Quiet Riot

BUYER’S EDGE

Sector rotation still in effect as technology names see some institutional selling. The election may be loudly contested, yet the market stayed mostly subdued.

INDEXWEEKCLOSECHANGE% CHANGEYTD %
DJIA29263.48-216.33-0.72.5
Nasdaq11854.9725.680.232.1
S&P 5003557.54-27.61-0.810.1
Russell 20001785.3441.302.47.0
Weekly Advancing/Declining Volume NYSE: 1.6, NASDAQ: 2.1 
Accumulation/Distribution Count, 20 DaysS&P 500: 4/3, NASDAQ: 5/5  
Weekly Advances/Declines, IssuesNYSE: 2.7, NASDAQ: 2.2  
New HighsNYSE:   377 (-13%), NASDAQ: 492  (-11%)
New LowsNYSE:  25 (-38%), NASDAQ: 54 (-19%)
SYMBOLNAME% CHG40EMACHART
XLEENERGY5.7Second week of rallying brings it to the 40EMA, but still a downtrend.
XLBMATERIALS1.09Pullback from new high last week. 
XLIINDUSTRIAL1.05Inches up to new high for second week in a row. 
XLFFINANCIAL0.55Convincingly above 40EMA, 15% off high. 
XLYCONSUMER DISC0.16Pullback from new high last week. 
XLCCOMMUNICATIONS SRVCS-0.36Pullback in handle of 10-week base.
XLKTECHNOLOGY-0.9Pullback in handle of 10-week base.
XLREREAL ESTATE-1.52Pullback in handle of 9-mo. base.
XLPCONSUMER STAPLES-1.53Fades from new high. 
XLVHEALTH CARE-2.96Pullback from new high last week. 
XLUUTILITIES-3.86Pullback in handle of 9-mo. base.

WHAT’S GOING ON

 Big Tech leadership continues to fade. 

  • Apple (AAPL, -1.61%), 
  • Microsoft (MSFT, -2.57%), and 
  • Facebook (FB, -2.62%) have narrowed their +two-month ranges. 
  • Alphabet (GOOG, -1.96%) bucked the trend as it hit a new high.  

Key Industry Action

  • Three-year base breakout in resorts and casinos, apparel manufacturers, apparel stores, personal services, drug manufacturers.
  • Home furnishings, medical devices new high.
  • Business services breakout.
  • Security and Protection, RV’s, beverages in cup and handle.
  • Luxury goods, right side of base.
  • Copper new high.
  • Medical distribution base breakout.

GSRTRADES

These are the stocks in breakout mode that meet the strict criteria for Growth Stock Trades.

These top names are leadership and will help determine the success of others on our Bases and Lower Bases lists. Strong representation from biotech, cloud computing, stay at home, work at home, software and online retail. 

BREAKOUTS & PULLBACKS

TickerCompany NameTIERDEMANDIndustry
AAXNAxon Enterprise Inc4X++Aerospace & Defense
APPSDigital Turbine, Inc.3P++Internet Software/Services
AVLRAvalara Inc4X++Packaged Software
BERYBerry Global Group Inc4P+Containers/Packaging
BLFSBioLife Solutions, Inc.4X++Medical Specialties
BPMCBlueprint Medicines Corp.1P+Biotechnology
CDNACareDx, Inc.4X++Medical Specialties
CELHCelsius Holdings, Inc.1P++Beverages: Non-Alcoholic
CGCCanopy Growth Corporation3P++Agricultural Commodities/Milling
COWNCowen Inc Class A3P+Investment Banks/Brokers
CRDFCardiff Oncology, Inc.3X++Medical/Nursing Services
EXASExact Sciences Corporation1X++Biotechnology
FATEFate Therapeutics, Inc.1X++Biotechnology
FIVNFive9, Inc.4X++Information Technology Services
FOLDAmicus Therapeutics, Inc.4X++Biotechnology
FRHCFreedom Holding Corp.3P++Investment Banks/Brokers
FRPTFreshpet Inc4P++Food: Specialty/Candy
FSLRFirst Solar, Inc.4P+Electronic Components
FTCHFarfetch Limited Class A2X++Internet Software/Services
FUBOfuboTV Inc.1X++Movies/Entertainment
FUVArcimoto, Inc.1X++Motor Vehicles
GRBKGreen Brick Partners, Inc.4P++Homebuilding
GRWGGrowGeneration Corp.1P++Wholesale Distributors
HIHillenbrand, Inc.4XIndustrial Conglomerates
HTHHilltop Holdings Inc.4PRegional Banks
HUBSHubSpot, Inc.4X++Information Technology Services
IIPRInnovative Industrial Properties Inc1P++Real Estate Investment Trusts
IIVIII-VI Incorporated1X++Electronic Equipment/Instruments
IPHIInphi Corporation3X++Semiconductors
IRIngersoll Rand Inc.3X+Industrial Machinery
LOBLive Oak Bancshares, Inc.3P++Regional Banks
MELIMercadoLibre, Inc.3X++Internet Software/Services
MGNIMagnite, Inc.4X+Advertising/Marketing Services
MRNAModerna, Inc.1X++Biotechnology
MRTXMirati Therapeutics Inc.1X++Biotechnology
NETCloudflare Inc Class A4X++Information Technology Services
NOVASunnova Energy International Inc4X++Wholesale Distributors
NTLAIntellia Therapeutics, Inc.3X++Biotechnology
NTRNutrien Ltd.1PChemicals: Agricultural
NTRANatera, Inc.4X++Medical/Nursing Services
OCULOcular Therapeutix Inc1X++Pharmaceuticals: Major
OSBNorbord Inc.4P+Forest Products
PLANAnaplan, Inc.4X+Packaged Software
PLUGPlug Power Inc.3X++Electronic Components
QTWOQ2 Holdings, Inc.4X+Information Technology Services
RAREUltragenyx Pharmaceutical, Inc.1X++Biotechnology
RGENRepligen Corporation4P++Pharmaceuticals: Major
ROKURoku, Inc. Class A4X+Electronics/Appliances
RPDRapid7 Inc.4X+Information Technology Services
SBGISinclair Broadcast Group, Inc. Class A4XBroadcasting
SNAPSnap, Inc. Class A4X++Internet Software/Services
SQSquare, Inc. Class A1P++Information Technology Services
STNEStoneCo Ltd. Class A4P+Packaged Software
SWAVShockwave Medical, Inc.2X++Medical Specialties
TERTeradyne, Inc.4P+Electronic Production Equipment
TRUPTrupanion, Inc.4X++Specialty Insurance
TWSTTwist Bioscience Corp.4X++Biotechnology
ZZillow Group, Inc. Class C2X++Information Technology Services

Keep your profits,

Dan

GSRTrades November 15, 2020

BASES

TickerCompany NameTIERDemandIndustry
BMYBristol-Myers Squibb Company3X+Pharmaceuticals: Major
CNCCentene Corporation4P+Managed Health Care
COOPMr. Cooper Group, Inc.4P++Finance/Rental/Leasing
FVRRFiverr International Ltd.3X++Data Processing Services
GPNGlobal Payments Inc.2PData Processing Services
MRNAModerna, Inc.1X++Biotechnology
NTRNutrien Ltd.1PChemicals: Agricultural
PGNYProgyny, Inc.4P+Miscellaneous Commercial Services
PLANAnaplan, Inc.4X+Packaged Software
RDS.ARoyal Dutch Shell Plc Sponsored ADR Class A4PIntegrated Oil
SINASINA Corp.4PInternet Software/Services
WBWeibo Corp Sponsored ADR Class A2PInternet Software/Services
XPERXperi Holding Corporation3XSemiconductors

