EB Daily Market Report - Monday, November 4, 2019

Executive Market Summary

• Our major indices are breaking out to new all-time highs, including the Dow Jones, which was late to the party
• Crude oil prices ($WTIC) are up 1.4%, aiding energy (XLE), easily the leading sector today
• Defensive sectors are weak and many consumer stocks are not participating
• Higher treasury yields ($TNX is up 5 basis points to 1.78%) resulting in strong bank performance ($DJUSBK), but home construction ($DJUSHB) suffering
• McDonalds (MCD) CEO Steve Easterbrook was fired over company policy, providing yet another headwind for restaurants ($DJUSRU), which have been abysmal for roughly 7 weeks now
• Our three Active Trade Alerts are mixed and we've changed our stop on NKE, which is explained below

Market Outlook

We're now in "blue sky territory" meaning that there's no overhead price resistance. We haven't seen any selling at overhead levels, so that makes anticipating selling episodes a bit more difficult. In this type of environment, I'd really pay attention to hourly charts and look for a negative divergence to emerge as a sign of slowing momentum. That will likely create our first short-term resistance area. Here's a current look at the S&P 500 hourly chart:

Based on this chart, I don't believe we've reached a short-term high just yet. We'll likely hit some profit taking soon, but my guess is that it will be met by buying at the rising 20 hour EMA. Then the next price high would need to be evaluated.

Sector/Industry Focus

Energy (XLE) is flying today and is the clear leader for the S&P 500, but you can see upcoming obstacles for the sector from the chart below:

We're rapidly approaching channel resistance. Clearing that would be a solid first step to repairing its chart technically. But overhead price resistance still remains closer to 63-64.

Strong Earnings ChartList (SECL)

The SECL was updated over the weekend to reflect earnings reports through last Tuesday, October 29th. There are now 157 companies on the SECL. I ran a scan around noon today looking for stocks on the list that have traded at least 50% of its average daily volume over the past 90 days. There were 17 as follows:

AMKR, BCS, MG, CMRE, CRSP, EHTH, HOG, LSCC, LULU, MHK, MLM, MX, NKE, PG, SHOP, SPOT, STM

Of these, I wanted to comment on 3 of them:

HOG:

On my Trading Places LIVE show this morning, I mentioned that HOG was downgraded and that a gap lower could provide an opportunity. HOG is reversing higher after a gap lower this morning. Watch both price support and 20 day EMA support, both of which are just above 38.00.

CRSP:

In late-October, CRSP traded more than 1 million shares on 3 consecutive UP days, which was a first for the stock over the past year. Over that 3 day stretch, CRSP gained roughly 30%. We're seeing profit taking today and that may continue near-term. I'd expect to see buyers though if it approaches its rising 20 day EMA.

MLM:

MLM printed a negative divergence recently, which many times will lead to PPO centerline and 50 day SMA tests. That's what's happened here. Entering MLM close to support at 260 and exiting near resistance at 275 has been working as MLM consolidates its earlier gains. This is a bullish continuation pattern that I expect will resolve itself to the upside with an eventual breakout in MLM. For now, however, respect the range.

Active Trade Alerts

Here are comments on our three current active alerts:

ZUMZ (-1.85%) - earnings date is December 5th. ZUMZ is underperforming today, which is very frustrating given that apparel retailers ($DJUSRA) are +0.51% on the day. One positive is that recent selling has been on very light volume, not indicative of distribution.

NKE (+0.65%) - recently reported earnings so the next earnings date won't be for another couple months. We are raising our stop to any INTRADAY move below 89.00. Currently, NKE is trading with a "filled" candle (one where the closing price finishes below the opening price) and it would be the 10th day out of the last 11 trading days that has occurred. Given the heavy volume on the recent selling and the deteriorating relative strength, it seems prudent to tighten our stop.

ROST (+0.14%) - earnings date is November 22nd. Only slightly higher today, but has printed higher highs and higher lows for three consecutive days so the uptrend appears to be resuming.

Today's Movers

I noticed a couple high-flyers of late that are worth pointing out, though they're both extremely risky:

TTOO:

3.00-3.25 seems like solid price resistance, but TTOO is picking up volume today as it approaches this key level. A breakout could trigger very heavy volume buying.

WOW:

6.50 has been a key pivot area on this chart on several occasions. Friday's breakout above 6.50 was accompanied by very heavy volume. Today's pullback to 6.50 could be a solid trading opportunity. I'd just be careful if it closed much beneath this level.

Earnings Reports

Here are the key earnings reports for this week, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 billion. Finally, any portfolio stocks that are reporting are highlighted in BOLD. Please make sure you check for earnings dates for any companies you own or are considering owning:

Monday, November 4 (after the market closes):

ITUB, UBER, MAR, PRU, ED, OXY, NTR, O, HIG, PXD, RNG, IFF, STE, JKHY. Others less than $10 bil: TNDM, SHAK, APPS, EVER

Tuesday, November 5:

FIS, BDX, AGN, EMR, REGN, NEM, ZBH, ES, PPL, MCHP, VIV, MTCH, ATUS, FANG, VST, PAA, EXPD, ARNC, HST, Y. Others less than $10 bil: PODD, AVLR, RPD, KTOS, BMCH

Wednesday, November 6:

QCOM, CVS, FISV, EOG, HUM, MFC, BIDU, ET, GOLD, WEC, SLF, SQ, FLT, GIB, EXPE, FOXA, IAC, VMC, ANSS, LBTYA, CBRE, ROKU, DISH, EVRG, CNHI, BR, CTL, DXCM, ATO, WYNN, HOLX, IQ, CVNA, GDDY, AES, EQH. Others less than $10 bil: MRO, TRIP, SEDG, NTRA, AYR, FIT, CECO, ELF

Thursday, November 7:

DIS, BKNG, ZTS, APD, ATVI, KDP, JCI, MNST, CNQ, ABC, MTD, BAP, AZUL, MT, CNP, DISCA, CAH, SYMC, BIP, TTWO, BCH, XRAY, NCLH, PNW, NRG. Others less than $10 bil: TTD, DBX, RL, ZG, PLNT, SVMK, STMP, SYNA

Friday, November 8:

ENB, DUK, HMC, AEE, MGA. Others less than $10 bil: None

Economic Reports

September factory orders: -0.6% (actual) vs. -0.5% (estimate)

Happy trading!

Tom