EB Daily Market Report - Monday, May 4, 2020
Guest Appearance
StockCharts TV's "Your Daily 5" is broadcast at 1pm EST every day and today I had a guest appearance and provided my 5 charts/themes that viewers should pay attention. Be sure to check it out. You can watch live on StockCharts TV at 1:00pm EST, while replays run at 2:30pm EST and 5:30pm EST. Or you can go to youtube.com and search for "StockCharts Your Daily 5". It will be posted there later today.
Executive Market Summary
- Futures were a bit weak as global markets continued to sell overnight and into this morning
- We've seen recovery since the open, however, with the NASDAQ outperforming
- A strange combination of technology (XLK, +0.56%) and energy (XLE, +0.47%) were the two sectors in positive territory
- Industrials (XLI, -2.17%) and financials (XLF, -1.95%) were weakest as the latter struggled with lower treasury yields
- Autos ($DJUSAU) and renewable energy ($DWCREE) were two of the best industry groups
- March factory orders tumbled 10.3%, slightly more than the consensus estimate of 9.5%
- We have no active trade alerts at this time
Market Outlook
Relative strength is returning to areas that we've been focused on since the initial drop in late-February. Here's the industry group relative strength leaderboard for today:
Those are the Top 15 industry groups intraday and I see familiar areas like gold, toys, specialty retail, and software.
Sector/Industry Focus
On Friday, I featured the computer hardware industry group ($DJUSCR), which is having a nice day today. Now let's check out software, which has been a relative strength leader for a LONG time:
Don't give up on an industry just because it seems like it can't keep going up. I can go up a lot longer than we might think. Earnings strength in software names deserves much higher PE multiples because of the historically low interest rates. I expect this group to be a leader for the foreseeable future for that reason.
Strong Earnings ChartList (SECL)
On Saturday in our WebinAR (WAR) Room, I unveiled a rather simple scan that looks for stocks that are reversing short-term downtrends. That is, a higher high prints after several days of downtrending that resulted in lower highs printing. Here are stocks in our SECL that meet this "reversing" criteria today:
CIEN, CPB, FIVN, HD, LLY, MUSA, NVDA, QTS, SBAC, SNBR, TW, ZM
Here are two that look appealing to me:
NVDA:
MCO:
The attempted bounces are occurring right off of 20 day EMAs, a level where we typically see weakness in uptrending stocks reverse.
Strong and Weak AD ChartLists
Look at the best performing Strong AD ChartList stocks and the worst performing Weak AD ChartLists:
Best Strong AD ChartList stocks:
Of the top 13 stocks today, 11 are healthcare and 2 are technology. Of the 11 healthcare stocks, 8 are biotechs ($DJUSBT). It's clear to me where Wall Street has begun putting their collective money. But if buying individual stocks, you still must be somewhat selective because the DJUSBT is up just 0.16% at last check.
Worst Weak AD ChartList stocks:
Of these 15 worst performers, 7 are airlines stocks. So just like we can see that biotech is clearly IN favor, airlines ($DJUSAR) are clearly OUT of favor.
Earnings Reports
Here are the key earnings reports for today and tomorrow, 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. Beginning next week, I'll be placing an asterisk (*) next to stocks that are showing excellent relative strength and accumulation/distribution lines 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. For this week's earnings reports, you should check out our "Q1 Earnings" webinar, where I detailed in two separate ChartLists those stocks where I'd look for good and bad quarterly earnings results. Please be sure to check for earnings dates for any companies you own or are considering owning:
Monday, May 4:
ITUB, SRE, WEC, RACE, PEG, AIG, WMB, TSN, O, SWKS, JKHY, WAB, VAR, ACGL. Others less than $10 bil: CNA, VNO, OHI, MHK, XPO, FIVN, CRUS, ALSN, UNM, FN, SHAK, EVER
Tuesday, May 5:
DIS, D, REGN, ITW, ATVI, NEM, LHX, TRI, DD, EA, SBAC, ALL, MELI, SYY, SU, KLAC, RSG, VRSK, PRU, EQR, SLF, MTCH, INCY, TT, MPC, TDG, AME, MPLX, APTV, FCAU, ANET, OXY, LDOS, PEAK, XYL, EXPD, FMC, PINS, MLM, W, BKI, CTLT, PKI. Others less than $10 bil: DVA, WU, BYND, LITE, ENPH, PLNT, DVN, IOVA, EVBG, TRIP
Economic Reports
March factory orders: -10.3% (actual) vs. -9.5% (estimate)
Happy trading!
Tom