LOWER BASES

TickerCompany NameTIERDemandIndustry
ACLSAxcelis Technologies, Inc.4PElectronic Production Equipment
AGNCAGNC Investment Corp.1XReal Estate Investment Trusts
ALNYAlnylam Pharmaceuticals, Inc1X++Biotechnology
AMDAdvanced Micro Devices, Inc.4P++Semiconductors
AMZNAmazon.com, Inc.4P++Internet Retail
APPSDigital Turbine, Inc.3P++Internet Software/Services
AXNXAxonics Modulation Technologies, Inc.1X++Medical Specialties
AYXAlteryx, Inc. Class A4X+Packaged Software
BAMBrookfield Asset Management Inc. Class A2PInvestment Managers
CHGGChegg, Inc.4X++Miscellaneous Commercial Services
CHWYChewy, Inc. Class A4X++Internet Retail
CNQCanadian Natural Resources Limited4POil & Gas Production
CODXCo-Diagnostics, Inc.1P++Biotechnology
COUPCoupa Software, Inc.4X++Packaged Software
CRMsalesforce.com, inc.4P++Packaged Software
CRWDCrowdStrike Holdings, Inc. Class A1X++Packaged Software
CVNACarvana Co. Class A4X++Specialty Stores
DDOGDatadog Inc Class A2P++Packaged Software
DOCUDocuSign, Inc.4X++Packaged Software
DTDynatrace, Inc.4P++Packaged Software
EDITEditas Medicine, Inc.1X++Biotechnology
ESPREsperion Therapeutics, Inc.3XBiotechnology
ETSYEtsy, Inc.1P++Miscellaneous Commercial Services
EXPIeXp World Holdings, Inc.3P++Financial Conglomerates
FLGTFulgent Genetics, Inc.1P++Medical/Nursing Services
FLWS1-800-FLOWERS.COM, Inc. Class A4P++Internet Retail
FSLYFastly, Inc. Class A4X++Information Technology Services
GRUBGrubhub, Inc.4X++Specialty Stores
HZNPHorizon Therapeutics Public Limited Company3P++Pharmaceuticals: Other
KPTIKaryopharm Therapeutics, Inc.2X+Biotechnology
MPWMedical Properties Trust, Inc.4PReal Estate Investment Trusts
NLSNautilus Inc3P++Recreational Products
NVAXNovavax, Inc.1X++Biotechnology
NVDANVIDIA Corporation4P++Semiconductors
OSTKOverstock.com, Inc.3P++Internet Retail
PBAPembina Pipeline Corporation4POil & Gas Pipelines
PRPLPurple Innovation, Inc.4X++Miscellaneous
PTONPeloton Interactive, Inc. Class A1P++Other Consumer Services
QDELQuidel Corporation1P++Medical Specialties
RNGRingCentral, Inc. Class A4X++Packaged Software
ROKURoku, Inc. Class A4X++Electronics/Appliances
RPAYRepay Holdings Corp. Class A4X++Miscellaneous Commercial Services
SGENSeagen, Inc.1P++Biotechnology
SHOPShopify, Inc. Class A3P++Internet Retail
SPWHSportsman's Warehouse Holdings, Inc.3P++Specialty Stores
SWBISmith & Wesson Brands, Inc.3X++Aerospace & Defense
TBIOTranslate Bio, Inc.1X++Biotechnology
TDOCTeladoc Health, Inc.3X++Hospital/Nursing Management
TEAMAtlassian Corp. Plc Class A4X++Packaged Software
TFCTruist Financial Corporation3PRegional Banks
TWLOTwilio, Inc. Class A4X++Packaged Software
TWOU2U, Inc.4X++Packaged Software
VEEVVeeva Systems Inc Class A4P++Packaged Software
VIRVir Biotechnology, Inc.2P++Biotechnology
VIRTVirtu Financial, Inc. Class A2P++Investment Banks/Brokers
VLDRVelodyne Lidar Inc.1X++Semiconductors
VRTXVertex Pharmaceuticals Incorporated4P+Biotechnology
WWayfair, Inc. Class A4X++Internet Retail
WIXWix.com Ltd.4X++Information Technology Services
WKHSWorkhorse Group Inc.1X++Auto Parts: OEM
WORKSlack Technologies, Inc. Class A4X+Packaged Software
WTRGEssential Utilities, Inc.4PWater Utilities
ZGNXZogenix, Inc.1XPharmaceuticals: Other
ZMZoom Video Communications, Inc. Class A1P++Packaged Software
ZSZscaler, Inc.4X++Packaged Software

Rotation

BUYER’S EDGE
Trend’s still up until it’s not.

Big tech names sold off as value stocks were bid higher on the heels of the presidential election results. You’ve gotta go with what you see instead of what should be. 

INDEXWEEKCLOSECHANGE% CHANGEYTD %
DJIA29479.811156.414.13.3
Nasdaq11829.29-65.94-0.631.8
S&P 5003585.1575.712.211.0
Russell 20001744.0499.886.14.6

Monday’s massive rally lost it’s steam by the end of the day as the S&P 500 closed 1.7% off its high on heavy volume. This mark will serve as resistance, while the 50-day moving average serves as support below.  

Well above average volume makes for a convincing bullish argument. But watch the distribution on the Nasdaq. Market tops are a process more than they are an event. 

Weekly Advancing/Declining Volume NYSE: 1.6, NASDAQ: 1.3
Accumulation/Distribution Count, 20 DaysS&P 500: 4/3, NASDAQ:  4/5
Weekly Advances/Declines, IssuesNYSE: 4.1, NASDAQ:  2.6
New HighsNYSE:   431 (+67%), NASDAQ:  552 (+50%)
New LowsNYSE:  40 (-55%), NASDAQ: 67 (-53%)

We’re heading into traditionally strong time of year. We’re also seeing a lot of short covering. 

Market leadership may be shifting. Let’s watch for new top names to set themselves apart from the pack. So far, we’re seeing healthcare names setup really nicely. 

News from Pfizer (PFE, +6.1%) and BioNTech (BNTX, +15.22%) with their COVID vaccine reportedly more than 90% effective in trials could be a game changer for the economy.

Is this the end of the stay-at-home Covid economy? We’ve seen heavy selling in names like Teledoc (TDOC, -11.19%) and eSports ETF (ESPO, -4.86%), to name just a couple tracked here.  

Consumer spending is strong as evident with small caps having a massive week as the R2K shot 6% higher with Q3 earnings from the S&P 600 topped expectations by 50%. 

TOP DOWN, SECTOR PRICE ACTION & NEWS ANALYSIS

SYMBOLNAME% CHG40EMACHART
XLEEnergy Sector Fund17.11Bucks a downtrend for the week with a powerful move, but still remains in a larger, two-year downtrend. 
XLFFinancial Sector Fund8.29Shot convincingly above its four-month range. Lots of overhead resistance to cool its jets at these levels. 
XLIIndustrial Sector Fund5.43New high, trend up. 
XLREReal Estate Sector Fund5.28Shot convincingly above its four-month range. Lots of overhead resistance to cool its jets at these levels. 
XLPConsumer Staples Sector Fund3.75New high, trend up.
XLUUtilities Sector Fund3.06Approaching new high as it carves the right side of a base.  
XLVHealth Care Sector Fund2New high, trend up.
XLBMaterials Sector Fund1.49New high, trend up.
XLCCommunication Services Sector Fund0.64Approaching new high as it carves the right side of a base.  
XLYConsumer Discretionary Sector Fund0.45New high, trend up.
XLKTechnology Sector Fund-0.31Approaching new high as it carves the right side of a base.  

 Big Tech leadership has cooled. 

 Apple (AAPL, +0.48%), Microsoft (MSFT, -3.22%), and Facebook (FB, -5.61%) have narrowed their +two-month ranges. 

Alphabet (GOOG, +0.87%) bucked the trend as it hit a new high.  

Semiconductors (SMH, -0.41%) closed lower after hitting a new high. We want to see the uptrend stick here as the broader market correlated well with its success. 

Healthcare (XLV, +2%) hit a new high. 

Lots of individual names breaking out and setting up in Biotech (IBB, +2.41%). This theme has been a driving part of this report for months. Nothing new to readers here. 

