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S&P Off the Lows but Still Under 2800

Jim Giaquinto

The major indices came well off their lows by the closing bell on Wednesday, but it was still another rough session for the market as the month of May looks to be challenging right until the end.

We all know what’s going on. The regression in trade sentiment between the U.S. and China combined with declining bond yields have investors nervous about growth. Some folks are even talking about recession once again and comparing this pullback to the December 2018 correction.

It would certainly be a good idea to chill out a little bit instead of comparing this to one of the worst pullbacks in recent history. However, sometimes the market makes it tough to do so.

The Dow slumped another 0.87% (or about 221 points) on Wednesday to 25,126.41. That adds onto yesterday’s drop of 238 points as the index seems well on its way to a sixth straight week of losses.

The NASDAQ dipped below 7600 with a slide of 0.79% (or 60 points) to 7547.31, while the S&P said goodbye to 2800 by dropping 0.69% to 2783.02. The latter index also momentarily slipped below its 200-day moving average.

But it wasn’t all doom and gloom today. Stocks had a nice rebound off their lows. For example, the Dow plunged more than 400 points at its worst.

It was a nice turnaround from yesterday when the indices finished at their session lows. Let’s hope it’s a sign that this selling pressure has eased somewhat, because it would be a great shot-in-the-arm heading into June to finish this difficult month with a couple positive performances. 

Today's Portfolio Highlights:

Home Run Investor:
With superheroes flying around all over the place, a Star Wars movie set to be released later this year, and Disney apparently remaking all their cartoons into live-action blockbusters; the box office seems to be a pretty good place for investors right now. That’s why Brian Bolan added IMAX Corp. (IMAX) on Wednesday. This entertainment technology company has a solid earnings history with four beats in a row averaging 15% over that time. More importantly, earnings estimates for this year and next are slowly but surely moving higher, which gives IMAX the enviable status of a Zacks Rank #1 (Strong Buy). Read the complete commentary for more on this addition and don’t be surprised if the editor adds again later this week.

Insider Trader:
Despite being down 34% over the past year, three insiders at Wabtec (WAB) bought shares of their own company this month. This railroad components maker, which recently merged with GE Transportation, saw its general counsel and two directors make moves recently. Tracey considers this a positive signal, especially since these particular insiders don’t normally buy. The editor added WAB on Wednesday with a 10% allocation.

Surprise Trader: It may seem odd to add a company called Five Below (FIVE) as we head into the summer months, but this specialty value retailer has nothing to do with temperature. Instead, it offers merchandise for teen and pre-teens priced at $5 or less. But Dave expects to get a lot more than that by adding FIVE to the portfolio on Wednesday. The company has a positive Earnings ESP of more than 3% for the quarter coming after the bell next Wednesday. It also is part of a highly-ranked space (retail-misc.) and is expected to report revenue growth of about 23%. The editor picked up FIVE with a 12.5% allocation. See the full write-up for more.

TAZR Trader: With the market continuing to move lower, Kevin entered a couple bearish trades on Wednesday. He sold short Wix.com (WIX) and Atlassian (TEAM) both with allocations of 7% to 8%. These companies are software high fliers that are overextended and due for some major retracement now given the weak market. The editor also added another 5% to Direxion Daily S&P 500 Bear 3X Shares (SPXS), which was originally added last week. Read the full write-up for more on today’s moves.

Have a Great Evening,
Jim Giaquinto

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