EB Daily Market Report - Monday, March 9, 2020
Special Note
Stockcharts.com's website has not been fully functional today, so charts have been inaccessible. Therefore, I have no charts for you today. I should be able to provide you charts in tomorrow's DMR and hopefully during this afternoon's webinar.
Webinar Today
We're hosting a special webinar tonight at 4:30pm EST. It's an exclusive webinar only for EarningsBeats.com members. I want to provide our members important information regarding this extremely volatile period and how I'm approaching it.
The room should be open sometime around 4:00pm and we'll start promptly at 4:30pm. I hope you can join me, but if you cannot, it will be recorded for later viewing.
You should be able to access the room using the above link after 4:00pm EST.
Executive Market Summary
- Futures were lock-limit down this morning with the Dow Jones looking to open down 1300 points or more
- Crude oil prices ($WTIC) have crumbled, down 17%, though they're well off the lows
- Treasuries have also benefited from this "risk-off" environment, with the TNX down 20 bps to 0.51%
- Energy (XLE, -17.36%), financials (XLF, -8.61%), and materials (XLB, -6.89%) are hardest hit today
- Consumer staples (XLP, -2.89%) and utilities (XLU, -3.87%), two defensive groups, are sector leaders
- Volatility ($VIX) makes the current environment treacherous, rising to more than 60 for only the second period in its history
- We have no active trade alerts at this time
Market Outlook
There's really not much to say, except that we remain in an incredibly fearful period. The only time we've ever seen the Volatility Index ($VIX) higher than it is today was in 2008 during the financial crisis that compromised the integrity of the entire global financial system. Do I think it's overblown and overdone? Yes. Does the stock market care what I think? No. The stock market acts irrationally during periods like this as we await capitulation, when the kitchen sink is tossed in. Expect volume that is completely off the charts and a massive reversal in stocks. That might look like the Dow Jones being down 2000 points intraday, followed by a reversal into positive territory by day's end. Those are the types of signals that suggest market makers are buying like crazy and usually indicates that selling pressure has slowed. Otherwise, market makers wouldn't buy.
Continue to be very careful in this environment, but if you feel compelled to begin buying with fear level so high, I can't really blame you. As I explain below, I've decided to put about 25% of my capital to work given the extreme VIX reading.
Sector/Industry Focus
Staying away from areas that continue to be impacted directly by the coronavirus or the oil price war makes sense. These areas include recreational services ($DJUSRQ), airlines ($DJUSAR), travel & tourism ($DJUSTT), hotels & lodging ($DJUSLG), and potentially restaurants ($DJUSRU). Also, all energy industry groups are under tremendous selling pressure given the lower demand for oil, coupled with the oversupply.
Active Trade Alerts
We have no active trade alerts at this time.
Strong Earnings ChartList (SECL)
I continue to use this volatile period to do more homework and less trading. That strategy usually works well for me during periods like the one we've endured the past 2-3 weeks. I am planning ahead, searching for possible trades once I feel the high level of fear has been priced into equities. Those who are more risk-averse should likely consider only ETFs when moving back into stocks, so perhaps the SPY (tracking the S&P 500) and the QQQ (tracking the NASDAQ). I began putting a fraction (maybe 25% or so) of capital to work this morning in both of these ETFs as a means to participate somewhat if the market bounces short-term from a VIX reading above 60 (!!!). But who's to say whether the VIX hits 90 as it did in 2008? In the event the market continues its plunge, I'll slowly move the rest of my capital into these ETFs.....and perhaps slowly into a few stocks in our portfolios - mostly the Model and Income portfolio stocks.
Buying ANY individual stocks requires the ability and willingness to take on higher risk in an absolutely chaotic market. I cannot make that decision for EB members. That's something that each of you must decide independently. Consulting with a financial advisor that you trust certainly makes sense.
Movers & Shakers
We'll take another look here tomorrow when charts are up and running at StockCharts.com.
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. An asterisk (*) is placed next to stocks that are showing excellent relative strength heading into their respective earnings report. In my judgment, I'd expect strong results and guidance, although correctly predicting which way a stock might gap after an earnings report is much more difficult. If you decide to hold a stock into earnings, please understand the significant short-term risk that you are taking. Please be sure to check for earnings dates for any companies you own or are considering owning:
Monday, March 9:
FNV*. Others less than $10 bil: MTN, THO*, SFIX
Tuesday, March 10:
None. Others less than $10 bil: REYN, PSN, DKS, CLDR, KFY
Economic Reports
None
Happy trading!
Tom