Cannabis (MJ, -4.32%) closed down for the week after a 27% upside charge last week.  The Biden administration could decriminalized Marijuana at a federal level, and potentially a move to full legalization. 

GSRTRADES

These are the stocks in breakout mode that meet the strict criteria for Growth Stock Trades.

These top names are leadership and will help determine the success of others on our Bases and Lower Bases lists. Strong representation from biotech, cloud computing, stay at home, work at home, software and online retail. 

BREAKOUTS & PULLBACKS

TickerCompany NameTIERDemandIndustry
CDNACareDx, Inc.4X++Medical Specialties
CGCCanopy Growth Corporation3P+Agricultural Commodities/Milling
CRDFCardiff Oncology, Inc.3X++Medical/Nursing Services
CYTKCytokinetics, Incorporated1X++Biotechnology
EXASExact Sciences Corporation1X++Biotechnology
FOLDAmicus Therapeutics, Inc.4X++Biotechnology
FRHCFreedom Holding Corp.3P++Investment Banks/Brokers
FSLRFirst Solar, Inc.4P++Electronic Components
GRWGGrowGeneration Corp.1P++Wholesale Distributors
IIVIII-VI Incorporated1X++Electronic Equipment/Instruments
IPHIInphi Corporation3X++Semiconductors
IRIngersoll Rand Inc.3X+Industrial Machinery
MDBMongoDB, Inc. Class A4X++Packaged Software
NETCloudflare Inc Class A4X++Information Technology Services
NOVASunnova Energy International Inc4X++Wholesale Distributors
NOWServiceNow, Inc.4P++Information Technology Services
NTLAIntellia Therapeutics, Inc.3X++Biotechnology
NTRANatera, Inc.4X++Medical/Nursing Services
OCULOcular Therapeutix Inc1X++Pharmaceuticals: Major
PINSPinterest, Inc. Class A4P++Internet Software/Services
PLUGPlug Power Inc.3X++Electronic Components
RDS.BRoyal Dutch Shell Plc Sponsored ADR Class B4PIntegrated Oil
SNAPSnap, Inc. Class A4X++Internet Software/Services
SQSquare, Inc. Class A1P++Information Technology Services
STNEStoneCo Ltd. Class A4P++Packaged Software
SWAVShockwave Medical, Inc.2X++Medical Specialties
TERTeradyne, Inc.4P+Electronic Production Equipment
XPELXPEL, Inc.4P++Automotive Aftermarket
ZZillow Group, Inc. Class C2X++Information Technology Services

Follow GSRTrades for setups of top names.

Stay safe,

Dan

Corona Drift

Quick Take: Buy Bias. Fed fueled buying ignores weak business and economic data. 

FOR THE WEEK

For all the reasons to sell amidst this coronavirus infected economy, the market just doesn’t.

The market will continue to drift higher until it doesn’t.  

INDEXCLOSECHANGE% CHANGEYTD %
DJIA26671.95596.652.3-6.5
Nasdaq10503.19-114.25-1.117.1
S&P 5003224.7339.691.2-0.2
Russell 20001473.3250.643.6-11.7

Money shifted into value oriented Industrials, Materials and Healthcare this week as the tech gorillas cooled with a pullback. 

Watch for growth stocks as a group to cool off as funds take profits from a legendary rally. Though opportunities still abound for new breakouts. 

Big dividend payers remain a thing. Watch how the Dow doesn’t sell off as hard as the S&P 500 and Nasdaq on down days. Treasuries won’t yield much as the government promises to keep rates low for a couple of years.

Optimism is growing on the covid-19 vaccine front as a collaboration with Pfizer (PFE, +1.15%) and BioNTech (BNTX, +11.21%) received fast-track designation from the FDA.  

Moderna’s (MRNA, +51.49) had reported a positive first phase in its study.  Novavax (NVAX, +48.89%) also continues to receive votes of hope as its stock teared higher for another week.

The market’s V recovery continues to be supported by economic data.  

The trend in job recovery continues, though about a third of the jobs lost during the virus lockdown have been recovered, according to US employment data released Thursday.

As the band plays upbeat, a darker reality threatens with the coronavirus. 

States making up nearly a third of the US economy reported a fearsome uptick in covid-19 cases. California, Texas, Florida and Arizona are taking measures to counter the spread.  

There’s no guidebook for this. We simply don’t know what to expect as the pandemic plays out. 

No one expects year over year earnings for the second quarter to be good. The attention will go to guidance, as usual.

Analysts may have predicted the worst for companies struggling during lockdown, look for surprises, and more importantly the reactions to those surprises.

Big banks reporting earnings largely beat estimates as a group. But uncertainty in the market has led them to reserving more cash for failed loans. 

News reactions were a mixed bag for the six largest banks reporting: Citigroup (C, -4.62%), JPMorgan (JPM, +1.96%), Wells Fargo (WFC, -2.04%), Goldman Sachs (GS, +2.85%), Bank of America (BAC, -3.33%) and Morgan Stanley (MS, +5.24%.)

Lack of participation in this bull market from the financials does not bode well for business. Price action on the Financial sector ETF  (XLF, +2.09%) is not supporting a rosy future as it continues to struggle with mostly sideways chop.

LEADERSHIP

Tech leadership tests its bullish form with sizable drops. Let’s call it profit taking after huge runs since March. 

Facebook (FB, -1.24%), Apple (AAPL, .42%) Amazon (AMZN, -7.44%), Netflix (NFLX, -10.16%) Google (GOOG, -1.7%) Microsoft (MSFT, -5.05%)  

Netflix (NFLX) shares fell 10%, with a bulk of those losses coming after the company issued cautious subscriber guidance at the end of the week.

Gold (GLD, +0.55%) and Biotech (IBB, +3.41) have their breakouts intact. These have been the drivers in the Materials and Healthcare sectors. 

TECHNICALLY SPEAKING

Picture Perfect Breakout Setup
  • The S&P 500 is poised for another breakout as it trends above its major moving averages, just 5% from its 52-week high.
  • NYSE volume was 7% lower than last week as edged out sellers with a 1.2 ratio.
  • Nasdaq volume was 10% higher as buyers prevailed with a 1.7 ratio.
TICKERINDUSTRY ETF% CHG
XLIIndustrial Sector Fund5.87
XLBMaterials Sector Fund5.47
XLVHealth Care Sector Fund5.14
XLUUtilities Sector Fund4.22
XLEEnergy Sector Fund3.24
XLPConsumer Staples Sector Fund2.16
XLFFinancial Sector Fund2.09
XLYConsumer Discretionary Sector Fund0.4
XLREReal Estate Sector Fund0.06
XLCCommunication Services Sector Fund-0.5
XLKTechnology Sector Fund-1.16

GROWTH STOCKS

Buyer’s Bias intact. Opportunities abound.

BREAKOUTS

AEYEAudioEye, Inc.Internet Software/Services
ALNYAlnylam Pharmaceuticals, IncBiotechnology
CHGGChegg, Inc.Miscellaneous Commercial Services
CRSPCRISPR Therapeutics AGBiotechnology
CRWDCrowdStrike Holdings, Inc. Class APackaged Software
IMMUImmunomedics, Inc.Biotechnology
NKNantKwest, Inc.Biotechnology
PAASPan American Silver Corp.Precious Metals
RAREUltragenyx Pharmaceutical, Inc.Biotechnology
RMBLRumbleOn, Inc. Class BInformation Technology Services
SEDGSolarEdge Technologies, Inc.Electrical Products
TNDMTandem Diabetes Care, Inc.Medical Specialties
TTDTrade Desk, Inc. Class AAdvertising/Marketing Services
WRTCWrap Technologies, Inc.Industrial Conglomerates
ZMZoom Video Communications, Inc. Class APackaged Software

BASES

ALBOAlbireo Pharma, Inc.Pharmaceuticals: Other
AXNXAxonics Modulation Technologies, Inc.Medical Specialties
CGENCompugen Ltd.Biotechnology
DRNADicerna Pharmaceuticals, Inc.Biotechnology
EXASExact Sciences CorporationBiotechnology
OCULOcular Therapeutix IncPharmaceuticals: Major
OROsisko Gold Royalties LtdPrecious Metals
OTRKOntrak, Inc.Medical/Nursing Services
STNEStoneCo Ltd. Class APackaged Software
XLRNAcceleron Pharma IncBiotechnology
ZZillow Group, Inc. Class CInformation Technology Services

Control your loses, let your winners run.

