EB Daily Market Update

Tom Bowley - November 11, 2019

Executive Market Summary

The bond market is closed today in honor of Veteran's Day
After early weakness, the Dow Jones is at another all-time high; the other major indices are down, but well off their intraday lows
Real estate (XLRE) leads today's action, while another defensive sector, utilities (XLU), lags
Home construction ($DJUSHB) seeing relief today with the bond market closed
Growth stocks favored over value stocks today, a switch from the past couple months
Our two Active Trade Alerts are mixed today

Market Outlook

A healthy banking environment is excellent for equities. Strengthening banks suggests more willingness to lend. Having audited banks in my prior career in public accounting, I can assure you that bankers are no different than other human beings. When they feel better, they take more risks in an effort to earn more money. So as the yield spread widens (and the Fed has promised to do its part by buying $60 billion short-term treasury bills per month through at least February), banks will become more aggressive in their lending, which helps the economy to expand. Is there any doubt about the health of banks ($DJUSBK) right now?

The signals I'm seeing continue to say "full speed ahead"!

Sector/Industry Focus

In a bull market, I'm always looking for wide participation. The more groups rallying, the merrier! Check out the materials sector (XLB). They've been a relative laggard for quite some time, but we've just seen an absolute breakout - great news indeed:

While the XLB hasn't been a relative leader, it is being pulled higher by the current bull market advance. That's all we need to see.

Strong Earnings ChartList (SECL)

I am in the process of updating the SECL to include dozens and dozens of companies that recently reported their quarterly results and beat Wall Street consensus estimates as to both revenues and EPS. Many of these companies will provide solid trading opportunities over the next several weeks and the charts will be annotated with a key price/gap support level or two. Here are two examples of what's currently on the SECL and what I look for:

FAST:

FTNT:

TDOC:

Hopefully, you can see some similarities here. Exceptionally high volume. Continuing strength AFTER gaps higher. Clear breakouts. Relative strength. I'll be discussing this and much more at 4:30pm EST this afternoon during our "Top 10 Stocks - Sneak Preview" webinar.

Active Trade Alerts

Here are comments on our two current active alerts:

ZUMZ (-1.21%) - earnings date is December 5th. In failing to hold its 20 day EMA and 50 day SMA, ZUMZ is signaling that it remains in a sideways consolidation pattern for now between 30 and 34.

ROST (+0.07%) - earnings date is November 22nd. ROST tested its 20 day EMA earlier today, as I suggested it might last week. The uptrend remains in play.

Today's Movers

I ran a scan of all S&P 600 Small Cap stocks that have a SCTR score over 75 and an RSI below 50. 6 stocks were returned as follows:

IRT, MTH, RH, STAR, VGR, ZUMZ (current active trade alert).

RH is part of the home improvement industry ($DJUSHI) and has pulled back recently to test both price support and its 50 day SMA. Check it out:

The 50 day SMA test was key as RH recently printed a negative divergence - higher price high with lower PPO. That's typically a signal that a stock needs a rest and rest is what RH has done. I expect another run higher to test its October high above 190.

Earnings Reports

Here are the key earnings reports for this week, featuring stocks with market caps of more than $5 billion. I also include a few select companies with market caps below $5 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 11:

TME, FNV, UGI, DXC. Others less than $5 bil: None

Tuesday, November 12:

LIN, TSN, ROK, DHI, SWKS, CBS, AAP, HTHT, SE, DOX, DDOG, SAGE, LTM, ACM, GWR, RETA, ADT, HUYA, YY, IAA. Others less than $5 bil: ERJ, CRON, TLRY, CSIQ, CDLX

Wednesday, November 13:

CSCO, TCOM, NTAP, VIPS, CAE. Others less than $5 bil: TTEK, GOOS, TSEM, SSYS

Thursday, November 14:

WMT, NVDA, AMAT, WB, WPM, NICE, VIAB, CGC, DLB, WIX, BAK, GDS. Others less than $5 bil: HP, ACB, SINA, KLIC

Friday, November 15:

Economic Reports

None

Happy trading!

Tom