Daily Market Report - Monday, September 16, 2019

Executive Market Summary

• Dow Jones and S&P 500 down today, backing off after nearly reaching record territory
• Small caps showing relative strength as Russell 2000 is up 0.50%
• Energy (XLE) leads all sectors after drone attack in Saudi Arabia
• 9 of 11 sectors lower, led by materials (XLB) and consumer stocks (XLY and XLP)
• Transportation stocks ($TRAN) weak with oil prices surging, especially airlines ($DJUSAR)
• 10 year treasury yield ($TNX) falls 7 basis points back to 1.83%

Market Overview

U.S. stocks are lower this morning, but there are a couple key levels to watch in very near-term action on the S&P 500:

Following a drone attack on Saudi Arabia's oil facilities that wiped out roughly half of their daily crude production, crude oil prices ($WTIC) have shot up more than 12% today to $61.49 per barrel at last check. So what was the headline I read this morning? "Fears of Global Recession Increase with Huge Spike in Oil Prices". Really? I guess the media has moved on from the trade war and needed another topic to peddle their fear mongering initiatives.

The end result of the attack was that energy shares (XLE, +2.50%) are up huge on the session. Not too surprisingly, energy companies litter the S&P 500's best performers today. Apache Corp (APA, +9.65%) and Hess Corp (HES, +8.92%) are the two top performers.

Sector/Industry Focus

Airlines ($DJUSAR) are struggling with the sudden surge in crude oil prices. However, the group hasn't lost its rising 20 day EMA, which I consider to be very important given its recent advance:

Banks ($DJUSBK) so far are being turned back at key price resistance:

Soft drinks ($DJUSSD) should also be watched closely. They've been a leading industry group, so some profit taking isn't a problem. But we don't want to lose price support and moving averages:

Strong Earnings ChartList

The Strong Earnings ChartList is a list of companies that, in their most recent quarterly earnings reports, beat Wall Street consensus estimates as to both revenue and earnings per share (EPS). In addition, they are adequately liquid and also were technically sound after reporting their results. Currently, there are 329 companies on this Strong Earnings ChartList. I've run scans against this ChartList and the following highlights companies that meet the criteria shown.

New 52 week highs - 10 of 329 stocks

Dril Quip (DRQ) is obviously benefiting by the surge in energy shares today. If it can hold on today's close, we certainly could be looking at a nice breakout:

A close above 53 would likely send DRQ up to test its next key level of price resistance near 58.50.

Also, watch Natera (NTRA) today as it's attempting to break out of an ascending triangle, which would be quite bullish:

A false breakout with a long tail to the upside would be short-term bearish, although I do expect NTRA will eventually make its confirmed breakout.

High volume stocks, trading more than 1x normal daily volume at 12pm EST - 5 of 329 stocks

Here's a table showing the Strong Earnings ChartList stocks that made the cut today:

EverQuote (EVER) is a stock in our Aggressive portfolio and could be poised for another breakout. The increasing volume would confirm it:

Monday Setup

Resmed, Inc. (RMD) is a stock that's seen profit taking over the past 1-2 weeks. It's down close to 10% from its high and its RSI is now at 43, generally a solid level for entry during an uptrend. I like entry at the current price, but a second entry at 125.00 with a closing stop just beneath that level (124.00) would help to lower risk on the trade:

My target would be a move to test the recent price high near 141.00.

Today's Movers

I don't trade stocks outside the Strong Earnings ChartList, but I know many of you do. I'll use this section to try to find a couple stocks that I believe have more upside potential based on a current assessment of their technical picture.

American Renal Associates (ARA) is a high-flyer, so buyer beware. Still, it more than doubled in five trading sessions earlier this month. Today marks the third consecutive drop and those who are in the much more aggressive camp might find this an attractive trade if it reaches its rising 20 day EMA:

An intraday move down closer to 8 is possible, but a 20 day EMA test would provide a ton of upside. It's not for those who are risk-averse, however, as ARA carries an inordinate amount of risk.

Earnings Reports

This is a very light week for earnings, but there are several to watch:

Monday, September 16:

None

Tuesday, September 17:

ADBE, FDX, CHWY, CBRL, APOG

Wednesday, September 18:

GIS, MLHR

Thursday, September 19:

DRI, SCS, SCHL

Friday, September 20:

None

Happy trading!

Tom Bowley, Chief Market Strategist
EarningsBeats.com

"Better Timing.  Better Trades."