The put/call ratio is showing us that stocks are grossly overbought. Instead of picking upside stocks, I’m focusing on weak names that tend to break down first and the most on a market pullback. I have two well-known stocks on my chopping block that have been breaking down and trading below their 50-day moving averages — and more in today’s stock market recap.
In the stock market recap, global stocks are mixed today as investors analyze Thursday’s economic data.
Jobless claims and the Consumer Price Index are scheduled for today. We’re in a balancing act between our economy running too hot and not picking up enough. The sweet spot would be gradual growth — this would keep the Federal Reserve from changing its course on current policy.
April’s CPI was at 0.8%. Analysts’ consensus for May was 0.4%. Prices jumped 0.6% in May. This might fuel more inflationary worries ahead of next week’s Federal Open Market Committee meeting.
The bond market is breaking out and prices are at their highest level in three months. This deflationary pressure is good, but too much of it would be bad news. Technology stocks and the Russell 2000 are benefitting the most from the bond market’s latest moves.
The put/call ratio, which I mentioned on Wednesday, is looking stretched out. When you combine this ratio with current momentum levels, the potential upside for stocks is limited.
Pinterest Inc. (NYSE: PINS) combines visual media and interest-based searches to give users a unique experience for inspiration. PINS is down around 22% from its 52-week high. This stock was a power play in 2020 but has lost steam this year.
PINS has been making lower highs for the past few months and even broke its 200-day moving average in May. I would sell PINS around the $65 level and cover at the 50-day MA of about $68.
The second weak stock is a food ordering and delivery platform also experiencing lower highs and downward momentum. The 50-day MA is below its 200-day MA, and the stock is trading under both.
In today’s video, you’ll discover why small caps are rising… whether the bond market will continue to trade higher… whether the put/call ratio is increasing or decreasing… and which two stocks are cooling off and ready to fade.
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