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12/19/2023 10:16:24 AM Eastern Time

SIZZLING BUT NOT TOO HOT…YET  
By Charles Payne, CEO & Principal Analyst

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Yesterday’s solid session saw investors shift back into growth, Consumer Staples (XLP), and Energy (XLE).

The correct names were in the green as the Mag-Seven resumed its weight station role.

Market Breadth

What stands out most with yesterday’s market breadth is that only four stocks touched new 52-week lows on the New York Stock Exchange (NYSE) and 62 on the NASDAQ Composite.

After a mind-boggling run, there was some profit-taking in mid and small-caps. And large-caps keep chugging along.

Never Fear Index

This contrarian indicator continues to dwell in areas that suggest too much confidence.

It's Getting Hot In Here…

Now, the market has entered the ‘extreme greed’ zone, which doesn’t mean instant reversals, but it will have lots of investors spying on the exits.

Moreover, Jay Powell has awakened zombie companies and the shortest ones.

Maybe the ride gets bumpy, but the strength of this move shouldn’t be seen as a negative. Great work from RenMac illustrates the deGraaf Thrust, which sees the market higher six months after 70% of the S&P 500 make 20-day highs. It worked every time (six) going back to 1957.

If the Street is modeling six rate cuts next year, the bias will remain to the upside.

Developments in and around the Red Sea are grabbing more attention from the Street.

The economic calendar picks up today with news from the housing market.

Portfolio Approach

We are adding a new position in Technology (APP) in the Hotline Model Portfolio.

Today’s Session

Housing starts surged, but permits were lower. I think we embark on a period of wild swings on economic data. 

Meanwhile, the cash continues to cascade into the stock market coupled with serious short covering - it’s a party (for everyone but the shorts and smartest folks in the room that laughed at you all year long). But don’t lose your head.

Long Idea: Applovin Corporation (APP) @ $41.46
Industry: Technology; Application Software
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BACKGROUND: AppLovin Corporation engages in building a software-based platform for mobile app developers to enhance the marketing and monetization of their apps in the United States and internationally. The company's software solutions include AppDiscovery, a marketing software solution, which matches advertiser demand with publisher supply through auctions; Adjust, an analytics platform that helps marketers grow their mobile apps with solutions for measuring, optimizing campaigns, and protecting user data; MAX, an in-app bidding software that optimizes the value of an app's advertising inventory by running a real-time competitive auction; and Wurl, a connected TV platform, which primarily distributes streaming video for content companies. Its business clients include various advertisers, internet platforms, and others. The company was incorporated in 2011 and is headquartered in Palo Alto, California.

SKINNY: APP is a growth stock with strong financial performance. The Q3 results exceeded expectations, driven by its AI-powered advertising engine and strong software platform venue. Recently, concerns over insider sales and executive turnover raised doubts, but this appears to be overblown. Our target is $50.