EB Daily Market Report - Friday, November 8, 2019
Executive Market Summary
- U.S. stocks are struggling a bit as 60 minute negative divergences kick in
- There's leadership today from healthcare (XLV) and communication services (XLC)
- Energy (XLE) is the laggard as crude oil ($WTIC) is down close to 1% today
- The 10 year treasury yield ($TNX) quite notably closed above 1.90% resistance yesterday; we're down 1 basis point to 1.91% at last check
- The German DAX ($DAX) also is struggling a bit today and the S&P 500 many times will mirror this European index
- Our two Active Trade Alerts are fractionally lower today
Market Outlook
Ok, so the negative divergence on the 60 minute chart that I've been referring to seems to be handcuffing the stock market in the very near-term. Here's a visual of what I was suggesting might take place:
In the very near-term, I'd look for the two price/gap support lines to encourage buying. There's also a near-term trendline in place that intersects closely with the bottom support line near 3050. I indicated that a 1-2% pullback could be in order and I think that's what we're seeing thus far. Please note that a break beneath these support levels would not be the end of the world. It would simply suggest that we take a look at a daily chart to find the next key level of support. One level to watch would be the rising 20 day EMA, currently at 3036.
Sector/Industry Focus
A strong bull market rally is typically characterized by wide participation where most sectors and industries appear strong technically. Several sectors have already broken out and now communication services (XLC) is on the threshold:
Continuation patterns off of uptrends can take several shapes, but they have one common ingredient. They're all bullish and we should expect resolution to the upside until proven otherwise. There are so many bullish signals in place right now for global equities that I'd be shocked to see the above pattern on XLC resolve in any fashion other than a breakout - and I expect that breakout sooner rather than later.
Strong Earnings ChartList (SECL)
There's one popular beaten-down name (actually, there are several) that you might see alerted this afternoon. I want to see if it's likely to print its current reversing candle at price support. The stock is in the weak software group ($DJUSSW) and has fallen close to 30% in the past 10 weeks. Here it is:
SHOP:
I don't get into the habit of buying stocks that are downtrending on a relative basis to its peers and the S&P 500. However, SHOP did just beat Wall Street consensus estimates as to both revenues and EPS and now it's testing a very important support level. I like the reward to risk setup here, even if I struggle with the recent relative weakness.
Active Trade Alerts
Here are comments on our two current active alerts:
ZUMZ (-0.75%) - earnings date is December 5th. ZUMZ is down fractionally today as its 8 day stretch of trading sideways continues. It's now very close to its 50 day SMA, currently at 31.29.
ROST (-0.76%) - earnings date is November 22nd. ROST fell back late in the day yesterday to close just above 113, which I figured would be initial short-term resistance. I'd look for the 20 day EMA to provide solid support to the downside.
Today's Movers
I reviewed today's heavy volume stocks on the S&P 500 and found the following chart interesting:
DIS:
DIS reported very solid revenues and earnings, topping Wall Street estimates on both. But DIS had a strong run higher in the first 8 months of the year, so I believe it could be forming a bullish inverse head & shoulders continuation pattern. A pullback to gap support around 133 could establish a bottoming inverse right shoulder. Just something to keep an eye on.
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:
Friday, November 8:
ENB, DUK, HMC, AEE, MGA. Others less than $10 bil: None
Monday, November 11:
TME, FNV. Others less than $10 bil: DXC
Economic Reports
November consumer sentiment: 95.7 (actual) vs. 96.0 (estimate)
September wholesale inventories: -0.4% (actual) vs. -0.3% (estimate)
Happy trading!
Tom