Dan

Bio Bull

The Bear put a headlock on the Bull as we head into a traditionally strong pre-holiday week. 

Bias here has gone down to a cautionary Yellow Flag. Recent Growth Stock breakouts are working, though road signs flash warning as the uncertainty of a pandemic looms. 

For the Week: 

  • The S&P 500, -2.42% 
  • The Nasdaq, -2.59%
  • The Dow, -2.84%

Don’t look too much into the selling. Despite two clear distribution days, the bias here won’t shift lower as long as leadership and price action hold up above the major moving averages. 

Technology continues to pull action higher, though most other sectors continue to struggle under the 200-day averages. 

Lighter volume for the NYSE and Nasdaq was’t panic motivated, and was long overdue as a consequence of an “over bought” market. 

The coronavirus battlefront threatens further economic impact. Rising infection and hospitalization rates in some regions will thwart business. To what degree is uncertain.  

The Fed showed concern for banks when Friday it instructed them to preserve capital by putting a hold on buybacks and paying dividends. Continued high unemployment is worrisome, and will need to be resolved before stimulus wears off. 

Another round of government stimulus may very well be in the works, which would be a big boost to market sentiment. 

Next week will be a day shorter as the U.S. celebrates the Fourth of July

It’s window dressing time. Quality names are well bid as being as portfolio managers look to impress customers with their holdings.

Small caps will likely benefit from the annual Russell 2000 realignment on June 29, as well as the 90 day ETF realignment to end the quarter.

The best thing the Bull has going for it is names from the Dow paying dividends four times greater than the 10-year Treasury notes. Smart money will gravitate to this.

LEADERSHIP

The semiconductor index (SMH, -1.87%) is flirting with a failed breakout. Action here is key to the broader market’s direction.

Watch for any weakness in the internet (FDN, -2.01%) and software (IGV, -0.88%) indexes. The Bull has been led from its March lows by these stay at home friendly businesses. Any faltering could pull major indexes in the southern direction that the energy, finance, retail, industrial and transportation stocks have been leaning toward. 

Facebook (FB, -8.32%) and Google (GOOG, -5.65%) took dip down to their 50-day moving averages this week, breaking their upward drifts. 

Meanwhile, this group of stellar tech names continues to hold bullish form: Apple (AAPL, -3.07%) Amazon (AMZN, -2.24%), Netflix (NFLX, -4.83%) and Microsoft (MSFT, -2%.)  

Gold (GLD, +0.45%) remains near highs. The biotechs (IBB, -2%) continue to produce a multitude of growth stock breakouts. See below. 

TECHNICALLY SPEAKING

  • The S&P 500 is lacking a long-term trend as the 50-day moving average tracks slow the 200-day MA.
  • NYSE volume for the week was 5% lighter than last week, and favored the bears with a 0.6 ratio of buyers to sellers. 
  • Nasdaq volume was 15% higher and showed an even 1 ratio of buyers to sellers.
  • Declining issues dominated for the NYSE and Nasdaq with advance/decline ratios of 0.3 and 0.4 respectively. 

GROWTH STOCKS

Growth Stock breakouts are holding, though we’re seeing some erosion in these quality names as fewer appear to be on track for new buy setups. 

Fresh breakouts in biotech show optimism for the industry as the pandemic takes  center role in the healthcare sector. 

Breakouts

PFSIPennyMac Financial Services, Inc.Finance/Rental/Leasing
PLMRPalomar Holdings, Inc.Property/Casualty Insurance
ZMZoom Video Communications, Inc. Class APackaged Software
AMRCAmeresco, Inc. Class AEngineering & Construction
CHGGChegg, Inc.Miscellaneous Commercial Services
IPHIInphi CorporationSemiconductors
TTDTrade Desk, Inc. Class AAdvertising/Marketing Services
VAPOVapotherm, Inc.Medical Specialties
ALNYAlnylam Pharmaceuticals, IncBiotechnology
CGENCompugen Ltd.Biotechnology
IMMUImmunomedics, Inc.Biotechnology
OCULOcular Therapeutix IncPharmaceuticals: Major
CRSPCRISPR Therapeutics AGBiotechnology
CRWDCrowdStrike Holdings, Inc. Class APackaged Software
EXPIeXp World Holdings, Inc.Financial Conglomerates
TWSTTwist Bioscience Corp.Biotechnology
AEYEAudioEye, Inc.Internet Software/Services
RAREUltragenyx Pharmaceutical, Inc.Biotechnology
WRTCWrap Technologies, Inc.Industrial Conglomerates
CDNACareDx, Inc.Medical Specialties
ALBOAlbireo Pharma, Inc.Pharmaceuticals: Other

Bases

NBIXNeurocrine Biosciences, Inc.Biotechnology
NTRANatera, Inc.Medical/Nursing Services
XLRNAcceleron Pharma IncBiotechnology
BYNDBeyond Meat, Inc.Food: Major Diversified
PAASPan American Silver Corp.Precious Metals
TNDMTandem Diabetes Care, Inc.Medical Specialties
STNEStoneCo Ltd. Class APackaged Software
LGIHLGI Homes, Inc.Homebuilding
PAYCPaycom Software, Inc.Packaged Software
DRNADicerna Pharmaceuticals, Inc.Biotechnology
ZZillow Group, Inc. Class CInformation Technology Services
IIPRInnovative Industrial Properties IncReal Estate Investment Trusts
SILKSilk Road Medical, Inc.Medical Specialties
SWAVShockwave Medical, Inc.Medical Specialties
OROsisko Gold Royalties LtdPrecious Metals
AKCAAkcea Therapeutics, Inc.Pharmaceuticals: Major
EXASExact Sciences CorporationBiotechnology
KERNAkerna Corp.Data Processing Services
DRNA: Always good to see strong buy-volume prior to breakout.
PRTK: Another biotech with strong fundamentals in a sound base.

Stay safe,

Dan

Snap Back

Quick Take: Sell Bias. Economic and pandemic uncertainty serve as a backdrop in an election year.  

Dear Market Player:

For the week, the Bull took a one-two hit as sellers took profits amid fears over the world’s health and finance concerns. 

The seemingly overdue selling sent the S&P 500 down -4.78% on institutional grade volume, and the Nasdaq down -2.3% on volume that favored the bulls by a modest margin. 

The week’s heaviest selling came Thursday on the heels of Fed Chairman Jerome Powell’s press conference where he stated raising interest rates wasn’t a consideration given the country’s  economic situation.

The Fed said it doesn’t see the economy returning to pre-pandemic levels until 2022. This year’s GDP may fall 6.5% and unemployment, not at about 13%, may recover to about 9% by the end of the year.  

A resurge in covid-19 cases in places such as Florida, Texas and Arizona reminded the country still has an invisible enemy to reckon with. 

Treasury Secretary Steve Mnuchin said a second quarantine was not an option, though a second round of stimulus checks may be.

A market awash in cash keeps the Bulls perky. They are reassured the Fed has their back as it expects the economy will continue to tick. 

Fund managers in June typically gravitate toward quality stocks as they add the winners to portfolios to impress clients. We’ve seen top dividend vehicles attract bids as bonds lose popularity with low yields. 

The Tech leaders pulled back with the broader market for the week, though still well above major moving averages . They continue to serve as strength in an economy that favors their “do it from home” offerings. FB, AAPL, AMZN, NFLX, GOOG and MSFT. 

New highs encourage from MICROSOFT (MSFT, +0.29%) chip standout Nvidia (NVDA, +0.14%) and eSports ETF (ESPO, +0.89%.) 

