Today we run a screen for “quality” stocks based on the Chaikin methodology. Using the Russell 3000 as a starting universe, we look for stocks that have the following characteristics:
- Stocks Rating: Very Bullish, Bullish or Neutral +
- Financials: Bullish
- Earnings: Bullish
- Technicals: Bullish
- Relative Strength: Strong
There are 27 stocks that have passed the screen that could be candidates on the long-side of the portfolio when the market begins to show signs of stabilization.
*This is a screen that I have created to determine quality based on the metrics that we use at Chaikin Analytics and is not a representation of the “quality factor” that some use as an investment strategy.
Advancers: NRZ (26%), WEN (9%), HAL (8%), W (8%), EPR (8%)
Decliners: H (13%), BIIB (11%), MAR (8%), HLT (7%), HOG (6%)
Market Commentary/Looking Ahead
US equities finished lower in Wednesday trading after triggering another circuit breaker when the S&P 500 fell by 7%. In a small victory, equities rebounded into the close to finish above the 2018 lows. Energy, Industrials and Financials continued to underperform. Communication Services and Staples were least bad as all sectors closed lower on the day. Treasuries were weaker with the curve steepening; the 10-year yield moved back above 1%. The dollar extended its recent strength, hitting three-year highs. Gold closed down 3.1%. WTI Crude remains under extreme pressure.
Looking at key retracement levels from the 2009 lows to the highs reached last month, we can see that the 38.2% lines up with the December 2018 low near 2,350. The 50% retracement level is near 2,030 which is in the range of the 2014 – 2016 consolidation. Beyond there, the 61.8% retracement level would bring the index to roughly 1,700 which would be a ~50% drawdown from the recent highs.
S&P futures are down 1.6% in volatile trading. Asian markets were mostly lower overnight. European markets are moving higher. Treasuries are stronger across the curve. The dollar is stronger against the major crosses. Gold is up 0.3%. WTI Crude is up 12.8% after falling nearly 12.5% on Wednesday.