EB Weekly Portfolio Report - Sunday, December 11, 2022
Upcoming Earnings Reports
According to Zacks.com, the following companies will be reporting earnings this week and each is a component of one of our portfolios:
Monday, December 12: None
Tuesday, December 13: None
Wednesday, December 14: None
Thursday, December 15: None
Friday, December 16: None
PLEASE NOTE: The above companies were provided using Zacks.com. We do hold our portfolio stocks through one earnings report, but every EarningsBeats.com member must make his/her own investing/trading decisions about holding stocks into earnings reports as it's the most volatile (risky) time to own a stock.
Portfolio Rules and Objectives
Here are the common traits and objectives of our portfolios:
- There are 10 leading stocks from up to 10 leading industries in each portfolio (at the time of selection). Generally, there will only be one stock per industry group, but there could be exceptions.
- They are typically held for an entire 90-day period, with no stops in place. We strive for consistency, transparency, and simplicity in our portfolios. EB.com members may hold these stocks for the entire 90 days, trade them, use stops, etc., but for purposes of our calculation, we will likely make no exceptions to our "buy and hold for three months" strategy.
- Every stock will generally be held through ONE earnings report
- The expectation is that relative winners will carry the portfolio to outperformance
- All portfolio stocks were announced on Thursday, November 17th, and were all entered into as of the close on Friday, November 18th for tracking purposes
- Primary objective is to outperform the benchmark S&P 500 over time; quarter-to-quarter performance can be extremely volatile, especially if significant rotation takes place intra-quarter
Here are several considerations for EB members:
- The Income Portfolio should have the least amount of volatility as it will typically be comprised of quality large cap stocks with solid dividends
- The Model and Aggressive Portfolios should be viewed similar to aggressive growth funds; they will typically have a lot of volatility and periodic drawdowns can be significant from time to time
- The Income portfolio stocks will all pay dividends, with the expected average dividend yield to be at least 1.0%
- Drawdowns (losses) should be much milder on the Income portfolio, with more volatility expected on the other two; please review inception-to-date charts below to gain an idea of the volatility associated with each
- I believe the larger drawdown on the Income portfolio at the beginning of the pandemic was an anomaly, occurring as many defensive, higher-yielding companies uncharacteristically underperformed during a market decline.
- Large drawdowns in the February through May 2021 and the November 2021 to February 2022 periods were due to the rapid rotation from growth stocks to value stocks; each quarter, our portfolios are based on themes and there is never a guarantee that our analysis and beliefs will be proven correct
- Consider owning or trading these stocks in whatever manner is most comfortable for you; while we will buy all 10 stocks in the manner identified above, feel free to trade certain stocks or wait for pullbacks if the stocks are overbought
- We have no idea what risk each member is willing or able to take. We are not registered investment advisors so be sure you understand the risk you take. Please consult your financial advisor.
- EarningsBeats.com shareholders/employees may own all or some of the portfolio stocks from time to time.
Weekly Snapshot
Here's a weekly recap:
Weekly Summary
Benchmark S&P 500:
It was a "bend but don't break" kind of week for our major indices. We saw the S&P 500 fall 4 of the 5 days last week, with rather significant declines to open the week. The key 20-day EMA was lost, but critical levels of price and gap support still remain. So damage was inflicted, but it's not yet to a point where the short-term outlook has changed considerably. Here's the S&P 500, followed by the NASDAQ 100:
S&P 500:
NASDAQ 100:
These levels are what I'm most focused on as we head into a very important week. There's a critical November CPI report due out on Tuesday morning, which could see a substantial gap higher or lower, depending on the data. Then there's the Fed meeting, which will be held on Tuesday and Wednesday. The Fed policy statement will be released Wednesday at 2pm, so expect another round of crazy volatility in the final two hours of trading before the close.
Model Portfolio:
The Model Portfolio fell 3.87% last week, underperforming the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Model Portfolio component stocks performed last week:
Aggressive Portfolio:
The Aggressive Portfolio dropped 5.35% last week, underperforming the S&P 500. Here's the updated inception-to-date chart of the portfolio:
Here are how the Aggressive Portfolio component stocks performed last week:
Income Portfolio:
The Income Portfolio declined 2.77% last week, outperforming the S&P 500.
