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U.S. Stock Indexes Battle To Stay Positive

U.S. stock indexes turned mixed, then lower in early action Friday. Meanwhile, the government shutdown continued and Bloomberg News reported that China in December will suffer a seventh consecutive month of slower economic growth.




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The S&P 500 slipped 0.1%, while the Nasdaq reversed to a 0.4% decline. The Dow Jones industrial average dipped 0.1%. Small caps rose 0.3%, according to the Russell 2000 gauge.

Volume dropped on both the NYSE and the Nasdaq.

Procter & Gamble (PG) led the Dow with a 1% gain. Cosmetics provider Coty (COTY) led the S&P 500 with a 4% pop.

Bear Market Territory

After stepping into bear market territory recently, the Nasdaq and the S&P 500 have recovered some lost ground. The Nasdaq dropped about 24% but has cut that deficit to 19%. The S&P 500 fell 20% but now is 15% off its high.

IBD-style investors are waiting for a confirmation that would signal a new uptrend has begun. There is no way to know how quickly or how long that will take.

Meanwhile, investors should watch for stocks that are showing constructive action, even if a base is a way’s off. Check the fundamentals as well, sifting for stocks that are expected to step up earnings growth in fiscal 2019.

Two Stocks To Watch

One stock that is out of favor is former leader Chipotle Mexican Grill (CMG). Chipotle has skipped a cycle or two and could be ready to lead again.

Analysts expect the company to grow earnings 29% in 2018 and then step up to 40% growth in 2019. In the past six quarters, adjusted earnings grew 167%, 77%, 144%, 33%, 24% and 62%.

At first glance, Chipotle’s weekly chart looks sloppy. A second glance might let the investor see a double-bottom pattern in the making. The stock needs to build more on the right side, if a pattern is to be completed.

Starbucks (SBUX) is another former leader with potential. The Street expects earnings to grow 10% in fiscal 2019 ending in September and then step up to 14% growth in fiscal 2020.

The wild card for Starbucks is China. The country is Starbucks’ fastest-growing market and second biggest market overall. If the U.S. and China can settle their dispute over trade and tariffs, Starbucks could benefit.

Starbucks is working on a shallow seven-week base. The stock is 7% off its high.

Stocks on the IBD 50 list were mixed in early trade Friday. Restaurant chain Wingstop (WING) led, gapping up 4.5% in heavy volume. The stock retook its 50-day line and appears to be working on a base.

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