EB Daily Market Report - Monday, October 14, 2019
Executive Market Summary
- Trade news remains big; this morning China indicated they weren't willing to sign Phase 1
- U.S. futures were lower, but we've since seen recovery and a flat overall market
- Energy (XLE) is struggling as crude oil prices ($WTIC) are down more than 3%
- Healthcare (XLV) is providing leadership as biotechs ($DJUSBT) rise for a 4th consecutive session
- Nike (NKE) upgraded, contributing to further strength in footwear stocks ($DJUSFT)
- Computer hardware ($DJUSCR) maintains strength as well, led by Apple (AAPL)
- 3 of 4 Active Trade Alerts are lower today, though none are breaking any significant support levels
Market Outlook
The S&P 500 managed to clear a short-term downtrend line with Friday's strength, although that's just step 1 when it comes to triggering a much larger advance. One question that needs to be answered now is whether the S&P 500 can clear overhead price resistance before it sinks back beneath its key moving averages:
Generally, the rising 20 day EMA holds as support on pullbacks during an advancing market. So holding the current rising 20 day EMA will be the first critical short-term test if we see a period of selling.
Sector/Industry Focus
We know transports ($TRAN) are very important to the health of the stock market. I've discussed in recent articles that truckers ($DJUSTK) are showing nice relative strength and are aiding transports in their effort to breakout from the downtrend they've been mired in since the 2018/2019 market consolidation began. I'm not worried about truckers. Railroads ($DJUSRR), on the other hand, are more difficult to love right now. Their daily chart illustrates the down channel they've been in since printing a double top in July:
While the weakness here cannot be ignored, it should be noted that their longer-term weekly chart is not nearly so bearish. Therefore, we need to watch the DJUSRR daily chart regularly, awaiting a possible breakout of the current down channel. If it were to occur, it would begin to paint a much more bullish picture for the S&P 500 in general and transports more specifically.
Strong Earnings ChartList (SECL)
I did nothing scientific this morning. Instead, I just simply pulled up the charts in the SECL and wanted to point out a couple that I found interesting:
G:
37.25-38.75 is an area of support where I'd expect a turn higher in G. It had a huge gap higher with earnings in August and it has since slowly worked its way back to key support. I think it goes higher from here.
MELI:
MELI has hit multiple levels of absolute and relative support, just as it prints a positive divergence. I wouldn't be surprised if a significant bottom has printed here.
APPN:
Software stocks ($DJUSSW) seem to be rebounding one by one. The DJUSSW never lost its relative support from early-June and APPN appears to be the next stock in the space that's righting its technical ship. A confirmed close above both its 20 day EMA and 50 day SMA would add to the bullishness here.
Active Trade Alerts
Here are our current active trade alerts:
NOC (+1.37%) - nice rebound today, outperforming the overall market.
ZBH (-0.81%) - climbed back above its 20 day EMA on Friday, so I'm watching today's weakness to see if it can hold its now-rising 20 day EMA. It's bounced off this morning's intraday low and is currently back close to that moving average.
TWTR (-1.75%) - one day after seeing much better action, TWTR finds itself right back where it was. The good news is that selling in TWTR over the past several weeks has been accompanied by fairly light volume - not indicative of widespread selling and distribution. I'm still expecting a pre-earnings push higher.
ZUMZ (-3.16%) - ZUMZ seems to be consolidating between 30-32. Friday's advance challenged the upper side of the range, while today's selling is challenging support to the downside.
All 4 active trade alerts remain solid technically.
Today's Movers
Tesla (TSLA) is having a solid day with volume beginning to accelerate. There's still overhead gap resistance to negotiate, but TSLA looks better technically than it has in months:
The blue circle shows TSLA breaking out vs. its automobile peers ($DJUSAU) to a 6 month high. The red arrow, however, shows that the biggest price hurdle remains. When TSLA gapped down from 265 in July, it did so with very heavy volume. I'd expect to see sellers there, so until TSLA clears gap resistance, it probably would pay to remain cautious.
CBL:
I don't normally focus on small priced stocks, but CBL's chart pattern was worth discussing. Its downtrend seemed to end with increasing volume and a surge higher in the first couple weeks of September. It has since been forming a bullish symmetrical triangle continuation pattern. I'd feel better about entry on a test of the lower uptrend line, but for those of you that are bigger risk takers, CBL is worth keeping an eye on.
Earnings Reports
Here are the key earnings reports for this week, featuring stocks with market caps of more than $10 billion. The number of companies reporting will increase significantly over the next 3-4 weeks so please make sure you check for earnings dates for any companies you own or are considering owning:
Monday, October 14:
None
Tuesday, October 15:
JPM, JNJ, WFC, UNH, C, NFLX, GS, BLK, PLD, AMX, UAL, WIT, OMC, FRC, JBHT
Wednesday, October 16:
BAC, ABT, IBM, ASML, USB, PNC, CCI, CSX, KMI, PGR, BK, ALLY
Thursday, October 17:
PM, HON, UNP, DHR, MS, ISRG, BBT, STI, PPG, ERIC, MTB, KEY, TEAM, GPC, DOV, NVR, TXT
Friday, October 18:
KO, HDB, AXP, SLB, SYF, STT, CFG, KSU
Economic Reports
None
Happy trading!
Tom