EB Daily Market Report - Tuesday, November 19, 2019
Special Note
Today is "Top 10 Stocks" day! Later this afternoon at 4:30pm EST, we'll be hosting our quarterly webinar that features the 10 additions/replacements for each of our portfolios. In addition to releasing the new list of stocks, it'll be an educational event that discusses the state of the market, including key leadership and rotation. Also, we'll discuss last quarter's and inception-to-date results. I'd love to have you join me if you're available. If not, no worries. We'll record the event and the recording will be available to everyone later tonight.
We also announced a stellar list of speakers slated to join us for Market Vision 2020 on Saturday, January 4, 2020. It's an event designed to help everyone prepare for 2020. You'll hear a range of opinions for 2020 from leading technicians, many of whom you're probably familiar with. Yesterday, John Hopkins sent an email out to all EB.com members indicating that he was adding all of you to the Market Vision 2020 newsletter so that you don't miss any updates. You won't receive anything, however, unless you opt in. Please check your email and opt in so that you can receive everything as it's released. This Friday, for instance, we'll have one of our speakers join us to discuss a very important topic. It's FREE to everyone that signs up for the newsletter, so make sure you opt in. Room instructions will be sent out to all newsletter subscribers on Friday morning. This special "mini-series" webinar will begin at 11am EST and will be recorded for those unable to attend live.
Executive Market Summary
- Home Depot (HD) and Kohls (KSS) disappointed with both earnings and outlooks
- NASDAQ is providing leadership today with both the Dow Jones and S&P 500 lower
- Building permits hit a 12 year high, further encouraging news for home construction
- The 10 year treasury yield ($TNX) is down slightly to just below 1.80%
- Healthcare (XLV) is the leading sector, buoyed by a surging biotech group ($DJUSBT)
- Our lone Active Trade Alerts is ROST, which is relatively flat today
Market Outlook
Relative strength within aggressive sectors is a primary reason why I believe Wall Street is looking for higher prices during the balance of 2019 and into 2020. What we want to see in each of the five aggressive sectors are relative strength charts that remain in longer-term uptrends. They don't usually all five lead at the same time, but instead rotate and take turns. Consumer discretionary (XLY) has definitely taken a back seat over the past 5-6 weeks and that's okay as long as the bigger picture doesn't see a breakdown. Here's what I currently see:
I'd watch 105-108 in terms of absolute price support, while the relative price channel shows there's still plenty of room for relative weakness before I'd grow more cautious.
Sector/Industry Focus
Now let's look at how a relative channel can benefit an aggressive sector - industrials (XLI):
From a distance, the XLY and XLI long-term absolute and relative charts may look quite similar since they're both in nice uptrends. But the timing of leadership of each varies quite a bit as you zoom in closer. At the end of 2016, and throughout much of 2017, industrials led while consumer discretionary lagged. But in 2017, the XLI found trendline support and then led for much of the next two years. Industrials? They lagged. Now we're seeing rotation again as industrials begin to show leadership while consumer discretionary hits overhead channel resistance and falls back.
The key, however, is that both remain in solid uptrends.
Strong Earnings ChartList (SECL)
Yesterday, I reviewed the high percentage gainers on our SECL. Today, given the weakness we're seeing in parts of the market, let's reverse that strategy and look at the biggest losers on the SECL and see if we can find desirable trading candidates:
As of 11:10am EST, here are the 11 stocks that were down more than 3%:
Here are three I'd consider:
BOOT:
BOOT has been in a very nice uptrend and is a leader among apparel retailers ($DJUSRA). The selling today, especially if it reaches the 20 day EMA, could present a nice short-term trading opportunity.
BYND:
When will the selling on BYND finally end? Well, recently a lockup expired, meaning that insiders could finally sell. That typically takes place six months after a company goes public. I think once the insiders get done selling and take their money, we could begin to see a "fairer" landscape for BYND. I've laid out three key areas of price support. Recently, BYND reversed with a hammer off initial price support and we're testing it again. An aggressive entry would be at this level, although failure to hold recent lows would likely suggest another 20% drop.
QCOM:
Today's test of the rising 20 day EMA seems like an opportunity to me. I'd look for a bounce to test recent highs. If the 20 day EMA is lost, then gap support below 85 comes into play.
Active Trade Alerts
Here are comments on our current active alerts:
ZUMZ (-1.00%) - earnings date is December 5th. ZUMZ closed yesterday at 29.88, two cents beneath our closing stop of 29.90, so it's been removed as an alert. If you continue to hold, be mindful of the intraday low after earnings at 28.97. The recent selling has been on fairly light volume, so it certainly doesn't appear to be any type of distribution. I'd give ZUMZ a reasonable chance of bouncing, we just simply want to manage our losses and keep them small.
ROST (-0.28%) - earnings date is November 21st. We were not quick enough on the trigger this morning, but ROST did approach the 114 resistance level that I discussed yesterday. I'd keep a very tight window here since ROST reports its latest quarterly results on Thursday. A move to 114 and I'd take the money. We'll exit on any CLOSE beneath the 20 day EMA, which is currently at 111.59.
Today's Movers
U.S. equities are a bit challenged today, so let's wait until tomorrow for opportunities outside our SECL.
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 (or active trade alerts) that will be reporting results are highlighted in BOLD. Please make sure you check for earnings dates for any companies you own or are considering owning:
Tuesday, November 19:
HD, MDT, TJX, TDG, PAGS, ARMK, KSS, WUBA. Others less than $5 bil: URBN
Wednesday, November 20:
LOW, TGT, PDD, NTES, CPRT, SQM. Others less than $5 bil: LB, NUAN, JACK, LZB
Thursday, November 21:
INTU, ROST (active trade alert), SPLK, STNE, POST, GPS, PLAN, JWN, WSM, BERY, PSTG, M. Others less than $5 bil: BJ
Friday, November 22:
SJM. Others less than $5 bil: FL, BKE
Economic Reports
October housing starts: 1,314,000 (actual) vs. 1,320,000 (estimate)
October building permits: 1,461,000 (actual) vs. 1,378,000 (estimate)
Happy trading!
Tom