EB Daily Market Report - Tuesday, November 26, 2019
Special Note
Our services will be modified a bit this week since it's Thanksgiving Week here in the U.S. There will be no Trading Places LIVE on Wednesday morning at 9am EST. Also, there will be no Daily Market Report on either Wednesday or Friday of this week. I will be hosting a Market Vision 2020 mini-series, however, on Friday beginning at 11am EST. I'll be discussing "The Creation and Design of Winning Portfolios". While we've been requiring subscription to the free Market Value 2020 newsletter in order to receive room instructions for these mini-series events, we will waive that requirement for our EarningsBeats.com members and will make sure you receive room instructions as well. This event will be recorded for those unable to attend live.
If you'll be traveling this week for the holidays, please be safe! On behalf of the entire EarningsBeats.com team, I wish those celebrating this week a very Happy Thanksgiving!
Executive Market Summary
- All our major indices are higher once again, adding to record all-time highs
- Leadership today comes from two defensive groups - real estate (XLRE) and consumer staples (XLP)
- Energy (XLE) and financials (XLF) are lagging
- The XLE is weak despite a clear uptrend underway in crude oil prices ($WTIC), which are higher again today
- Apparel retailers ($DJUSRA) are strong today behind Chicos (CHS) and Burlington Stores (BURL) quarterly earnings reports
Market Outlook
I discuss transports ($TRAN) a lot because I'm a big believer in the Dow Theory, which looks to transportation stocks to break out to confirm the Dow Jones Industrial Average ($DJI) breakout. If an economy is truly expected to strengthen, more goods will be shipped. It's really quite simple. Sometimes we all try to make the stock market much more complex than it really is. If the stock market looks ahead 6-9 months and we see transports performing well, especially vs. the much more defensive Dow Jones Utilities ($UTIL), then it's very difficult for me to be anything other than bullish.
Check out this TRAN:UTIL relative chart:
Over the past 6-7 weeks, we've already seen this ratio explode higher. For now, however, it still remains in a down channel. I believe that's going to change based on many other observations of the U.S. stock market and economy, but our confirmation comes on a relative breakout near 13.30 (filled red circle). If that happens, we'll likely be flying, 18-wheelin, and laying the tracks for a major rally in 2020.
Sector/Industry Focus
Mid caps ($MID) have broken out and deserve our attention:
I know that much of the current bull market rally off the December 2018 low has been driven by large caps, but as traders grow more confident about our economy, small and mid caps typically lead. It's great to see both groups breaking out currently.
Strong Earnings ChartList (SECL)
As posted above, mid caps ($MID) are breaking out so I ran a scan of S&P 400 mid cap stocks on our SECL that have SCTR scores above 90 (best of breed). My scan is written as follows:
A member wrote to me and asked what the "[favorites list is 105]" means. I selected my Strong Earnings ChartList from StockCharts.com's drop down menu of "ChartLists" under "Scan Components". The 105 is simply a number that StockCharts.com assigns to my Strong Earnings ChartList. I just wanted to clarify.
Here were the 14 stocks on our SECL that met these criteria in SCTR order, highest to lowest:
SYNA, CRUS, VC, LITE, THC, SNX, RS, MKSI, OC, BC, ENR, AAXN, OSK, TPX.
These are all great looking charts, but most are overbought and not exactly at great reward to risk entry levels. Therefore, I'll concentrate on the 3 that are closer to support.
VC:
After an excellent earnings report, VC gapped higher, but then sold off. I believe it's undergoing an accumulation phase as it's a leader among auto parts companies. 87-90 would seem like best entry.
MKSI:
MKSI gained 20% in three days after its latest quarterly earnings report. It's part of the red-hot semiconductors industry as well. I like this pullback and consolidation for entry.
TPX:
TPX is also consolidating after a very strong quarterly earnings report. It's part of the furnishings group, which has been strong as well. I believe this period of consolidation and basing is presenting an opportunity on the long side.
For all of the above stocks, I think they'll break out above their recent highs, but that's where more significant short-term selling could develop if the prior uptrend resumes.
Active Trade Alerts
There are no current alerts. I've received a couple emails from members asking for more alerts. If I happen to spot a stock in real time that looks like a solid reward to risk trade candidate, we'll send it out. One problem is that I spend much of my time throughout the day either writing blog articles, hosting Trading Places LIVE shows, writing the DMR, and then taking the time necessary to research and prepare for all of those activities. That makes it difficult to actively seek out trade alerts throughout the trading day. To be honest, it impacts my own short-term trading routine, which is fine. I love providing the education that we do at EarningsBeats.com.
