Nine Stocks I'm Watching With Warning Signs of a Short-Term Market Top
Here's what is making me more cautious and how I plan to navigate the environment.
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My approach to market timing is to be reactive to changing market conditions rather than try to anticipate when a change may occur. The line between reaction and anticipating isn’t always very clear. There is no avoiding some level of prediction regardless of your approach.
I’m seeing some warning signs in the action that is making me more cautious.
First, we have seen a reversal in rotation action back into big-cap technology and Magnificent Seven MAGS names. The Russell 2000 IWM hit a high on the Monday before Thanksgiving and has been trending slightly lower, while the Nasdaq 100 QQQ has gone in the opposite direction and is hitting a new all-time high on Wednesday morning.
Second, breadth has been running weaker and the market has become narrower on the backs of fewer big-cap names. This action can continue for a while, but if it does, it will suck up capital from the rest of the market. The Nasdaq 100 is already technically extended, and the gap that was created on Wednesday morning will now be key support. If it starts to fill, then it is likely to fill totally and trigger quick profit-taking.
The main thing I’m watching for is an intraday reversal in the indexes and a close near the lows. That would be the sort of price action that will trigger more profit-taking.
This toppy action is occurring in tandem with an appearance by Fed Chair Jerome Powell on Wednesday. If the market wants to correct, it will likely use Powell as an excuse. There is also jobs news on Friday, and that could also be a good excuse if it impacts the odds of a quarter-point cut later this month.
I’m not bearish, but I’m looking to navigate short-term volatility so that I can focus on buying some of my favorite names at better entry levels. A few that I’m watching are ADMA Biologics ADMA, AST SpaceMobile ASTS, BridgeBio Pharma BBIO, Cipher Mining CIFR, Delcath Systems DCTH, Dell Technologies DELL, Bitcoin Trust ETF IBIT, Mereo BioPharma Group MREO, and Sensus Healthcare SRTS.
I’m in no rush to buy, and an intraday reversal would actually be a good thing for entries.
At the time of publication, Rev Shark was long ADMA, ASTS, BBIO, CIFR, DCTH, DELL, IBIT, MREO and SRTS.
