After just a one-day pullback, stocks located the winner's circle again on Wednesday, as growth titles continue to outpace value names.
Every bull market needs a certain amount of speculative sentiment in order to thrive. Investors need to take chances. The speculative sentiment is, and has been, on a boil. This can be seen by an outperforming growth sector and a buoyant new-issue market.
The market is not without its negatives, though. A lack of breadth is seen in the woefully low 27% of NYSE stocks above their 200-day moving average. This compares with the much-better 61% level shown at this stage of the 2019 bull market. This despite the stout NYSE advance-decline line, which is actually holding up better than the S&P 500 itself.
The other minus is the lagging financial groups, such as the banks, brokers, and insurers.
While breadth and the financials are more long-term signposts than intermediate-term indicators, they are worth being aware of. They do not, however, take the place of the averages and leaders as our primary two indicators for intermediate-term speculation.
The gold mining group has been coming on recently. This occurs as gold futures hit a high of $1,829 the ounce, a figure not seen since '11. Two of our Focus List ideas, Pan American Silver (PAAS) and SSR Mining (SSRM), broke out today. A third, Wheaton Precious Metals (WPM), is discussed below, and is inches from its entry pivot. It is to be noted that this is a volatile group and thus higher risk. The stocks should be allowed plenty of room to do their thing.
Overall, we are 16 weeks into this bull market that began Mar. 23 amid worries over the coronavirus and its effect on the economy. As recently noted, Bill O'Neil has said that breakouts in emerging leaders generally occur for the first 13 weeks after a follow-through day. The Nasdaq's Apr. 6 follow-through occurred about 14 weeks ago.
Thus, it would be expected that the number of pattern setups begins to dwindle in the absence of a pullback in the averages. As it turns out, most of the leadership has already come out of basing patterns and is extended in price. As a result, there are just five actionable names discussed below and on our Focus List.
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Arcturus Therapy Holdings (ARCT)
Bill.com Holdings (BILL)
Wheaton Precious Metals (WPM)
Zoominfo Technologies (ZI)
In sum, while the averages are in good shape, the supply of pattern setups has dried up for the moment. This has occurred at other points during this bull market and has remedied itself in short order. A pullback, while seldom welcome, would not be the worst thing in the world.
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All stock charts created using MarketSmith unless otherwise noted. ©2020 MarketSmith, Incorporated. All other charts created using TradeStation. ©2001-2020 TradeStation Technologies. All rights reserved.
The views contained herein represent those of Marder Investment Advisors Corp. At the time of this writing, of the stocks mentioned in this report, Marder Investment Advisors Corp., Kevin Marder, or an affiliate thereof held positions in PAAS and SSRM, though positions are subject to change at any time and without notice. Estimate data provided by FactSet. Expected earnings release dates provided by EarningsWhispers.