EB Daily Market Report - Friday, March 20, 2020

Special Webinar

We've been doing more of these lately, but we want to reach out to our members and help you navigate this uncertain market as best we can. Accordingly, I'll be hosting a 2pm EST webinar tomorrow, Saturday March 20th. With so many of us staying home these days and "social distancing" and, in my case, with no sports on these days, it feels like a great opportunity to reassess all that's happened and look forward to brighter days as a community.

You'll find a room link on our website's main member page. Here's the LINK. The room should open roughly 30 minutes (1:30pm EST) before the webinar begins. If you're interested in the agenda, you can also find this on that member page and link above. Our last webinar on max pain Tuesday evening took a long time to process the recording. We haven't had any issues since, but live attendance would be best in the event we run into those same difficulties.

Executive Market Summary

• Futures were mostly higher overnight and our major indices did gap up on the open as monthly options expire at today's close
• Our key indices are moving back and forth between higher and lower prices
• The inability to drive prices sustainably higher today (and this week) concerns me given the very oversold conditions and so much net in-the-money put premium
• The Federal Reserve announced that it will be expanding its asset purchases to include municipal bonds
• February existing home sales were better than expected, but economic fallout will likely begin with many March reports
• The 10 year treasury yield ($TNX) is down another 19 basis points to 0.92%
• At last check, only energy (XLE, +1.76%), real estate (XLRE, +0.97%), and consumer discretionary (XLY, +0.77%) are higher today among our sectors
• We have no active trade alerts at this time

Market Outlook

It's options expiration day and a long-awaited rally doesn't seem to be in the cards. Some beaten-down names in beaten-down industry groups have seen strength in early action, but that doesn't seem to be lasting. There's a TON of incentive for prices to move higher and yet they are not. While this guarantees us nothing, it definitely makes me nervous heading into the weekend and knowing that Monday morning will likely bring us substantially worse virus news. Will the market handle it well? I would doubt it.

Personally, I've decided to downsize my holdings again. The VIX is falling back as it's at 61, or lower by 14% today, yet that's resulted in almost nothing in terms of market strength - very unusual indeed. Everyone must make his/her own decisions. One problem with staying out is that if ANY really good news surfaces about a virus treatment or vaccine trial, we could see a big short-term rally, perhaps a huge OPENING rally. My strategy at this point is to simply maintain my portfolio as best I can and look for short-term opportunities, risking very little in terms of portfolio percentage. Until the stock market begins rewarding us for holding overnight, that's simply a risk that I'm not comfortable taking.

All of the above pertains to a TRADING portfolio. If you're a long-term investor, nothing has changed. Long-term means long-term. I'm sure we'll talk more about this in tomorrow's webinar. I hope you can join us.

Sector/Industry Focus

A few areas of the market that have been torn apart have seen a bit of relief the past couple days and, quite honestly, it probably has more to do with options expiration than anything else. Airlines ($DJUSAR) were up close to 20% at one point today, wiping out a TON of net in-the-money put premium. Now the group is up by 3.6%. Now you see it, now you don't! Gambling stocks ($DJUSCA) rose more than 50% (!!!!!!!!) from Wednesday's low to the earlier high today, wiping out a TON of net in-the-money put premium. But you must be so quick to take profits. In order to make 50%, you'd had to have bought at the exact bottom and sold today at the exact top. There was a good chance these stocks would rally into options expiration, but nailing the exact bottom is extremely difficult.....and painful if your timing is off.

There will be a number of industries requiring bailouts before all of this is over. One current problem with trading ETFs is that you buy a number of companies in the benchmark index that have very difficult futures ahead. That would be one reason why it might be better to put small positions in stocks that could benefit from changes that will likely take place as a result of "social distancing". I'll talk about that tomorrow in our special webinar.

Active Trade Alerts

We have no active trade alerts at this time. The lack of alerts is quite deliberate on our part. I'm a fairly aggressive trader and I am, for the most part, sitting out all this crazy volatility. I've had few short-term trades and when I do, I trade very small percentages of my portfolio. A high VIX environment can make you lots of money quickly, but it can also ruin you. Please be careful and don't hesitate to take quick trading profits and move back to cash. Cash is powerful during volatile market action.

Strong Earnings ChartList (SECL)

Today is a crazy day. We're wrapping up March options after a period of unbelievable volatility. I have no idea where the market will end today, nor where it might open Monday, but I'm personally much more comfortable with the majority of my trading portfolio in cash.

Movers & Shakers

The S&P 500 leaderboard is littered with companies that have recently been in "melt down" mode. MGM, which has lost 75%-80% of its value in a little over a month, is up nearly 25% today. Even still, it's down 15% from today's earlier intraday high. The volatility is insane. Other leaders today include CCL (cruise lines), WYNN (gambling), UAL (airlines), and MAR (hotels). This definitely could be options-related. We could see more short-term strength, but I'm avoiding trading any of these industry groups that will likely require bailouts. They could have a much further drop coming. Again, be careful. Keep those stops in play and be quick to take profits. Don't worry about missing out on further gains. ANY GAIN IS A GOOD GAIN right now.

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:

Friday, March 20:

TIF

Economic Reports

February existing home sales: 5,770,000 (actual) vs. 5,500,000 (estimate)

Happy trading!

Tom