The US presidential election November will attract more attention from market pundits in the coming months. The corporate America’s tax structure will have an impact on its outcome. Look for polls as influence to buyers and sellers. 

Evidence of froth persists as low priced stocks have attracted bids, presumably from Robinhood type traders looking for an easy buck. This type of activity from the “lesser informed” has gone hand-in-hand with market tops before. 

NEXT WEEK

Tuesday: Earnings announcement from software maker Oracle (ORCL) and homebuilder Lennar (LEN.) 

Thursday: Earnings announcement from Kroger (KR.)

Friday: Earnings announcement from Carmax (KMX) AutoZone (AZO) and Tesla (TSLA.) 

TECHNICALLY SPEAKING

  • The S&P 500 closed just above its 200-day moving average for the week.
  • Two distribution days gave the Bear and edge for the week. 
  • All sectors posted losses.
  • The least weak were: Tech (XLK, -1.97%, Communications (XLC, -2.50%) and Consumer Staples (XLP, -3.81%)
  • Weakest were: Energy (XLE, -11.2%), Financial (XLF, -9.18%) and Materials (-8.01%)
  • NYSE Volume was 10% higher than last weak with a slightly bearish .8 Up/Dn ratio.
  • Nadaq Volume was 5% higher with a slightly bullish Up/Dn ratio of 1.  
  • The Advance Decline ratios were decidedly bearish with the NYSE at .2 and the Nasdaq at .4.

GROWTH STOCKS

Watch for recent breakouts falling apart. A handful of these happened last week.  This would serve as a caution for potential breakouts.

Homebuilders and REITs setting up in bases. Success here will bode well for the broader market.

Biotechs are holding their bullish patterns.

BREAOUTS

Adobe IncADBESoftware & IT Services
Autodesk IncADSKSoftware & IT Services
Biomarin Pharmaceutical IncBMRNPharmaceuticals
Datadog IncDDOGSoftware & IT Services
Fastly IncFSLYSoftware & IT Services
Livongo Health IncLVGOHealthcare Equipment & Supplies
Neurocrine Biosciences IncNBIXBiotechnology & Medical Research
Trade Desk IncTTDSoftware & IT Services

BASES

Adaptive Biotechnologies CorpADPTBiotechnology & Medical Research
American Homes 4 RentAMHResidential & Commercial REIT
Beyond Meat IncBYNDFood & Tobacco
D.R. Horton IncDHIHomebuilding & Construction Supplies
GSX Techedu IncGSXPersonal & Household Products & Services
Invitation Homes IncINVHResidential & Commercial REIT
ServiceNow IncNOWSoftware & IT Services
Paycom Software IncPAYCSoftware & IT Services
Pinterest IncPINSSoftware & IT Services
Peloton Interactive IncPTONLeisure Products
10X Genomics IncTXGHealthcare Equipment & Supplies

Coming IPO’s from online used car seller Vroom (VRM) and Peter Thiel’s data miner Palantir hope to attract the bids like the recent IPO electric pickup truck maker Nikola (NKLA.)  

Stay safe,

Dan

FauxMo

Quick take: No Bias. Too much uncertainty.

Fear of missing out was the rally cry for many Bulls heading into Friday’s unemployment numbers. But apparently few were able to grasp the unexpected addition of 2.5 million jobs last month, which turbo charged shares even higher with the believe that a V-shaped recovery has been nailed in. 

For the week, the S&P 500 shot up +4.91% and the Nasdaq +3.42%. The buying was large and heavy with all sectors participating. 

The unexpected data miss from the “experts” has raised eyebrows. Perhaps the unfamiliar ground of shutting down the economy coupled with stimulus programs like the Payroll Protection Program has distorted economists visions. Perhaps the government’s history of errors in data plays a roll. 

What is clear is that the economy is mostly open now. What is unclear is how the economy will look when the stimulus runs out. The unemployment rate stands at 13% at them moment, down from 15% before Friday’s announcement. 

Stocks do not offer an attractive risk-reward scenario. Difficult to bet the market will continue to charge higher given valuations and the uncertainty of the economy – as well as the coronavirus.

The Dow, +6.81%, has been a big upside driver for the market as the hunt for yield continues. Dividends pay higher than treasuries. It’s hard to retire. 

Mixed signals with fund flows.:

While discount brokers have reported large inflows, many wealth advisors and fund managers haver reported outflows from stocks and into the safety of bonds. 

Large numbers of block trades Friday may suggest real buying. Funds available from quantitive easing will weigh in as will short covering.

For a change, the market is being led by non-tech names. Tech remains firm, with the FAANG and Microsoft stocks showing strength. But it’s the breadth of the rest of the market that has really stepped in of late. 

We may see some bad earnings reports in the second quarter, though the prospects are better for the second half of the year – IF the coronavirus does’t become a problem again. 

This pandemic market has created winners and losers depending on how well a companies model has allowed them to adjust to quarantines. 

There is always something to be afraid of.

Commercial Real Estate is threatened with with nearly half the rents not paid in May. Starbucks, TJ Max and Ross Store are among those who reportedly did not pay.

Wells Fargo (WFC, +19.64%) pulling back on auto and home equity loans is a concern for the credit market. Rental car company Hertz declaring bankruptcy is also worth taking note of for signs of a trend, or perhaps opening the door for other companies to succeed. 

TECHNICALLY SPEAKING

  • The S&P 500 is trending higher above major moving averages, and is abut 6% away from its February high.
  • NYSE about 25% higher than last week and the Nasdaq 40% higher. 
  • NYSE buy-volume dominating sell-volume by more than 4 to 1, Nasdaq more than 2 to 1. 
  • All sectors advanced, with Industrials (XLI, +7.12%), Consumer Discretionary (XLY, +7.06%) and Energy (XLE, 6.08%) the biggest winners. 

GROWTH STOCKS

Loads of high quality setups. We can see the 5G stocks making bases now, though they’re not qualifying with underlying fundamentals.

BREAKOUTS

Abbvie IncABBVPharmaceuticals
Autodesk IncADSKSoftware & IT Services
A. O. Smith CorpAOSMachinery, Equipment & Components
TopBuild CorpBLDConstruction & Engineering
Biomarin Pharmaceutical IncBMRNPharmaceuticals
Deckers Outdoor CorpDECKTextiles & Apparel
Danaher CorpDHRHealthcare Equipment & Supplies
Epam Systems IncEPAMSoftware & IT Services
GoDaddy IncGDDYSoftware & IT Services
Acushnet Holdings CorpGOLFLeisure Products
Howmet Aerospace IncHWMMetals & Mining
Horizon Therapeutics PLCHZNPPharmaceuticals
Lowe’s Companies IncLOWSpecialty Retailers
Livongo Health IncLVGOHealthcare Equipment & Supplies
Paycom Software IncPAYCSoftware & IT Services
Pool CorpPOOLLeisure Products
Thor Industries IncTHOLeisure Products
Trade Desk IncTTDSoftware & IT Services
UnitedHealth Group IncUNHHealthcare Providers & Services
Slack Technologies IncWORKSoftware & IT Services
Williams-Sonoma IncWSMSpecialty Retailers

BASES

American Airlines Group IncAALPassenger Transportation Services
Avantor IncAVTRHealthcare Equipment & Supplies
Brunswick CorpBCLeisure Products
BWX Technologies IncBWXTAerospace & Defense
Beyond Meat IncBYNDFood & Tobacco
Charter Communications IncCHTRMedia & Publishing
D.R. Horton IncDHIHomebuilding & Construction Supplies
DaVita IncDVAHealthcare Providers & Services
Floor & Decor Holdings IncFNDSpecialty Retailers
Heineken NVHEIABeverages
Hologic IncHOLXHealthcare Equipment & Supplies
J B Hunt Transport Services IncJBHTFreight & Logistics Services
Manhattan Associates IncMANHSoftware & IT Services
Microsoft CorpMSFTSoftware & IT Services
Cloudflare IncNETSoftware & IT Services
ServiceNow IncNOWSoftware & IT Services
Peloton Interactive IncPTONLeisure Products
SiteOne Landscape Supply IncSITEFood & Tobacco
Stericycle IncSRCLProfessional & Commercial Services
Atlassian Corporation PLCTEAMSoftware & IT Services
10X Genomics IncTXGHealthcare Equipment & Supplies
Ubiquiti IncUICommunications & Networking
VMware IncVMWSoftware & IT Services

The stock market has not reacted to the protests and riots across the country. That shouldn’t be a sign of uncaring, only that it doesn’t appear to be taking away from business. Many companies have stepped up and donated for the sake of ending racism.

