) near 187
Coterra Energy (CTRA) near 22.9
Inspire Medical (INSP) near 216
Juniper (JNPR) near 32
Photronics (PLAB) near 16.3
Regeneron Pharm. (REGN) near 600
SeaWorld (SEAS) near 58
Titan Int’l (TWI) near 11.0
ZIM Shipping (ZIM) near 66