EB Weekly Portfolio Report - Monday, August 21, 2023
Delay
I apologize for the late EB Weekly Portfolio Report this week. I was traveling home from an out-of-town golf tourney and didn't arrive home until late last night.
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, August 21: None
Tuesday, August 22: None
Wednesday, August 23: None
Thursday, August 24: None
Friday, August 25: 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, May 18th, and were all entered into as of the close on Friday, May 19th 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:
- S&P 500: -0.31%
- Model Portfolio: -3.02%
- Aggressive Portfolio: -4.03%
- Income Portfolio: -1.48%
- Model ETF Portfolio: -2.45%
Weekly Summary
Benchmark S&P 500:
The S&P 500 had a rough week and its finish could be seen through rose-colored glasses......or not. I tend to be a fairly optimistic analyst when reviewing the stock market, because I know that history favors positive resolutions. You may think the optimism is unfounded, given all the news that we face day to day, but there's ALWAYS bad news. I believe the stock market moves in cycles and that news is WAAAAAAAY overrated. It's much more about money flows. Listen, if rates keep rising and we the 10-year treasury yield ($TNX) pierce 5%, I'll be as nervous as many of you. It won't be because of the news, it'll be because higher yields are a REAL threat to money flowing from stocks to bonds. I don't know that 5% is THE number, but there's a lot of conservative money in U.S. markets that will find a 5% yield to be extremely attractive over a 10-year period with little risk.
Anyhow, let's look at a critical 10-year weekly chart of the S&P 500:
A 20-DAY EMA test is a short-term test. A 20-WEEK EMA test is more of an intermediate-term test. We knew the short-term risk had increased in July due to daily negative divergences and a much more complacent options world. I am definitely bullish off of this 20-week EMA test, but that guarantees us absolutely nothing. I'll turn MUCH more cautious if we can't rally off the growing pessimism that gripped Wall Street last week. We should NEVER ignore a 5-day reading of the put call ratio ($CPCE) that reaches .85, which is how high we went last week. The stock market has a VERY STRONG tendency to bounce from that level of short-term pessimism.
Model Portfolio:
The Model Portfolio fell 3.02% 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 lost 4.03% 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 fell 1.48% 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 dropped 2.45% last week, underperforming 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.
Recent Setups
Here is an update on the six setups provided in last week's Model Trade Setups:
TSLA:
Original Comments: Relative strength and the AD line are strong. And recent selling has been on below-average volume.
UPDATE: I didn't expect it, but TSLA fell back to test the breakout above its February high. I believe the key on TSLA, as with many others, will be what happens at the declining 20-day EMA, if it gets there? A move through, like in January 2023, would suggest technical repair is underway. The opposite? Well, it would increase the likelihood of a price support test, perhaps another low. Also, I believe TSLA looks much better on its weekly chart (long-term), but it will need to be able to power back through its 20-week EMA, which was lost last week.
AMD:
Original Comments: The AD line and relative strength on AMD are not holding up well, so if price support is lost, it would be much more difficult for me to hold.
UPDATE: There was a loss of recent price support, but it was able to find buyers just above 100, close to the support level established from the breakout above 100 in May.
NVDA:
Original Comments: After earnings, NVDA rolled up to 406, consolidated a bit, and then busted through this resistance. It now becomes support on NVDA's move back to the downside. If 406 support doesn't hold, I wouldn't be surprised to see more NASDAQ weakness with NVDA possibly moving back to 380-385.
UPDATE: Fortunately for NVDA, and quite possibly the NASDAQ 100 as well, 406 price support held and NVDA had a very solid week. NVDA reports its quarterly results after the bell on Wednesday.
KEYS:
Original Comments: KEYS chart is problematic enough that I'd be out on any close below 155.
UPDATE: I think it's clear now why I felt 155 was such a big level for KEYS. It was already very weak on a relative basis and its AD line was suspect. After closing below 155, KEYS was crushed.
IT:
Original Comments: I like the AD breakout here and all the "tails" going down to 334-336, while hanging onto its key support range from 333-337. A close beneath 333, however, and all bets are off.
UPDATE: After closing beneath 333, IT fell to its next price support level around 325. That was the price breakout level from May, clearing prior tops at that level in March and May.
UAL:
Original Comments: Volume has been light on the selling and UAL's AD line keeps moving higher. I suspect UAL is very likely to move back to the upside, but will it hold 51.96 price support prior to this advance?
UPDATE: Well, price support near 52 did NOT hold and now, as UAL attempts to recover, 52 price resistance awaits as does the now-declining 20-day EMA, currently near 52 as well. AD line remains solid and volume on the recent selling has been light. Accordingly, I give UAL higher marks than most. If this overall market decline is temporary, I suspect UAL would be a leader during a recovery.
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.
I'll pass on setups for this week, due to the delay in this report already. However, I'll be reviewing potential trading candidates in DMRs this week.
The Week Ahead
While earnings are mostly behind us, there'll be a few notable earnings reports out this week that could influence market direction, especially if guidance is better than expected. The biggest potential influencer will be NVIDIA Corp (NVDA), which reports on Wednesday after the close. This is possibly the biggest earnings report in the entire semiconductor industry, so I'm certainly interested in what they have to say this week. There'll be several retailers reporting as well, including Lowe's Companies (LOW), Dollar Tree (DLTR), Ulta Beauty (ULTA), Dick's Sporting Goods (DKS), Burlington Stores (BURL), BJ's Wholesale Club (BJ),
Among other key technology names, we'll get the latest results from Intuit (INTU), Analog Devices (ADI), Workday (WDAY), Snowflake (SNOW), Autodesk (ADSK), Splunk (SPLK), and Network Appliances (NTAP).
If you want two key weekly charts to follow among industry groups, these are two that would certainly be at or near the top of my list:
Semiconductors ($DJUSSC):
Software ($DJUSSW):
These are VERY influential areas of the stock market, particularly for the NASDAQ 100 ($NDX). If either or both of these industry groups lose their 20-week EMAs and price support reflected above, it could be a very long balance of August and September for U.S. equities.
Happy trading!
Tom Bowley, Chief Market Strategist
EarningsBeats.com
"Better timing. Better trades."