Society will ultimately be better for all of this. As Martin Luther King said, “riots are the language of the unheard.” Hopefully a lot of listening will take place as response.

There will come a day where people are only seen by their good actions and bad actions. Skin color and culture will be irrelevant in the true judgment of a person.

Stay safe,

Dan

Up And Away

Quick Take: No Bias. Uncertainty remains, though you can’t fight the Fed. 

Never count out American optimism. People want to get back to normal. Rockets and riots aside, this market continues to find buyers. 

The S&P 500 rose 3% for the week and is 11% off its 52-week high. The Nasdaq rose 1.77% and is down less than 4% from its high in February.

Scores of setups from growth stocks with new highs from top earners and issues ready to breakout to new highs. Forecasts from companies benefiting from the changed economy are bright. 

All of this upside has happened with a Sell Bias, which has now turned Neutral.  Uncertainty over the true economic damage as well as the future course of the coronavirus keeps vision cloudy.  

Clearly, the government stimulus is looking like a savior at this juncture. The big question is will the money outlast the coronavirus?

Dow stocks paying good dividends were in favor this week as subtle profit taking from tech stocks took place. 

Surprising economic data with consumer confidence up for April, as were new home sales. Personal savings also rose a record 33%. 

President Trump won’t likely want to risk letting the stock market to flounder in an election year. Though tensions with China, and potential interference with trade remain a major threat to the market. 

LEADERSHIP

FAANG Stocks keep their leadership intact with strong, bullish chart patterns, though none hit new highs for the week. 

New highs are just a shot away with basing patterns from Apple (AAPL), (GOOG) and Microsoft (MSFT)  

TECHNICALLY SPEAKING

  • The S&P 500 regained its 200-SDMA with a solid four closes above the mark for the week. 
  • All sectors were positive for the week.
  • Advancing volume ruled for the second week in a row for the NYSE and Nasdaq.
  • A touch less broad than last week, the rally experience just a little fewer advanced and new highs. 
  • Near 52-week highs and relatively strong since the March lows are Gold (GLD, -0.18%), Healthcare (XLV, +3.40%) and Technology (XLK, +1.53%) Sectors were well bid. 
  • Sectors lagging below major moving average with relative weakness are Real Estate (XLRE, +5.96%) and Industrials (XLI, +6%. s)

GROWTH STOCKS

Novavax (NVAX, -0.15) stays alive with its breakout. Sell-volume has been lighter than buy-volume, giving hope to this stock that’s doubled since we first mentioned it a few weeks ago. 

Many believe we could see multiple coronavirus vaccines ready by the end of the year as more than 100 vaccines are in development.  

Though any success with a vaccine might not mean the end of the coronavirus. Vaccines for the flu only work half the time. 

BREAKOUTS

Biomarin Pharmaceutical IncBMRNPharmaceuticals
Charter Communications IncCHTRMedia & Publishing
Acushnet Holdings CorpGOLFLeisure Products
Cloudflare IncNETSoftware & IT Services
Pool CorpPOOLLeisure Products
Atlassian Corporation PLCTEAMSoftware & IT Services
Williams-Sonoma IncWSMSpecialty Retailers

BASES

A. O. Smith CorpAOSMachinery, Equipment & Components
Avantor IncAVTRHealthcare Equipment & Supplies
TopBuild CorpBLDConstruction & Engineering
Beyond Meat IncBYNDFood & Tobacco
Deckers Outdoor CorpDECKTextiles & Apparel
D.R. Horton IncDHIHomebuilding & Construction Supplies
DaVita IncDVAHealthcare Providers & Services
Epam Systems IncEPAMSoftware & IT Services
GoDaddy IncGDDYSoftware & IT Services
J B Hunt Transport Services IncJBHTFreight & Logistics Services
Manhattan Associates IncMANHSoftware & IT Services
Microsoft CorpMSFTSoftware & IT Services
SiteOne Landscape Supply IncSITEFood & Tobacco
Thor Industries IncTHOLeisure Products
Ubiquiti IncUICommunications & Networking
UnitedHealth Group IncUNHHealthcare Providers & Services

TOP 10 ETF’s As Ranked By New 52-Week Highs

First Trust Cloud Computing ETF (XNAS:SKYY)
Invesco Dynamic Software ETF (ARCX:PSJ)
First Trust NASDAQ Cybersecurity ETF (XNAS:CIBR)
Invesco Dynamic Networking ETF (ARCX:PXQ)
Amplify Online Retail ETF (XNAS:IBUY)
VanEck Vectors Video Gaming and eSports ETF (XNAS:ESPO)
Invesco NASDAQ Internet ETF (XNAS:PNQI)
Global X Social Media ETF (XNAS:SOCL)
Global X Future Analytics Tech ETF (XNAS:AIQ)
SPDR S&P Health Care Equipment ETF (ARCX:XHE)

This weekend’s launch of the combined SpaceX and Nasa rocket marks a turning point in the space industry where the private sector becomes involved. Perhaps as pivotal as when the government handed over the Internet to the private companies. 

SpaceX spent $400 million to develop its Falcon 9 rocket, about a tenth of what it costs Nasa. 

Stay safe,

Dan

Beach Ball

Quick Take: Sell Bias. Uncertainty in with a low Risk/Reward environment.

Dear Reader:

Stocks drifted higher for the week, like a beach ball catching a warm breeze of hope into the Memorial Day weekend.  

For the week, the S&P 500, +3.20% and the Nasdaq, +3.44% experienced broad-based buying on lighter volume, driven largely by some of sectors that have been the weekest from the past few weeks.

Trend Watch

COVID-19 is on the decline across the US, for the moment. New hospitalizations have dropped by 50% in the last 30 days, and deaths continue to decrease week over week. Though caution is due as the numbers have only plateaued for Los Angleles, Chicago and Washington DC.

States continued to re-open their economies at varied paces. Estimates are too fuzzy to take faith in. Most believe it will be another year for recovery of jobs and earnings lost.  

Pick your pattern: V-L-E-U-M-A. Stocks have put in a V pattern recovery off their bottom last month. The debate is wether or not it will mirror the economic recovery.  

Central banks around the world don’t have much room to lower rates. US Treasury Secretary Steven Mnuchin said the economy may experience “permanent damage” if quarantine rules stay in place for too long.

Chinese oil demand has returned. The leading commodity price index, the CRB, which includes oil, is down nearly a third since February. Economic bellwether Copper continues to weigh it down with low demand.  

Signs of commercial real estate weakness should be watched as the sectors deals with a changing economy. Stay-at-home workers may be the new trend, which if so, may lead to businesses wanting smaller footprints with their properties.  

So far, most commercial real estate REITs have reported being stable, according to trade group Nareit. Apartment REIT rent collections in May held at 95% to match April collections. Office real estate reported collections 92%, down 1% from April. 

Shopping center REITs have been the hardest hit as owners report collecting on just under half of their rents.  Grocery and drug stores have propped up free-standing retail REITs as the sector reported receiving 70% of rents for April and May. 

Four large retailers have declared bankruptcy during the pandemic: JCPenney, Neiman Marcus, Pier 1 and True Religion all declaring bankruptcy. 

Leaders

Amazon stock (AMZN, +1.12%) hit an all time high this week as its sales have ramped up during the quarantine. The Retail sector (RTH, +2.15%) closed the week just shy of an all time high, driven primarily from large online sellers like

Facebook (FB, 11.40%) hit an all-time new high after announcing its new online shop service, which will allow merchants to use their existing e-commerce sites into Facebook more easily. The company will collect on transaction revenue as well as more traffic for the company as its advertising has taken a blow. 

