EB Weekly Market Report - Monday, October 28, 2024

Tom Bowley - October 28, 2024

ChartLists Updated

The following ChartLists were updated over the weekend and are available for viewing/downloading on our website:

Strong Earnings (SECL)
Strong Future Earnings (SFECL)
Bullish Trifecta (BTCL)
Short Squeeze (SSCL
Daily Earnings ChartLists

Weekly Market Recap

Major Indices

Sectors

Top 10 Industries Last Week

Bottom 10 Industries Last Week

Top 10 Stocks - S&P 500/NASDAQ 100

Bottom 10 Stocks - S&P 500/NASDAQ 100

Big Picture

Here's an update of the Big Picture, 100-year chart of the S&P 500:

The bottom two panels show the 10-year and 20-year rate of change (ROC) continuing to climb. This is simply one more sign of a bull market gaining strength.

I remain long-term bullish.

Rotation/Intermarket Analysis

Here's the latest look at our key intraday ratios as we follow where the money is traveling on an INTRADAY basis (ignoring gaps):

QQQ:SPY

Support continues to hold here, but there's mostly sideways churning. It's not bullish, but it's not necessarily bearish either.

Remember, this chart is actually calculated QQQ:SPY, despite its "@SPYQQQ" name.

IWM:QQQ

There's been another rolling over in small caps relative to its large cap counterparts. This doesn't spell doom and gloom, but it's also not exactly supporting my expectations of small cap outperformance. I'll just keep following the back and forth for now.

XLY:XLP

This is likely the most bullish development from last week. Consumer discretionary (XLY) was first in performance last week among all major indices and sectors and we're seeing a relative downtrend break vs. consumer staples (XLP). Further confirmation is what I'd expect and look for in the week ahead.

Sentiment

5-day SMA ($CPCE)

We did see short-term selling last week, but it did little to push this complacency meter. The last four weeks have shown more complacency than any period since the 2022 cyclical bear market began in January of that year.

253-day SMA ($CPCE)

This remains a very consistent and very bullish indicator. The long-term 253-day SMA of the CPCE keeps falling from what used to be extreme pessimism. There's no doubt that this reading needs to fall further, perhaps much further. For now, however, it suggests U.S. equities are much more likely to push higher through year end as opposed to lower.

Sustainability Ratios

I like to track the "beneath the surface" strength by periodically reviewing key intermarket relationships and also by reviewing how the aggressive sectors and defensive sectors are performing relative to the benchmark S&P 500. Here are two key charts to follow:

Growth vs. Value:

As prices have risen off that August 5th low, bullish rotation has occurred simultaneously, which is definitely bullish. When these growth ratios are rising, it provides us a signal that traders are "risk ON", and that typically leads to higher prices.

Aggressive vs. Defensive Sectors:

First, let's look at the aggressive sectors:

Seeing 4 of 5 aggressive sectors outperforming the benchmark S&P 500 during the advance since August 5th is quite encouraging. That means that many of the defensive sectors have likely underperformed during this same period....

Long-Term Trade Setup

Since beginning this Weekly Market Report over one year ago, I've discussed the long-term trade candidates below that I really like. Generally, these stocks have excellent long-term track records and many pay nice dividends that mostly grow every year. Only in very specific cases (exceptions) would I consider a long-term entry into a stock that has a poor or limited long-term track record and/or pays no dividends. Below is a quick recap from a few weeks back:

JPM - weekly chart shows negative divergence, but rising 20-week EMA shows great support thus far
BA - remains one of the weakest stocks since the pandemic began, test of 120 price support is possible
FFIV - uptrend and bullish momentum remains in play
MA - July 50-week SMA test has led to solid action for past 10-11 weeks or so
GS - looks a lot like JPM technically, as rising 20-week EMA continues to provide support during advance
FDX - earnings helped FDX test overhead support near 301, now 240-250 support looks solid
AAPL - price support at 200 should be solid and the 20-week EMA held earlier in September
CHRW - hit 110 this week to test key overhead price resistance from August 2022
JBHT - rough week, but 150-160 support still looks solid
STX - been trending higher for nearly 2 years now
HSY - lengthy sideways consolidation continues; dividend remains healthy
DIS - a BA-type chart, wandering not too far above MAJOR long-term support at 80
MSCI - I seen building strength in MSCI and expect a rally to 650 by year end
SBUX - definitely much better off technically since the new CEO from Chipotle was announced
KRE - still trending higher and I love this area of the market in Q4 and into 2025
ED - struggling to clear 105 currently, but uptrend remains intact
AJG - bouncing off recent 20-week EMA test
NSC - railroads strong off the June low, NSC following suit
RHI - recent push higher cleared 20-week EMA, a short-term positive development

Keep in mind that our Weekly Market Reports favor those who are more interested in the long-term market picture. Therefore, the list of stocks above are stocks that we believe are safer (but nothing is ever 100% safe) to own with the long-term in mind. Nearly everything else we do at EarningsBeats.com favors short-term momentum trading, so I wanted to provide an explanation of what we're doing with this list.

