EB Watch List Update Report

Dear Members: MARKET NOTE: I have found over the years that trying to trade successfully in a toppy market is very difficult. The reason being; when traders feel like they've missed a rally they feel compelled to try to join in the party. Often this ends up being an exercise in futility. Of course there are always diamonds in the rough; those stocks that zoom higher even with the market in consolidation mode. But they aren't so easy to find. In this particular market, there seems to be an obsession to get the Dow to 20,000. It certainly would be a new milestone, just like 10,000 was many years ago. But that alone is not a good reason to chase stocks. I do want to point out that I'm not bearish on the market. I see the strong momentum, just like everyone else. But I cannot ignore the extremely overbought Dow. It might not be ready to crash but you can see how tough it is to move to higher levels. Interestingly, this almost singular focus on the Dow is likely misplaced; it only represents 30 stocks. But at this moment it is seen as a proxy for the overall market, with the bulls cheering it on. We're also in a bullish time of the year with traders hoping for a Santa Claus rally. But the strong move we've seen over the past month has lessened the chance for a major rally into year end; we've already had a major rally. I spent some time looking at the most recent additions to our Candidate Tracker. I keyed in on a few stocks that have pulled back nicely after moving higher on strong earnings. They are on my radar screen. But nothing is standing out as a "must buy" meaning the reward to risk is not great enough if we were to get a sudden turn lower in the market. I'm really interested in stocks that have at least a 3 to 1 reward to risk potential; in other words, three times upside to one time downside. I want to give you an example. I was looking at NUAN. It made a great move on very strong volume after it reported earnings mid November. Since then it has pulled back and is looking oversold to me. BUT, if the market stalls or suddenly moves lower here it will be difficult for any stock to make much progress. Since NUAN is exactly between its 20 and 50 day moving averages it could go either way, so not enough reward YET. I would much rather be patient and see if it can pull back to its 50 day, now at $14.88, and get even more oversold which would greatly increase the reward to risk. I'm seeing similar patterns on many stocks; strong earnings, nice move higher, pullback. But I want to get them cheaper! The bulls might indeed get there way and move the Dow to that 20,000 level. But it's still not a good reason to jump in right now. KEY EARNINGS REPORTS Companies reporting earnings today (December 16) include: There are no key earnings reports due out today Companies reporting earnings Monday (December 19) include: LEN ADDITIONS TO WATCH LISTS: No additions at this time. Will let you know via email if I find something worth pursuing. Going to continue to be very selective for the time being. BRIEF COMMENTS ON SELECT WATCH LIST STOCKS: SHORTS: LZB - Stock is up 1.5% today after moving lower the past two sessions. This goes to show you how tough it is to short stocks in a bullish market. Likely going to take a move lower in the overall market to move this one lower. LONGS: Large Cap Watch List None at this time Mid Cap Watch List None at this time Small Cap Watch List None at this time DELETIONS FROM OUR WATCH LISTS: None at this time I want to wish everyone a restful weekend and will be back Monday morning with my EB Watch List Update Report. At your service, John Hopkins EarningsBeats