When I run scans here in the DMR, identify the results of those scans, and then annotate charts, I'm providing viable trade candidates. That's the purpose of the SECL and Movers & Shakers sections of this report. I'm searching the entire market for prospects as I see market rotation. For instance, today's DMR focuses on mid cap and small cap stocks, some that are part of the SECL and others that are not, because that's a trendy area of the market today and recently.
When we add active trade alerts, the primary difference between these and the other trade setups is that we follow up daily on these trade alerts. This is done primarily for education. I try to provide everyone my perspective on what I'm thinking throughout the life of a trade - whether it's a winner or a loser. We've had discussions on trade alerts here at EarningsBeats.com and whether they're worthwhile. I believe they are because it's an extension of the education that we provide. But you should not view them simply as a way to manage an entire portfolio. For instance, if there are no alerts out, it should not be construed that I'm bearish or cautious. I am wildly bullish about the stock market's prospects over the next 12 months.
Movers and Shakers
We're enjoying quite a rally right now, especially in the small and mid cap space. I ran a high volume scan of the S&P 600 Small Cap Index and the S&P 500 Mid Cap Index, looking for stocks that had traded at least 40% of its normal daily volume during today's first hour.
There were 10 small caps as follows (in SCTR order, highest to lowest):
ARWR, MDCO, MNTA, CHS, SFNC, AAOI, CAL, ANF, MTSC, MOV
There were 17 mid caps as follows (in SCTR order, highest to lowest):
AAXN, AYI, CBRL, CHK, DKS, DY, EPR, FIVE, KMT, MSA, PEN, SAIC, SBRA, SWN, TECD, WH, WWD
I found the following 7 stocks from the scan results interesting and wanted to share my thoughts:
CHS:
CHS is breaking out and is finding renewed relative strength. Volume is accelerating, another bullish sign. Any future pullback to test either price support or the rising 20 day EMA makes sense technically for entry.
SFNC:
SFNC has been a laggard among banks, but it's worth noting Monday's breakout on strong volume that appears to have reversed its relative downtrend as well.
AAOI:
AAOI's downtrend isn't over, but it could be getting close. I like the recent increase in volume to forge an initial false breakout. If AAOI can clear that overhead price resistance near 12, this chart would really start to look bullish. In the meantime, honor that 9-12 trading range.
ANF:
Personally, I wouldn't do anything with ANF at this point. I simply wanted to point out what could be a bottoming reverse head & shoulders pattern. The pattern doesn't confirm until neckline resistance is cleared with an acceleration in volume.
CBRL:
CBRL has been a weak relative performer in restaurants for quite awhile, but recent improvement in its relative strength is masked somewhat by a horrible industry group. CBRL successfully tested a very key price support level near 152-153. If restaurants come back into favor, CBRL could be one to watch.
DKS:
I love, love, love, love candles like this one. It's essentially a maribozu candle where DKS has an intraday low very close to its open and its last price is very near its intraday high. It's an illustration of a company under major accumulation in my view. How it closes today and over the next couple day will provide us more clues as to the likelihood of a pullback, but make no mistake about it. I'm bullish DKS.
EPR:
Here we have a relative laggard in a sector that I don't like for 2020 - real estate. So what could be appealing here? Only price support in the 71-72 area. If that's lost, there's no chance I'd hang on. But it might hold right here. While I don't favor real estate as a relative leader in 2020, I do expect most areas of the market to participate and move higher. So if real estate moves higher on an absolute basis, EPR could find strength off of price support.
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 26:
BNS, VMW, ADI, DELL, ADSK, HPQ, DLTR, HRL, VEEV, KEYS, BBY, BURL, MOMO, EV. Others less than $5 bil: CBRL, DKS, BOX, GES, ANF
Wednesday, November 27:
DE. Others less than $5 bil: None
Thursday, November 28:
None
Friday, November 29:
None
Economic Reports
September Case Shiller HPI: +0.4% (actual) vs. +0.3% (estimate)
October new home sales: 733,000 (actual) vs. 707,000 (estimate)
November consumer confidence: 125.5 (actual) vs. 126.9 (estimate)
Happy trading and Happy Thanksgiving!
Tom