All hail new highs

  • Major US indexes still off from all-time highs
  • Several off-the-radar stocks have hit new records this week

It can pay to pay attention to relative strength.

While this month’s rebound has, as of yesterday, helped the S&P 500 (SPX) recoup around two-thirds of what it lost in May, some stocks have done the index one better by pushing to record highs. And they’re not necessarily the ones people are obsessing about in these tariff-dominated times.

First up, Procter & Gamble (PG) and Costco (COST)—two of the ultimate consumer staples defensive stocks—both of which pushed to all-time highs in recent days:

Procter & Gamble (PG) and Costco (COST), 4/14/19–6/12/19. Procter & Gamble (PG) and Costco (COST) price chart. Offensive players of the week?

Source: Power E*TRADE

The last time we checked in with PG and COST, it was the beginning of May, and no one knew a hefty downturn was in store for the market. But both stocks actually rallied to all-time highs in the middle of the month before pulling back toward the end of it, then raced back to new records this week.

As was the case six weeks ago, both stocks may have a “secret sauce” that has kept them on the menu of many traders: Internal momentum combined with their “defensive” status, which can help keep a bid under their prices (e.g., the first half of May) when the going gets rough for the broad market.

Then there’s Microsoft (MSFT), the “tech emeritus” that long ago passed the headline baton to “sexier” technology names that now tend to attract the momentum-trading crowd (you know, F-A-A-N…). The thing is, MSFT is currently the only trillion-dollar company among them, and the only one trading at record highs, thanks to an 11% rally off the pullback level noted in “Tech talk: Plan your trade, trade your plan”:

Microsoft (MSFT), 1/10/19–6/12/19. Microsoft (MSFT) price chart. Trillion-dollar baby.

Source: Power E*TRADE

MSFT’s -3% drop on June 3 highlights the fact that it’s not immune to contagion—i.e., the occasional pressures the sector may come under as Big Tech gets subjected to antitrust inquiries—but it’s not a specific target of the government.

Two of these three stocks have dipped slightly in recent days, and if anyone was caught off guard by the market’s mild downturn after Tuesday’s highs, they shouldn’t have been. After such an exceptional jump—last week was the SPX’s biggest up week of the year—some give-back is natural, even if it’s impossible to time perfectly.

Maybe the market has more to give back; same goes for these stocks, and others that have outpaced the market recently. But stocks with relative strength—those that are outperforming their industries, sectors, and the market—may continue to offer more trading bang for the buck if momentum again turns to the upside.

Relative strength, like a price trend, is in effect until proven otherwise.

Market Mover Update: Since tagging $159 on June 7, Molina Healthcare (MOH) has pulled back more than 6% to around $148, with the June $160 call options declining more than 80% in that span (see “Follow the volume”).

Yesterday’s highest-profile IPO, CrowdStrike (CRWD), quickly jumped more than 90% above its IPO target price of $34, peaking at $67.

Today’s numbers (all times ET): Import and Export Prices (8:30 a.m.), EIA Natural Gas Report (10:30 a.m.).

Today’s earnings include: Duluth Trading (DLTH), Broadcom (AVGO).

Today’s IPOs include: Fiverr International (FVRR).

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