We're now into October and this is usually a great month to buy stocks as the best historical period of the calendar year is rapidly approaching. Before we get to that period, however, we also need to be aware of the October 21st close - October 27th close, as this is the worst 1-week period of the year historically. Check out the historical upcoming returns in the "Looking Ahead" section below. I'll look to add at least 3-4 stocks to this list next week as this bearish period comes to a close.

I will add charts next week, but we're adding ADM, BG, CVS, IPG, and HRL to our list above. All 5 of these companies have solid long-term track records and have a solid dividend history as well.

Please keep in mind that I'm not a Registered Investment Advisor (and neither is EarningsBeats.com nor any of its employees) and am only providing (mostly) what I believe to be solid dividend-paying stocks for the long-term. Companies periodically go through adjustments, new competition, restructuring, management changes, etc. that can have detrimental long-term impacts. The stock price nor the dividend is ever guaranteed. I simply point out interesting stock candidates for longer-term investors. Do your own due diligence and please consult with your financial advisor before making any purchases of securities.

Looking Ahead

Upcoming Earnings:

Q3 earnings season is just starting. This is NOT a list of ALL companies reporting this week, so please be sure to check for earnings of any companies that you own or add. Any companies in BOLD represent stocks in one of our Portfolios:

Monday: WM ($84 billion), CDNS ($69 billion)
Tuesday: GOOGL ($2.03 trillion), V ($516 billion), AMD ($248 billion), MCD ($216 billion)
Wednesday: MSFT ($3.16 trillion), META ($1.44 trillion), LLY ($847 billion), SBUX ($110 billion)
Thursday: AAPL ($3.51 trillion), AMZN ($1.96 trillion), MA ($472 billion), UBER ($165 billion)
Friday: BRK/A ($987 billion), XOM ($472 billion), CVX ($275 billion)

Key Economic Reports:

Monday: None
Tuesday: August Case-Shiller home price index, August FHFA house price index, October consumer confidence, September JOLTS
Wednesday: October ADP employment report, Q3 GDP (initial reading), September pending home sales
Thursday: Initial jobless claims, September personal income & spending, October Chicago PMI, Q3 employment cost index
Friday: October nonfarm payrolls, September construction spending

Historical Data

I'm a true stock market historian. I am absolutely PASSIONATE about studying stock market history to provide us more clues about likely stock market direction and potential sectors/industries/stocks to trade. While I don't use history as a primary indicator, I'm always very aware of it as a secondary indicator. I love it when history lines up with my technical signals, providing me much more confidence to make particular trades.

Below you'll find the next two weeks of historical data and tendencies across the 3 key indices that I follow most closely:

S&P 500 (since 1950)

Oct 28: +126.68%
Oct 29: +77.49%
Oct 30: +60.46%
Oct 31: +18.59%
Nov 1: +46.81%
Nov 2: +79.69%
Nov 3: +98.11%
Nov 4: +52.85%
Nov 5: +72.97%
Nov 6: -24.52%
Nov 7: -11.42%
Nov 8: +20.69%
Nov 9: -10.78%
Nov 10: +35.74%

NASDAQ (since 1971)

Oct 28: +164.31%
Oct 29: +63.91%
Oct 30: +33.60%
Oct 31: +97.68%
Nov 1: +42.72%
Nov 2: +101.17%
Nov 3: +97.89%
Nov 4: +109.07%
Nov 5: +102.06%
Nov 6: +24.45%
Nov 7: -42.34%
Nov 8: -5.53%
Nov 9: -62.87%
Nov 10: +10.01%

Russell 2000 (since 1987)

Oct 28: +186.46%
Oct 29: +69.99%
Oct 30: +9.54%
Oct 31: +148.88%
Nov 1: +2.49%
Nov 2: +133.34%
Nov 3: +170.75%
Nov 4: +56.95%
Nov 5: +67.17%
Nov 6: +23.04%
Nov 7: -67.45%
Nov 8: +20.32%
Nov 9: -54.42%
Nov 10: +71.71%

The S&P 500 data dates back to 1950, while the NASDAQ and Russell 2000 information date back to 1971 and 1987, respectively.

Final Thoughts

Well, the worst historical week of the year is now behind us and we should feel historical tailwinds helping along prices over the next few months. As we wrap up October and head into November, this is what I'm thinking about:

History. We have just begun the most bullish historical period of the year, which runs from the close on October 27th through the close on January 18th.
Earnings. Get ready. This week alone, we'll get the latest quarterly results from GOOGL, AMD, MSFT, META, AAPL, and AMZN. If you're looking for likely market direction, look no further than these 6 mega companies.
Volatility ($VIX). It's dropping today, but it has been above 17 for nearly a month. A drop back below 17 would begin to send signals that fear is dissipating.
10-Year Treasury Yield ($TNX). The TNX continues to power forward as it's risen to 4.28%, another 5 basis points higher than last week's close. Here's the deal: If the TNX is rising because of expected economic strength, then that can be a very good thing. If, however, it's due to a threat of renewed inflation, that would likely be very bad for stocks. My guess is the former, but I'll be watching and trying to remain objective.
20-day EMAs. Can pullbacks hold 20-day EMA support? Those tests are quite normal in ANY market, but happens after price action tests this moving average - that's what's most critical.

Feedback

If you'd like to share your thoughts on our Weekly Market Report, positive or negative, you can reach us at "[email protected]".

Happy trading!

Tom