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Rally Doesn’t Falter; Gains Strength Into the Close

Jim Giaquinto

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When the market moved higher to start Tuesday’s session, you were probably thinking: “here we go again!” During this horrible month, we’ve seen plenty of rallies fail to make it to the closing bell. The most recent example was just yesterday.

But not today!

Not only did the market hold onto the morning runup and finish in the green, but it even accelerated into the close. That’s something we haven’t seen a whole lot of this month as we wrestle with rising rates, trade, the latest tech wreck, fears of a slowdown in growth, and an overall bad mood among investors.

The Dow climbed 1.77% (or about 431 points) to 24,874.64. The S&P jumped 1.57% to 2682.63. The Russell 2000 experienced the worst plunge during the correction, but today had the best performance by soaring nearly 2%.

The NASDAQ has gotten most of the attention during this downturn as the once tried-and-true tech sector slipped from its perch as market leader. On Tuesday, though, the index participated in the rally and improved 1.58% to 7161.65. All of the FANGs were on positive ground except for Amazon, which still seems to be paying for missing revenue expectations in its report last week.

Speaking of missing on the top line, the big news on Tuesday was Facebook’s quarterly report after the bell. In what has become almost standard for the FANGs this earnings season, the social media giant easily beat earnings expectations but fell short with revenues. It was also a little light on active users. As of this writing, shares of FB are right about breakeven afterhours, hopping between small gains and small losses. It was still a strong report, but strong reports have not been faring well in the market this earnings season. Maybe today’s rally marks a change in tone heading into November. We’ll see tomorrow...

Has the market finally hit bottom? This month has seen too many head fakes to make any predictions with confidence. Plus, it would be smart to wait and see what Apple has to say on Thursday before getting too giddy. But we can certainly hope that as this disastrous month of October comes to an end, so too will the worst of this correction.

Today's Portfolio Highlights:

Counterstrike: Are the bulls going to “wake up” in the next few days? Jeremy is making a bet that they will by adding 5% allocations in each of these names:

• Coupa Software (COUP)
• Corning (GLW)
• Advanced Micro Devices (AMD)

COUP and GLW both pulled back despite strong quarters. Meanwhile, AMD is actually a Zacks Rank #3 (Hold) from the beaten-down semiconductor space, but the editor believes it is poised for a big rebound. Read the full write-up for a lot more on these buys.

Momentum Trader: The great thing about pullbacks are the opportunities that they open. Dave sees one such opportunity with MCBC Holdings (MCFT), the Zacks Rank #1 (Strong Buy) maker of MasterCraft boats. Shares were on the rise after a solid quarterly report, but then pulled back during the market selloffs. Since then, it found support just above its 200-day moving average and seems set for a bounce. The editor plans to take advantage of this momentum by adding MCFT with a 12.5% allocation. Read the complete commentary for more.

Insider Trader: It’s only been about two years since At Home Group (HOME) went public, so you wouldn’t expect to see a lot of insider activity since all of the original investors got shares. However, this small-cap home furnishings retailer did see a director buy 10,000 shares last week. Apparently, this insider considers the stock’s 15.8% drop year-to-date to be a buying opportunity for the future. So does Tracey, who added HOME on Tuesday with a 10% allocation. Get more specifics in the complete commentary.

TAZR Trader: This correction has been hard on everyone, but none more so than the Russell 2000. The small-cap index dropped approximately 16%. However, it has managed to stay above 1470 for the past several days and has been forming a nice bottom structure in its chart. Kevin expects it could finally move higher, so he bought a 10% position in Russell 2000 Small Cap 3X Bull ETF (TNA). (NOTE: the editor warns that this is an aggressive, short-term trade that fits for this portfolio because it has relatively low long equity exposure.)

But that wasn’t all. In another bullish move, Kevin also bought a 10% position in ProShares UltraPro QQQ 3X Bull ETF (TQQQ), which is a favorite of the portfolio when taking advantage of an expected bounce. For right now, it looks like the downward momentum has stopped and that the Amazon panic selling is over. See the complete commentary for more on these moves and the editor’s outlook.

Surprise Trader: Earnings season continues regardless of which way the market moves, so Dave has no intention of sitting on the sidelines and waiting for the tide to turn higher. Instead, he added Telephone & Data Systems (TDS) on Tuesday with a 12.5% allocation. This Zacks Rank #1 (Strong Buy) telecom company has an impressive Earnings ESP of 22.3% for the quarter coming before the bell on Friday. See the full write-up for more.

Zacks Short List:
This portfolio was made to take advantage of rough times in the market. Therefore, it's not much of a surprise that the four names short-covered this week are all positive, including two double-digit winners. The stocks that left the service today include:

• Tencent Holdings Ltd. (TCEHY, +27.65%)
• Etsy, Inc. (ETSY, +21.83%)
• Newmont Mining (NEM, +4.34%)
• QUALCOMM (QCOM, +3.25%)

The new buys that replaced these names are:

• Ctrip.com Int’l Ltd. (CTRP)
• Teradata Corp. (TDC)
• PTC Inc. (PTC)
• National Oilwell Varco Inc. (NOV)

Learn more about this emotion-free portfolio that takes advantage of falling and volatile markets by reading the Short List Trader Guide.

Have a Great Evening,
Jim Giaquinto

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