Companies that cater to the stay-at-home crowd with strong balance sheets are being rewarded. Big Tech market value now makes up 24% of the S&P 500 index, a gain of three percentage points higher than before the crisis. 

Fake meat maker Beyond Meat (BYND, +1.97%) reported its first-quarter revenue doubled from a year ago as the concept gains in popularity. 

The plant-based meat industry reported sales up 280% for March compared to a year ago. Sales are expected to double to more than $25 billion in the next five years. Still they only make up one percent of conventional meat sales. 

Major food makers including Tyson Foods (TSN), Kellogg (K) and Con Agra (CAG) have been developing their own products. 

Technically Speaking

  • S&P 500 Price action spent another week inching toward its 200-DMA
  • The 50-day SMA has turned north, though has a ways to go before any cross with the 200-day 
  • NYSE and NASDAQ action favored the bulls on all measures: volume, new highs, and advances.
  • Recently hot Biotech (IBB, +0.82%) slowed its pace, while Gold (GLD, -0.44%) and Gold Miners (GDX, -2.79%) pulled back from new highs for the week. 
  • Beaten sectors rallied Industrials(XLI,+7.37%) and Real Estate (XLRE, +5.55%) Energy (XLE, +6.92%)
  • Healthcare, -0.80%, was the only sector down for the week, while Consumer Staples was near breakeven, +0.14%.

BREAKOUTS 

BioCryst Pharmaceuticals Inc BCRX Biotechnology & Medical Research
Electronic Arts Inc EA Software & IT Services
ETSY Inc ETSY Diversified Retail
Fate Therapeutics Inc FATE Biotechnology & Medical Research
Glu Mobile Inc GLUU Software & IT Services
NetEase Inc NTES Software & IT Services
Novavax Inc NVAX Biotechnology & Medical Research
Ultragenyx Pharmaceutical Inc RARE Biotechnology & Medical Research
Schrodinger Inc SDGR Software & IT Services
Atlassian Corporation PLC TEAM Software & IT Services
2U Inc TWOU Software & IT Services
United Therapeutics Corp UTHR Biotechnology & Medical Research
Vertex Pharmaceuticals Inc VRTX Biotechnology & Medical Research
Wix.Com Ltd WIX Software & IT Services
Acceleron Pharma Inc XLRN Biotechnology & Medical Research
Zynga Inc ZNGA Software & IT Services
Zynex Inc ZYXI Healthcare Equipment & Supplies

BASES

Lots of basing patterns out there. Here’s a handful of top quality stocks in hot industry groups.

ACADIA Pharmaceuticals Inc ACAD Biotechnology & Medical Research
Autodesk Inc ADSK Software & IT Services
Advanced Micro Devices Inc AMD Semiconductors & Semiconductor Equipment
Biomarin Pharmaceutical Inc BMRN Pharmaceuticals
Amicus Therapeutics Inc FOLD Biotechnology & Medical Research
Gravity Co Ltd GRVY Software & IT Services
Nautilus Inc NLS Leisure Products

Amicus Therapeutics Inc. (FOLD, +9.31%)

  • Setup tight in a ten-month base, this Biotech is part of a hot sector.
  • Solid revenue, accumulation make it attractive.
  • Recent breakout from sector with Fate Therapeutics (FATE) could be the trailblazer for it.

Use your stops, play it safe.

Dan

All Talk

Quick Take: Sell Bias. There’s too much uncertainty in the market and markets hate uncertainty. 

Dear Readers:

Lots of heavy talk from leaders with relatively little reaction from stocks this week.

For the week, the Nasdaq, -1.17%, and the S&P 500, -2.26%, closed above their 20-day moving averages. Broad based selling came with higher than average volume creating churning.

The market is looking for signs of economic recovery as the world continues to slowly re-open from coronavirus quarantines.

Neither Fed Chairman Jerome Powell, who said, “the recovery may come more slowly than we would like, nor top White House infectious disease expert Dr. Anthony Fauci had much to offer in optimism.

There’s solid reason to sell. Famed market players including David Tepper, Stanley Druckenmiller and Carl Icahn have voiced their opinions of an overvalued market.

Reasons to buy are overall less convincing, though explain the run up in select stocks that have been pulling the market higher. Investors don’t buy on GDP predictions as much as they do earnings guidance.

The government has pumped more than three trillion dollars into the system, and unlike the financial crisis where rescue funds shored up reserves for balance sheets. This money going to circulate more throughout the economy.

Companies offering products and services compatible for staying at home are being rewarded, as are big stores that have stayed open as they take business that would have otherwise gone to smaller businesses forced to close.  

Technology shares remain a bright spot. The trend here is stay-at-home products and services, which is right in tune with the tech giants that have been leading stocks higher.

Amazon (AMZN) +1.27%, Apple (AAPL) -0.78%, Microsoft (MSFT) -0.82%, Netflix (NFLX) +4.28%, Google (GOOG) -1.09%. 

Biotech, $BTK +2.38% continues its advance out of a twenty-month-long base as funding pours in for remedies against coronavirus. Biotechs are coincidently the most shorted sector, followed by financial and healthcare. Don’t let that sway you – the herd often gets slaughtered. More on individual $BTK names below. 

The commodity Gold, GLD +2.19%, as well as Gold Miners, GDX +4.91%, also push to new highs as investors seek security from uncertainty. 

Earnings guidance remains a rarity given the too many unanswered questions for the rest of the year. There were no major earnings surprises for the week.

Economic data was predictably poor for the week. Most notably, retail sales fell more than 16% in April, which was more than expected as well as a record. 

Economic forecasts, though often wrong, will likely serve even less useful as economists surely can’t predict the coronavirus as well. 

Potential game changers include: Any positive news regarding coronavirus drug treatment. US tensions with China remain a threat to the market. 

Key Earnings announcement next week from: Nvidia (NVDA), which charged higher after breaking out last week, Walmart (WMT), Target (TGT) Home Depot (HD) Lowes (LOW)

TECHNICALLY SPEAKING

  • The S&P 500 is moving sideways below its 200-day SMA and above its 50-day SMA, a common experience after a quick rebound from a sharp sell-off as bulls and bears have been slaughtered.
  • Volume for the week tilted to the Bears with NYSE declining at +17B and advancing at +10B 
  • Overall volume pattern gives and edge to the Bears with three clear Distribution days in the past month. 
  • NYSE decliners, 2,538, beat out advancers 498.
  • There were 130 new lows and 73 new highs. 

GROWTH STOCK ACTION

Stock selection for this report focuses only on high quality companies that actually make money and are part of strong trending industry groups.

This week we have a selection of names from the Biotech, Software and Online Gaming groups. 

HIGH QUALITY BREAKOUTS

Novavax, Inc. (NVAX) is in the midst of a breakout while setup in a new multi-year base. This maker of a promising flu vaccine is also experiencing attention for its experience with developing a vaccine for the coronavirus. 

Its price has doubled since first mentioned on this report last month. 

Also in Breakout Territory Are:

ZYXI,ZNGA,WIX,VRTX,TWOU,TEAM,SE,RGEN,NVAX,NTES,NLS,GLUU,FOLD,ETSY,CAPR

HIGH QUALITY BASES

ACAD,AMD,AMGN,BMRN,CVM,DVA,FATE,GIGM,GRVY,PSTI,RARE,ROKU,SDGR,UTHR,XLRN

LAST WORDS

Perhaps online trading has taken over as an American pastime. E-Trade and Ameritrade reportED three times as much trading compared to a year ago. 

The founder of Barstool Sports has transformed into a day trader and is having his time in the financial media – reminds of characters in online brokerage commercials in the tech bubble era at the turn of the century.

Could these characters be responsible for the run-up in stocks?

Stay safe,

Dan

Melt Up

Dear reader,

Stocks are hot as the world economy re-opens. 

