EB Daily Market Report - Wednesday, November 20, 2019
Executive Market Summary
- One day after Home Depot (HD) dropped an earnings bomb, Lowes Companies (LOW) reports solid results
- Target (TGT) blew away EPS estimates (1.36 vs 1.18) and raised its EPS guidance for FY20; its the S&P 500's best performer today, up 12.34% at last check
- The 10 year treasury yield ($TNX) is down today for the 6th time in the past 7 trading sessions; this rotation, however, has not led to an equity selloff
- Crude oil is surging more than 3% as energy (XLE) easily leads on a sector basis
- Oil equipment & services ($DJUSOI) is the big winner among industries
- Our lone Active Trade Alert is ROST, which is down today ahead of its earnings report tomorrow; we will remove ROST at today's close
Market Outlook
I'm going to concentrate on energy (XLE) for a bit today. Recently, we've see the U.S. Dollar Index ($USD) falling and that has typically led to brief periods of relative strength in energy stocks. You can see that below in the green shaded areas:
But the red shaded area shows that has not been the case during this latest period of dollar weakness. I believe we could see some "catch-up" in the coming days and weeks. Also, you need to realize that the XLE's best price action typically takes place from November through April - at least over the last 20 years:
If you add up the average returns for the XLE, you'll find that the November through April period averages a +8.6% return, while the May through October period averages -0.7%. That's quite a disparity and one worth noting.
Sector/Industry Focus
A big reversal is taking place today in energy (XLE) and I could see this leading to short-term outperformance here. First, take a look at the chart:
A similar reversal (bullish piercing candle) took place in early October and initiated a big rally in energy. Also supporting this bottoming theory would be crude oil's ($WTIC) recent drop to approach its bottom trendline in its current channel:
The above WTIC chart doesn't include today's price action. Crude oil is up 3.21% today to $56.98 per barrel. I'm looking for higher crude oil prices, which in turn, should lead to a bigger move higher in the XLE.
Strong Earnings ChartList (SECL)
I ran a scan of our SECL to highlight all stocks that have SCTRs above 80, but have fallen at least 5% over the past week. Here are the 5 (out of 325) results in SCTR order (highest to lowest):
SYNA, NPTN, MTSI, IPHI, HEES
NPTN, MTSI and IPHI are semiconductor stocks ($DJUSSC), which have reacted to a bit of profit taking in the space. Here are the other two:
SYNA:
After the huge post-earnings run up in SYNA, the initial selling episode resulted in a drop to 55.56 (support line drawn above) before buying resumed. Just below that, the rising 20 day EMA nears.
HEES:
Since peaking at 37.85 on November 5th, HEES has seen profit taking. I would expect to see a bottom form somewhere in the 31.50-33.00 price support zone.
Both of these stocks were very overbought and really needed a rest.
Active Trade Alerts
Here are comments on our lone active alert:
ROST (-1.17%) - earnings date is November 21st. ROST reports its quarterly results after the bell tomorrow, so we will remove ROST at today's close as a slight winner, unless selling accelerates this afternoon.
Movers and Shakers
I ran a scan of all S&P 500 stocks that have seen their SCTR scores surge from below 50 to above 95 in the past six weeks as the overall market has advanced. We know that the S&P 500 has been on a tear, but what stocks have been improving their relative standing during that time? That's what this scan was designed to discover. Here are the 8 stocks that met the criteria:
CI, CTL, DVA, FMC, FTNT, LEG, QRVO, TIF
Most of these stocks are quite overbought and could use a bit of selling before they become more of a trading opportunity. However, since its huge gap higher, TIF has pulled back some and is nearing its 20 day EMA.
TIF:
TIF appears to be channeling lower. I'd consider the 20 day EMA to be a key short-term support level. If that fails to hold on a closing basis, we could see a much larger drop.
For those interested, here was the simple scan that was written:
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:
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
FOMC minutes will be released at 2pm EST
Happy trading!
Tom