EB Daily Market Report - Wednesday, December 18, 2019
Executive Market Summary
- Futures were up again this morning and our major indices are mostly higher
- The 10 year treasury yield ($TNX) is up 4 basis points to 1.93%; a break above 2.00% could result in an S&P 500 "melt up" into January earnings
- Real estate (XLRE), communication services (XLC), and energy (XLE) are today's sector winners
- Materials (XLB) and industrials (XLI) are trailing on a relative basis
- FedEx (FDX) disappointed traders once again with its earnings - relative weakness clued us in to the risk here
- Internet stocks ($DJUSNS) are breaking out and poised to run much further; Facebook (FB) is up 2.6% and at its highest level since July
- Our alert TPX continues its trend higher and is now up roughly 8% since it was alerted
Market Outlook
In the very near-term, the S&P 500 has begun another nice uptrend on its hourly chart. Until that breaks, expect more positive action in U.S. equities. Here's the short-term uptrend line:
The solid blue line simply connects the recent lows. First, understand that the slope of this line will not continue for long - it's too steep. The S&P 500 has gained 4% in just the past 15 days. That can't continue long-term, so expect this uptrend to break at some point. The blue-dotted lines represent a potential channel to watch for if the solid uptrend line is broken. This channel was created by connecting the highs and then dragging that line down to the December 3rd low. That establishes a bit more modest uptrend and slope, though this channel can't be sustained longer-term either.
For now, enjoy the run higher during this historically-bullish holiday season.
Sector/Industry Focus
Consumer discretionary (XLY) had been lagging on a relative basis while it was consolidating, but it's now broken out above price resistance. It'll be interesting to see if it can regain relative strength:
I'm bullish the overall market and I believe all groups are heading higher, including the XLY. But the bigger question is "will it outperform the benchmark S&P 500 or will it simply be carried higher by the rising tide?" The initial step to see improving relative strength is to clear short-term relative resistance (two red arrows).
Active Trade Alerts
We have one active trade alert currently:
TPX (+0.88%) - reports earnings on February 12. TPX is currently trending higher and moving closer to our target at 91.80. It appears we could be printing the right side of a bullish cup. Our entry was 82.20, so TPX currently shows a gain of nearly 8%. Given the new zero-commission trading environment, it makes sense to consider scaling out of TPX from the current level up to 91.80.
Strong Earnings ChartList (SECL)
I ran a scan this morning of SECL stocks with an RSI reading between 40-50. I then sorted them in SCTR order and further analyzed those with readings above 60. Here's a snapshot of the scan results:
Below are a few of these stocks worth considering on the current pullback:
ACAD:
ACAD has fallen more than 10 bucks in the past couple weeks to test gap support. It's actually beneath both gap support and its 50 day SMA currently, so a reversal this afternoon could print a bottom. Failure to reverse today, though, would likely suggest further selling down to 40 initially.
SBH:
5 weeks ago, SBH hit 22 bucks after earnings. Now you can grab it on a Christmas sale near 18. The current price down to gap support at 16.64 is an accumulation zone, in my opinion.
SNBR:
There's been considerable consolidation here on light volume, likely setting up for another advance. The current price, down to 46, represents a zone to accumulate shares. Be careful on a close beneath 46, especially if it were to occur on heavier than normal volume.
Movers & Shakers
I ran a scan of all NYSE stocks trading at least 60% of their normal daily volume in the first 90 minutes of trading today. I then sorted the results in SCTR order and reviewed those with a SCTR above 75. Here are the scan results:
JBL:
A very bullish gap higher accompanied JBL's latest quarterly earnings report, but the failure to extend gains after the opening gap suggests we could see a pullback here. JBL is a leader, so a test of gap support and/or the rising 20 day EMA could provide solid entry.
VOYA:
I like the basing that's taken place in VOYA over the past several months and the very recent consolidation in a tight range the past 6-7 weeks. Today's breakout is clearing all of that resistance on heavy volume, a bullish signal indeed. If VOYA finishes strong today, the top of gap support will likely offer up great support in the weeks ahead.
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, December 18:
MU, GIS, PAYX, TTC. Others below $5 bil: MLHR, ABM
Thursday, December 19:
NKE, ACN, DRI, CAG, FDS. Others below $5 bil: SAFM, AIR
Friday, December 20:
KMX. Others below $5 bil: BB, WGO
Economic Reports
None
Happy trading!
Tom