Daily Market Report - Friday, September 20, 2019
Executive Market Summary
- Major indices are bifurcated today with the NASDAQ lagging and in negative territory
- Sectors are mixed, with healthcare leading the charge
- Pharmas ($DJUSPR), medical supplies ($DJUSMS) and biotechs ($DJUSBT) are all up more than 1%
- U.S. Dollar proxy (UUP) nearing 2-3 week high
- Most commodities are gaining ground
- 10 year treasury yield ($TNX) is mostly flat and continues to stabilize
Market Outlook
I spoke yesterday about technology (XLK). Today I want to focus on one part of communication services (XLC). The XLC has been steadily rising on a relative basis vs. the benchmark S&P 500 since its relative bottom in November 2018. One key area of communication services is internet stocks ($DJUSNS). Therefore, I'll concentrate on this industry quite a bit today. First, let's look at its daily chart:
I see a potentially bullish A-B-C-D-E ascending triangle taking shape here with only the "E" missing - a breakout. This is a huge pattern and, if it breaks to the upside, it measures to 2200. That would be a significant gain from current levels and would likely power the NASDAQ higher. Keep this in mind.
The DJUSNS is currently higher by 0.20% today, while the overall market is mixed. We have slight gains on both the Dow Jones and S&P 500, but the NASDAQ has slipped into negative territory. Sectors are mixed as well as you can see below:
Other than healthcare (XLV), defensive groups are lower, while aggressive sectors hover on both sides of the zero line.
Sector/Industry Focus
There is definitely one industry group that we want to keep a close eye on as we approach October. It's the internet group ($DJUSN). The seasonality chart below shows that the group as a whole averages gaining 8.7% during October over the past 19 years:
Strong Earnings ChartList
Stocks testing 20 day EMA at 10:33am EST - 7 of 329 stocks
I could make bullish arguments for all 7 of the above stocks, but AKAM looks the most promising to me. Here's the chart:
AKAM has shown solid relative strength vs. its internet peers ($DJUSNS) and that group overall hasn't been bad. Furthermore, the DJUSNS tends to perform very well in September and especially October, as reflected above in the Sector/Industry Focus section.
Current Alerts
We have no current alerts at the moment. One reason is that our major indices are very close to overhead price resistance so adding alerts at this point could prove costly if the overall market environment turns bearish near-term, which is generally the case during the next several days.
Today's Movers
Remember, we're near all-time record high price resistance and today marks the beginning of a very bearish historical period that lasts through Thursday, September 26.
It's either breakout day or false breakout day for Dr. Reddy's Laboratories (RDY). Volume appears to be heavier than normal and it was clearly in breakout mode earlier this morning:
Today's close will tell us a story here.
Another stock in a similar situation is II-VI Inc. (IIVI), which has massive volume today:
In the first hour of trading today, IIVI is already nearing its highest daily volume in months. A breakout on this type of volume would be quite bullish. Failure to do so would probably result in a pullback with another breakout attempt likely sooner rather than later.
Earnings Reports
Here are key earnings reports for the next two days:
Friday, September 20:
None
Monday, September 23:
CMD
Economic Reports
None
Happy trading!
Tom