EB Daily Market Report - Monday, February 10, 2020
SECL Update
The Strong Earnings ChartList was updated over the weekend, so you can now download the new ChartList into your StockCharts.com account (assuming you're an Extra member or above) from our website. When you're logged into earningsbeats.com, you'll see "ChartLists" on the left navigational panel. Here's where you would go to download any ChartList of ours:
The Strong Earnings ChartList (SECL) was updated over the weekend and now includes 269 charts. To access the list, you can go to our website using the link above OR you can click on the "SECL" link below and enter the password below:
Password: Earnings269
Executive Market Summary
- Our major indices opened lower, but have recovered and are all showing gains
- Crude oil ($WTIC) is down 1% and below $50 per barrel
- The 10 year treasury yield ($TNX) is down 2 basis points to 1.56%, despite the lack of economic reports today
- Consumer discretionary (XLY) is the leading sector, buoyed in large part by Amazon.com (AMZN)
- Asian markets were mixed overnight, while key European markets are fractionally lower
- We currently have no active trade alerts
Market Outlook
Let's not lose sight of transportation stocks ($TRAN). When a bull market really begins to kick in, it's typically accompanied by very strong transportation stocks. I like to review the following chart at least once every couple weeks and believe another breakout above recent highs would be incredibly bullish for U.S. equities:
Bull market consolidation periods are typically marked by lagging transportation stocks, but once we break away from sideways action to another leg of the primary uptrend, transports and small caps ($SML) usually help to lead the way. I feel we made a breakout in both the TRAN and SML, but the follow through to date has been lacking. I believe the main reason for this is that typical intermarket relationships are not present this time. Usually, a big breakout in the S&P 500, TRAN, and SML is accompanied by rising treasury yields as evidence of a strengthening economy. In our current environment, many believe the bond market's continuing rise (and the resulting downtrend in yields) is a sign of economic weakness ahead and keeping transport buyers on the sidelines. I think that will prove to be the wrong interpretation. As I've stated many times in the past, I believe bonds remain in play because the Fed is dealing with a very unusual combination of disinflation with a growing economy.
I believe we will see another breakout in the TRAN and SML very soon, but it might take further time to see relative strength in those two groups.
Sector/Industry Focus
Consumer discretionary (XLY, +0.64%) is today's leading sector and broadline retail ($DJUSRB, +1.54%) is the best performing industry group within the sector. Amazon.com (AMZN, +1.92%) is driving the strength in both groups as it continues its powerful breakout from a bullish ascending triangle continuation pattern. Here's a chart of the XLY that highlights a few possibilities as to future channel highs that we might look for:
The solid upper channel line represents the top of a potential channel in play right now. The bottom uptrend line has multiple successful tests along it, which underscores the importance of this trendline. I'm not sure the top channel line has been established. Right now, that solid line is the best we have, but if the XLY clears that to the upside, the blue dotted-lines mark potential channel trendlines, which would suggest the XLY moving much higher. After AMZN's big breakout, I believe the XLY will accelerate higher.
Active Trade Alerts
Currently, we have no active trade alerts.
Strong Earnings ChartList (SECL)
As mentioned above, we've added a large number of companies that beat both revenue and EPS over the past two weeks to our SECL. Of the 269 now on the list, here are the companies with SCTR scores above 97:
This will not be a bad list to concentrate trading efforts as stocks with very high SCTR scores tend to remain in uptrends. The worst performer of this group today is:
SYNA:
I'd watch that 80.00 level carefully. That could turn out to be THE key price support level moving forward. SYNA is probably the best computer hardware stock ($DJUSCR) right now, even besting Apple (AAPL).
Movers & Shakers
I ran a scan of S&P 600 small cap stocks to see which companies are showing unusually heavy volume (volume in excess of 50% of normal daily volume in first hour of trading). There were 18 as follows:
Here are the three that caught my attention, after looking at the charts:
PETS:
PETS is a clear leader in the drug retailer space ($DJUSRD) and broke out on Friday. Drug retailers have become more bullish in February and PETS is poised to take advantage of that. The best entry would be a pullback in price to the breakout level near 27.
MYGN:
This is a reprint of the MYGN chart that I showed on Friday. After gapping below prior support, it's typically a bearish signal where I'd expect further weakness. We did rally on Friday afternoon, but the selling appears to be regaining momentum today.
POWI:
The daily volume on POWI can be a little light for my taste, but I still wanted to point out the positives here. POWI held relative support and has rallied back to threaten a key price breakout. Volume today is heavy, so a breakout should be respected. It's part of a very strong semiconductor group ($DJUSSC).
Earnings Reports
Here are the key earnings reports for this week, featuring stocks with market caps of more than $10 billion. I also include a few select companies with market caps below $10 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:
Monday, February 10:
ITUB, AGN, MELI, QSR, RNG, L, BIP, STE, CNA, RE, DVA. Others less than $10 bil: XPO, VOYA, MOH, JCOM, RPD, AMKR, ACB, ELY, APPS
Tuesday, February 11:
D, EXC, HLT, ACGL, PEAK, AMCR, MLM, OMC, AKAM, UDR, MAS, LYFT, HAS, EXAS, WU. Others less than $10 bil: UAA, EEFT, AN, TGNA, NSP, LSCC
Wednesday, February 12:
CSCO, CVS, CME, GPN, AMAT, SHOP, MCO, EQIX, MFC, WELL, GOLD, IQV, SLF, WCN, CDNS, EFX, ATUS, MGM, SSNC, CTL, IFF, NLY, NTAP, TEVA, TYL, TAP, CVE, TRMB, REG. Others less than $10 bil: MRO, IPG, AVLR, CYBR, TRIP
Thursday, February 13:
BABA, PEP, NVDA, LIN, FIS, DUK, ZTS, WM, TRP, AIG, BCS, KHC, RSG, CCEP, DLR, DXCM, FTS, LH, ANET, INCY, EXPE, ROKU, AEM, DDOG, ZBRA, FNF, LBTYA, WST, GDDY, BIO, HII, NICE, BKI. Others less than $10 bil: MHK, AYX, IPGP, GNRC, TPX, HUN, YETI
Friday, February 14:
AZN, ENB, PPL, YNDX. Others less than $10 bil: NWL, CGC
Economic Reports
None
Happy trading!
Tom