Stocks Take a Rest from Setting All-Time Highs

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Two of the major indices saw their three-day winning streaks end on Wednesday, but the S&P managed a slight gain as the market mostly treaded water in the wake of its record-setting run.

The big news of the day was that the meeting between President Donald Trump and China leader Xi Jinping may not happen until December. It was originally scheduled for later this month at a global summit in Chile, but the country cancelled the whole thing last week.

As far as the market is concerned, a further-out meeting continues the uncertainty and provides more opportunity for this Phase 1 deal to fall through.

However, it should be noted that most of the language from the two sides has been positive of late. Let’s hope it lasts!

But even without news of a potentially delayed meeting, this market would probably have been under pressure on Wednesday. Stocks are breaking records all over the place, culminating with all three major indices reaching new highs on Monday.

So it was time for a break, which began yesterday with stocks selling off in the final hour and continued today with a lackluster session.

The major indices dipped sharply lower on the trade news, but they fought back before the closing bell. However, the S&P was the only one to return to the positive side, finishing with a slight gain of 0.07% to 3076.78.

The Dow broke even, though was technically down by 0.07 of a point, or 0%, to 27,492.56. The NASDAQ had the worst performance, though it was only off by 0.29% (or about 24 points) to 8410.63.

We’ve seen the kind of damage a bad trade headline can have… and this just isn’t it! Most likely, it was an excuse to take a rest after an impressive run higher.

Today's Portfolio Highlights:

Home Run Investor: The portfolio continues getting more aggressive during this record-setting market, which means Brian is adding more technology. On Wednesday, he picked up Tenable Holdings (TENB), a Zacks Rank #2 (Buy) provider of Cyber Exposure solutions. In other words, it’s a play on software security, which has seen some good news lately from other players in the space. Plus, TENB has beaten the Zacks Consensus Estimate for four straight quarters with an average surprise of 28% over that time. Earnings estimates are on the rise for this year and next, and the editor expects that TENB’s flip to profitability is “only a matter of time”. Brian also decided to sell AquaVenture Holdings (WAAS) for a 12.1% return in a month, as the water play beat earnings expectations but just isn’t aggressive enough for the portfolio right now. Read more in the full write-up.

Counterstrike: A craft beer is a great way for an investor to celebrate the market’s recent record-setting run. In a way, that’s what this portfolio is doing by adding a 10% allocation in The Boston Beer Company (SAM), which makes the popular Samuel Adams brand. After rising for most of the year, the stock came under serious pressure due to lower margins in the most recent report. It’s now dropped to its 200-day, and Jeremy thinks there’s “massive support” there. By the way, SAM remains a Zacks Rank #1 (Strong Buy). The editor also bought a 4% position in IPath Series B S&P 500 VIX Short-Term Futures ETN (VXX) as a small hedge for the overall portfolio in the event that a negative headline spikes the VIX. Read the full write-up for more on today’s moves.

TAZR Trader: Shares of GW Pharmaceuticals (GWPH) plunged on Wednesday on concerns of discontinued prescriptions and a slower growth rate of new patients. However, the biopharma company still beat on the top and bottom lines in its report. Regardless of today’s dip, Kevin reminds us that GWPH is still a “revolutionary” pharma company that will probably get to sales of $1 billion by 2022. With much of the risk now taken out of the stock, he bought GWPH on Wednesday with a 7% allocation.

Meanwhile, the editor decided that now was good time to play a potential pullback in November with earnings season coming to an end and the VIX looking to rise higher amid stalled momentum. He added 5% allocations in Proshares UltraPro Short QQQ (SQQQ) and ProShares UltraPro Short Dow 30 (SDOW) each. These are both ProShares 3X-leveraged “bear” ETFs. Kevin also sold a third of Invitae (NVTA) to reduce risk. Read the full write-up for more on today’s moves, including what analysts think of GWPH and the editor’s 4-point rationale for the bearish ETFs.

Surprise Trader: Usually Dave likes to add stocks a few days or even a week before their quarterly report, but he’s got to pounce on opportunities as earnings season begins to die down. Therefore, he added Realogy (RLGY) on the eve of its quarterly report coming before the bell tomorrow. This Zacks Rank #1 (Strong Buy) provider of real estate services has a positive Earnings ESP of 2.4% for the quarter and is part of a space (Real Estate – Operations) in the Top 17% of the Zacks Industry Rank. The editor also sold Boot Barn (BOOT) today for a 2.4% return in about 2 weeks. Read the complete commentary for more on today’s moves.

All the Best,
Jim Giaquinto

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