While the re-opening of businesses will come slowly, in stages, the stock market has wasted no time taking back lost ground for the year. 

Technology shares drove the week’s action as the Nasdaq roared 6% for higher to mark a 1% gain for the year.  The S&P 500 is down 10% for the year.

Fear of missing out on a new bull market, FOMO, became a theme this week. Last week it was short covering. Who wants to fight the Fed?

Some traders feel the Federal Reserve has put a floor on the market. There’s lots of money out there, and it doesn’t appear to be fleeing the market. 

The Bears are sticking to the notion that bear markets always have rallies that get everyone feeling good, like we’re in a new bull market. To this cause, the path of least resistance remains down as markets don’t do well with uncertainty, and there’s plenty of that at hand. 

China and Japan offer hints of what the US might expect post-quarantine. The Chinese have showed reluctance to resume normal life as restaurants and travel have not resumed to pre-virus levels. In Japan, an uptick in cases after quarantine has triggered a second round of lockdowns.  

Companies benefiting from social distancing have pulled indexes higher, including market flagships Amazon (AMZN), Netflix (NFLX), Microsoft (MSFT), Google (GOOG) and Apple (AAPL),  

Other hot spots include biotechnology, healthcare, high quality dividend payers and foreign stocks whose economies opened. Stocks may also be seen as a hedge against potential inflation with unprecedented money printing by the government. 

Meanwhile, major carnage in finance, retail, energy, industrials and travel related stocks threatens to become leadership to the downside if the bear returns.

There have been a number of positive first quarter earnings reports, especially from tech names. But first quarter numbers do not represent the full impact of the economic shutdown which started in its last two weeks. 

In the coming weeks second quarter earnings will be the focus, and are feared to be the worst of the year. Many feel a bounce back will occur in the third quarter.

About a third of the companies in the S&P 500 that report earnings have refused to give guidance given the unprecedented environment. Goldman Sachs expects S&P 500 earning to be off by a third for the full year. 

The S&P 500 fell 35% from its February hight to its March low, which matches exactly that an average bear market. The big question is whether or not the stock market losing a third of its value this year is an accurate reflection of future earnings.

The hope is that we’ve hit bottom. The market looks like its anticipating a V-shaped economic turnaround, which is hard to imagine happening given the horrendous economic data. 

So far, the market doesn’t care that economic data is at its worst since the Great Depression of the 1930’s. April’s unemployment report showed more than 20 million jobs lost. That’s the size of the state of New York. 

The good news is the unemployment report is a lagging indicator. More than a fifth of the 23 million jobless are classified as temporary rather than permanent.

US relations with China will likely play on market sentiment in the coming weeks. Threats of, and actual punishment to China for its behavior during the early days of the virus outbreak will be a headwind indexes, while talk of resuming trade talks may boost them. 

Trump wants a strong stock market heading into the November election. 

Technically Speaking

  • The S&P 500’s 3.5% climb for the week gives it a solid close above its 50-day moving average. But it wasn’t enough to take out last week’s high.
  • The 50-day averages are key. Any firm close below will assert the Bear’s cause. 
  • Bulls take the volume edge for the week, with two accumulation days to zero distribution days on the S&P 500 and Nasdaq.

Breakouts are happening. Upside momentum on the major indexes coupled with a boost in business for the newly strong stay-at-home market is rewarding companies with strong fundamentals.  

Recent Breakouts from eBay (EBAY), from a multi-month base, Etsy (ETSY) and Peloton (PTON) are just a few of many we’ve seen. 

Continued strength from Biotech is evident with the iShares Nasdaq Biotechnology Index ETF (IBB) approaching its 2015 high. 

Gilead Sciences (GILD) slipped 3% for the week as it flirts with a failed breakout. The company’s Covid-19 drug remdesivir is now shipping to hospitals. 

Many of bases are in the process of being formed, though few meet the strict criteria of our fundamental standards. 

The Trade Desk Inc. (TTD) is a top candidate as it technically broke out Thursday, though is still within acceptable range of its buy-point. 

The company’s cloud-based technology gives its customers the ability run digital ads via video, audio on multiple platforms. Fundamental year over year highlights include 33% quarterly revenue growth, 137 earnings growth and 22% return on equity. 

Many, many other opportunities are lining up. Many of which will hinge on broader market strength.

Also, Corona beer sales strong, according to its parent company Constellation Brands (STZ). Unfortunately, it does not meet our strict fundamental criteria for buys. 

Be lucky,

Dan

Erasure Bear

Dear Readers:

Friday we kicked off May trading with a broad sell-off on the major indexes, erasing gains made earlier in the week. Lack of volume shows less fervor for the Bears.

The month of April proved to be the best for the S&P 500 since 1987 as it rocketed up 12.7%, cutting its loss for the year to 10%.

The Coronavirus appears to be slowing. States are either re-opening or making plans to do so. All great news minus the fear of infections with a second wave which will persist until a vaccine is available.

Heavy-handed short covering has fueled upward momentum. This rally off the March low doesn’t look any different than a bear market rallies following similar steep sell-offs.

Buyers are more concerned with going against the government’s massive stimulus than focussing on the usual fundamentals.

Unfortunately, economic carnage from stay-at-home orders is feared to be among the worst the United States has seen, though only time will tell. First quarter GDP fell 4.8%, but the second quarter is estimated to have a 30% to 40% drop, with full year GDP expected to contract 4% to 5%. 

Widespread struggling among companies will continue. Earnings are expected to fall more than 15% for the first quarter. More than 30 million people have lost their jobs in the last six weeks. 

Quarterly reports from the digital heavyweights showed some resilience with sales and are poised to do well with their work-from-home products. Thought future guidance was lacking.  

Apple (AAPL), +2.16%, showed resilience with iPhone sales, though declined to give guidance. Google (GOOG), +3.23%, had better than expected revenue, search biz stable, cloud biz more appealing to CEO’s, work at home. Microsoft (MSFT), +0.01%,reported it was alive and well, a boost from its XBox home video game a highlight. 

Pandemic success Amazon (AMZN), -5.15%, said it would spend its $4B profit to help protect its workforce from Covid-19, including $1B for in-house testing. While its cloud business slowed, its video conference, gaming and entertainment picked up. Amazon’s stock is up more than 50% since its March low.

Technically Speaking

  • The S&P 500 holds above its 50-day simple moving average. 
  • Volume patterns continue to favor the bulls, though it may be short covering and stimulus related rather than truly committed buyers. Six clear Accumulation Days have been notched in since the March low, where the Bears have failed to notch in a single Distribution Day

Small caps are showing relative strength with the S&P Smallcap 600 up 3.48% for the week. Materials and Energy were big gainers here, a sign of optimism as the larger companies have been seen as safer for investors compared to the riskier, more leveraged small companies.

The market will become more selective over stocks with a flight to quality. Growth stocks prefer bull markets to move them higher. Few from this group tend to do well when the trend is down.

The Nasdaq Biotechnology Index (IBB) fell 4% and back below its breakout base line as it put the breaks on a strong rally that began mid-March. The sector remains in the spotlight with hopes of a remedy and cure for the virus. 

Gilead Science’s (GILD), +0.39%, Remdesivir showed positive testing results with about a thousand Covid patients, reducing their hospital stays by about four days on average to 11. Any hint that they’re on the right track with this could serve as a base for other drugs.

Intact breakouts in biotech include Cel-Sci Corp. (CVM), United Therapeutics Corp. (UTHR), Repligen Corp. (RGEN), Bio-Techno Corp (TECH) and Vertex Pharmaceuticals (VRTX.)

Heavyweight Amgen (AMGN) looks to be tested with its breakout, failing is BioMarin (BMRN.)

The economy is changing. It may be rough sledding at the moment, though we will come out of it stronger and better. This report will have much to say on trends shaping our lives and investments. There’s loads of opportunity. 

And, there’s plenty of chicken to make up for a decline in red meat. 

Good luck out there,

Dan