EB Weekly Portfolio Report - Sunday, December 18, 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 19: None
Tuesday, December 20: None
Wednesday, December 21: None
Thursday, December 22: None
Friday, December 23: 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:
Volatility ($VIX) was all over the place last week as the VIX hit 25.84 on Tuesday, before dropping to a low of 21.07 on Thursday, finishing the week nearly unchanged. That last part is fairly significant since the S&P 500 dropped more than 2% on the week. It's odd to see the VIX flat during a week in which prices fell more than 2%.
We've now entered the more bullish 2nd half of December, but it didn't get off to a great start on Friday, December 16th. The S&P 500 fell 1.11% on Friday to close out the crazy week, which included a monthly CPI report (November) and a fed meeting and 50-point rate hike.
It's hard to be short-term bullish based on the price action "on the surface." However, my longer-term picture hasn't really changed. 2022 has required a lot of patience, but since calling the market bottom on June 16th, we've now seen 6 months of consolidation with nearly all of the trading range occurring ABOVE that June low. Last week's drop was painful, because I really thought we'd hold key short-term support levels and rally into year end. At best, that bullishness is delayed. It was also options expiration week and stocks like Netflix (NFLX, -9.16%), which we pointed out last week had the MOST net in-the-money put premium of any stock on either the Dow Jones or NASDAQ 100, were crushed.
So let's take a look at the Top 15 industry groups last week:
Normally a down week like last week would have resulted in a ton of leadership by defensive sectors. I see 3 industry groups in the Top 15 last week that belong to defensive sectors - medical supplies ($DJUSMS and in health care), diversified REITs $DJUSDT and in real estate), and real estate holding & development ($DJUSEH and in real estate). Otherwise, it was mostly leadership from energy, materials, and our aggressive sectors.
I'm still not seeing signs that this weakness will extend for months and months. But we'll have to continue to be patient for an ultimate reversal and sustainable uptrend.
Model Portfolio:
The Model Portfolio fell 3.69% 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 slid 1.00% last week, outperforming 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 2.58% last week, underperforming 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 1.89% last week, 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:
Overall, I thought it was a solid week for the setups. It's difficult to have a lot of winning trades in a week where we see a 2% drop in the S&P 500. Many of the above stocks were up solidly in the first half of last week, but gave back those gains when everything sold off after the FOMC meeting. 4 of the 7 stocks outperformed the S&P 500 and the average return (-0.66%) was clearly better than the overall market.
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.
Now that the inflation report, the Fed meeting, and options expiration are behind us and the more bullish 2nd half of December is in front of us, we'll see if the overall market can begin and sustain a rebound. If so, our chances of winning setups will be much better. Here are the trading setups for this week:
From Our Portfolios:
DOCS:
20-day EMA test.
LULU:
Test of gap support.
CROX:
Bullish engulfing candle and gap/price support test.
IBM:
Price support test.
MCD:
Price support test and 50-day SMA rapidly approaching.
BAH:
Price support and 50-day SMA test.
From Our ChartLists:
AEHR (from SECL and SADCL):
Price support test.
WING (from SECL, SADCL, RGCL, and BTCL):
Price support and 50-day SMA test.
The Week Ahead
As we move into the latter part of December and toward 2023, it's really all about the technicals now. There won't be a lot of big economic news out through December 31st and very few earnings reports. So we'll have to see how the market responds this week to what was a very rough week last week. Here's a quick glance at the NASDAQ 100 ($NDX), which is the index that I believe really needs to get going:
The red circles are both warning signs, barring quick reversals. And the AD line needs to be watched carefully. In prior secular bear markets, the daily AD lines falling apart were a key signal. While that is not the only signal or the most important signal, it would be still be damaging nonetheless.
A big question surrounds the typical Santa Claus rally. Many consider it to be the week leading up to and after Christmas, but my analysis suggests it starts around the middle of December, so it could begin tomorrow morning. We'll soon find out.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."