EB Daily Market Report - Tuesday, November 12, 2019
Special Note
Yesterday's "Top 10 Stocks - Sneak Preview" webinar recording should be available for everyone later this afternoon. We've had to work through a couple of technical issues. Thank you for your patience. :-)
Executive Market Summary
- The S&P 500 hits 3100, NASDAQ pierces 8500 - both all-time record highs!
- Healthcare (XLV) leading as medical supplies ($DJUSMS), medical equipment ($DJUSAM), and biotech ($DJUSBT) all are up more than 1%
- Crude oil ($WTIC) up nearly 1% to 57.41 per barrel, energy (XLE) up in sympathy
- Utilities (XLU) and consumer staples (XLP) - two defensive sectors - are the laggards
- Gold ($GOLD) continues to weaken, while copper ($COPPER) strengthens
- Walt Disney (DIS) has gone LIVE with its Disney+ service, what it calls the "future of the company"
- Our two Active Trade Alerts are mixed today
Market Outlook
In yet another confirming signal of expected economic growth ahead, copper has begun to crush gold. When the market is nervous and fearful, the opposite is generally true. But as global traders turn more bullish on future global economic activity, we tend to see copper prices rise based on the simple laws of supply and demand and gold fall as fear subsides. Here's the latest look at this relative chart:
A rising COPPER:GOLD ratio tends to coincide with a solidly rising S&P 500. The fact that the relative PPO is rising again - much like it did in the second half of 2016 - tells me that this equity rally across the globe has just begun. Not only that, but I also expect the gains to accelerate, which is why I've provided a 4000 target for the S&P 500 in 2020. I believe we'll get there.
Sector/Industry Focus
I've been giving the biotech group ($DJUSBT) a lot of love lately and I'm throwing a bit more there way today. This morning, SunTrust initiated coverage on a number of biotechs, both large and small, and when the analyst community begins to cover a group more closely (and bullishly), that's typically a good sign. SunTrust initiated coverage on 11 biotechs, providing a BUY rating on ALXN, AMGN, BIIB, BMRN, BTAI, FATE, MNTA, PTCT, VRTX, while initiating both GILD and REGN with a HOLD rating. GILD has been underperforming so I'd agree with a lesser rating there, but I really like REGN as I've discussed previously. I also own REGN, so clearly I think it's a BUY. Of those that SunTrust mentioned, I like VRTX, MNTA, and REGN the most. I've provided those three charts below in the "Today's Movers" section. In the meantime, there are two critical overhead resistance levels for the biotech industry as a whole. We're testing one of them today:
It appears on the longer-term chart that a two year downtrend line has been broken, which is one very encouraging signal that an uptrend could be underway. The breakout above 2050 would help to confirm that. From a longer-term perspective, there is either a bullish cup with handle continuation pattern in play or a bullish ascending triangle continuation pattern in play, depending upon your view. Both would confirm a breakout on a close above 2200:
The measurement on such pattern breakouts would be identical as well. The depth of both the cup and the ascending triangle is 700 points, so a breakout above 2200 would measure to 2900. We want to be a part of this rally, if it occurs.
Strong Earnings ChartList (SECL)
We have completed our latest update of our SECL and we now have 307 stocks on our list. We have been sending out our SECL to all EarningsBeats.com members that are also at least Extra members at StockCharts.com. If you are currently a StockCharts.com Extra member or above and are NOT receiving the SECL from us, we simply need your StockCharts User ID so that we can send you the list. You can contact "[email protected]" with any questions.
I ran a scan today of SECL stocks testing their 20 day EMAs and here are the 6 that were returned:
ENTG, FSS, HLX, HOG, NWL, SCS.
I found these interesting:
HOG:
I provided a chart on HOG a little over a week ago and highlighted the above support level. Today's low once again tested that area. I'd be careful on any close below 38, but I suspect the current consolidation will precede another move higher.
NWL:
NWL broke out on heavy volume with its latest strong earnings report and its relative strength is excellent. The 20 day EMA down to the bottom of gap support presents a very nice accumulation zone. The rising 50 day SMA is just beneath gap support and also should offer up solid support as well.
Active Trade Alerts
Here are comments on our two current active alerts:
ZUMZ (+1.32%) - earnings date is December 5th. ZUMZ continues to consolidate with today's action back on the positive side of the ledger. A pick up in volume and clearing both its 20 day EMA and 50 day SMA would be a great start to another trend higher.
ROST (-0.56%) - earnings date is November 22nd. ROST is down on light volume, but does remain above its 20 day EMA. Apparel retailers ($DJUSRA) have been down the past three trading days. That's not helping either of our alerts.
Today's Movers
It's time to follow up with my earlier comment about the biotechs. I wanted to point out 3 healthy and/or improving stocks from SunTrust's list of initiated coverages. Here they are:
VRTX:
MNTA:
REGN:
Should the DJUSBT continue rising, we want to concentrate on individual stocks showing relative strength. I believe the three above do just that. Volume trends are also strong and, after years of consolidation in the industry, the entire group could be poised for a major rally.
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:
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:
JD
Economic Reports
None
Happy trading!
Tom