EB Weekly Portfolio Report - Sunday, January 8, 2023

Tom Bowley - January 08, 2023

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, January 9: None

Tuesday, January 10: None

Wednesday, January 11: None

Thursday, January 12: None

Friday, January 13: JPM

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:

The S&P 500 began January on a positive note and it certainly would be more bullish if that continues this month. Technically, I was very happy to see the S&P 500 close back above its 20-day EMA:

I'm watching gap support at 3748.57. The S&P 500 gapped higher from there after the October Core CPI was released much lower than expected. There's also recent price support at 3783.22, so those are the two key short-term support levels that I'd watch closely. A turn and close beneath both would indicate a higher likelihood that a test of the October low is in the cards. On the flip side, I really like that close back above the 20-day EMA. That, combined with an RSI test at 40 gives the look of a potential uptrend. Obviously, that would be squashed with a reversal this week. However, if we can build on that Friday strength and close above the 50-day SMA (currently 3904), that would add to the short-term bullishness. If you recall, 3900 has been a key pivot level for many, many months.

Ultimately, I want to see the S&P 500 close back over 4110.41. That will clear both price and trendline resistance, the latter of which resides in the 4030-4040 range.

The big boost on Friday came after nonfarm payrolls were released slightly above expectations. However, I believe it was the lower-than-expected average hourly earnings that triggered the rally, providing the Federal Reserve yet another sign that it needs to pause its rate hikes. If that wasn't enough, November factory orders were reported at 10am ET and they fell 1.8%, more than double the 0.8% drop that was expected. So the Fed is getting what it wants - a weakening economy AND tamer inflation data. The stock market's rise can be attributable, at least in part, on its expectation that the Fed will pivot soon, moving away from its hawkish tone. Will it happen? Well, it's been anything but a slam dunk in recent months, so I want to see it first.

Model Portfolio:

The Model Portfolio gained 2.77% last week, outperforming 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 1.75% 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 climbed 0.68% 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 jumped 1.79% 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:

It wasn't a very good week for our setups. Only 2 of 7 outperformed the S&P 500. They say that one bad apple can spoil the whole bunch. Well, that's how I felt about ENPH. The other six setups averaged gaining 0.65%, which wasn't great, but manageable. Unfortunately, ENPH was that bad apple and that resulted in our setups for the week being a disappointment.

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.

During the upcoming trading week,

Portfolio Stocks:

DBX:

Hammer at price support.

SBUX:

Breakout, soaring AD line, and increasing volume.

FCFS:

Break above 20-day EMA and in a very strong industry.

SILK:

Relative trendline support being tested. Also, at price support and nearing absolute trendline support.

LOW:

Test of key gap support and reversal on increasing volume.

TRV:

Breakout on increasing volume.

Strengthening PPO and soaring relative strength.

CMC:

Breakout, excellent AD and strong relative strength.

ELV:

Big reversal on heavy volume at price support.

The Week Ahead

Earnings season kicks off late this week as JP Morgan (JPM) reports its quarterly results on Friday. JPM has improved considerably in recent weeks on both an absolute and relative basis, so I'm expecting that they could kick off earnings season on a positive note. While I expect many earnings/guidance disappointments in areas like technology (XLK) and consumer discretionary (XLY), I also expect potential blowouts in several industry groups in financials (XLF) and industrials (XLI). It's going to be very interesting to see how the S&P 500 plays out in January. As I mentioned last week, January performance does matter - at least based on history. The odds of a solid year increase considerably if January is higher. Last week I broke down January S&P 500 performance into 4 quadrants, but we can also look at even more simply - based on whether January performance is positive or negative. Check this out:

Positive January performance (43 of 73 years): balance of year goes up 37 of 43 years, averaging +11.89%
Negative January performance (29 of 73 years): balance of year goes up 18 of 29 years, averaging +2.66%

I'd rather take my chances with a positive January. We got off to a good start, with the S&P 500 rising 1.45% last week.

Happy trading!

Tom Bowley, Chief Market Strategist

EarningsBeats.com

"Better timing. Better trades."