Here's the updated inception-to-date chart of the portfolio:
Here are how the Income Portfolio component stocks performed last week:
Model ETF Portfolio
Our Model ETF Portfolio lost 3.32% last week, slightly outperforming the S&P 500.
Here's the updated inception-to-date chart of the Model ETF Portfolio:
Here are how the Model ETF Portfolio components performed last week:
Model Trade Setups
I will provide Model Trade Setups each week in this Weekly Portfolio Report, which will simply be to outline possible trades based on key support, resistance, relative strength, and where these trades come from. For instance, my trading strategy for Strong AD ChartList (SADCL) stocks might be completely different than my trading strategy on Strong Earnings ChartList (SECL) stocks. Obviously, it would be different from a Short Squeeze ChartList (SSCL) trading candidate. I'll lay out the annotated chart and my reasoning for the (potential) trade. I may provide follow-up on some or all of these setups in the Daily Market Report (DMR). I'll also provide full disclosure, if I own any of the setups provided. Feel free to trade these Model Trade Setups based on the annotated charts provided, or according to your own trading strategy. Or ignore them. It's completely up to you. I am not a Registered Investment Advisor (nor is EarningsBeats.com). THESE TRADING CANDIDATES SHOULD NOT BE VIEWED AS INVESTMENT ADVICE.
I view EarningsBeats.com as a market research, market guidance, and market education platform. We do not attempt, in any fashion, to manage anyone's money. We have no idea the risk tolerance of each of our members, nor do we have any idea of your financial goals and objectives. It would be irresponsible for us to provide advice to any of our members. Therefore, please consult your own financial advisor before considering any buy/sell decisions. You are completely responsible for the financial decisions that you make.
Last Week's Setups
Here were the setups provided last week and how they performed:
We had awesome setups the prior week as the S&P 500 climbed more than 1%. Clearly, trade setups will not likely perform as well when the S&P 500 drops 3.37%. That was the case last week. Portfolio trades held up fairly well vs. the benchmark S&P 500, except for the two oil trades. Crude oil ($WTIC) dropped 11.20%, leading to an 8.45% drop in the energy ETF (XLE). Energy was not the place to be last week.
This Week's Setups
Every week, I will provide setups among our Portfolio stocks and our ChartList stocks. My preference is to trade Portfolio stocks, when appropriate. These stocks are in our portfolios for a reason - they're generally leaders within leading or improving industries.
After a rough week, we'll see if we can identify a few strong candidates this week, though our success or failure will likely depend a great deal on how the stock market reacts to the Tuesday CPI report and Wednesday Fed announcement. Here are the trading setups for this week:
From Our Portfolios:
FCFS:
Failed to hold its 20-day EMA last week, but gap support should be strong.
CHX:
CHX also failed to hold its 20-day EMA last week, but its gap support at 27.00 should offer up hope for a reversal this week.
ADP:
20-day EMA test.
LOW:
Approaching 20-day EMA and gap support.
From Our ChartLists:
PAYX (from SECL and RGCL):
Solid recent price support near 118-119.
ETSY (from SECL and SADCL):
Price support and 20-day EMA nearing.
TMDX (from SECL and RGCL):
20-day EMA test.
The Week Ahead
It's max pain week as December monthly options expire this Friday. Currently, however, there doesn't appear to be much incentive for market makers to drive prices in either direction. Previously, I've written and discussed the historical December pattern, which includes a so-so first half of the month, followed by a VERY strong second half. We have two BIG hurdles to clear this week as November CPI will be released on Tuesday morning. Recent history suggests we could see a big gap higher or lower, depending on whether we see any big surprise. Either way, we'll also need to negotiate the Fed meeting on Tuesday and Wednesday. Extreme volatility often follows the Fed announcement, which will occur on Wednesday at 2pm. I believe if key price and gap support holds through these two events/reports, we could see a considerable rally into year end.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."