EB Daily Market Report - Friday, May 15, 2020

Tom Bowley - May 15, 2020

Tomorrow's WAR Room

I'll be hosting another in the latest of our WebinAR (WAR) Room series tomorrow, Saturday, May 16th, 2020, at 2:00pm ET. There will be a lot of discussion involving the performance of our major indices, key sectors and industry groups, and individual stocks. The ChartLists that we've developed over the past 2-3 months really gives EB.com members a huge advantage and I'll discuss how to benefit from them.

Executive Market Summary

Futures were weak and our major indices opened lower
Small cap ($SML) and mid cap ($MID) are leading today
April retail sales were shockingly disappointing, yet today consumer staples (XLP) and consumer discretionary (XLY) are the best two sectors
The normal laggards are at it again - utilities (XLU, -2.81%), real estate (XLRE, -1.96%), and financials (XLF, -1.04%)
Volatility ($VIX) has been on the rise this week, but is down slightly today; Gold ($GOLD) has been a beneficiary, rising close to 3% on the week thus far
Options expiration is playing short-term havoc on the market with rotation into weaker names and out of stronger names

Market Outlook

The big reversal yesterday in the QQQ kept its AD line from moving to a one month low. Today's action should help to send this indicator higher as well, barring an afternoon selling episode:

Closing in the upper half of a day's trading range sends the AD line higher, regardless of whether a stock, ETF, or index closes higher from the prior day.

Sector/Industry Focus

Perhaps one of the biggest surprises in terms of industry strength since this pandemic began is truckers ($DJUSTK). This group ranks 7th out of all 104 industry groups since the February 19th top (I'll discuss more of this in tomorrow's WAR Room session). Here's the current look at the absolute performance of the DJUSTK:

The solid blue lines highlight the current channel, while the blue-dotted lines show the possibility of a lower-sloping uptrend to keep an eye on. Currently, however, the DJUSTK remains one of the few bright spots among industrials.

ChartLists

Let me give you the Friday update and how our 3 primary ChartLists are performing as options expire:

Based on the above, I'd conclude that the Weak AD ChartList is performing slightly better than the other two, but given the large net in-the-money put premium, there's probably additional market maker buying in these underperforming stocks. Quite honestly, we might see that into the early part of next week as well. However, I'd still stick with the better overall ChartLists for my long trades - the Strong AD ChartList and the Strong Earnings ChartList. I found it interesting that not a single one of our SECL stocks is down more than 3% today. I believe that speaks to the strength of this ChartList.

I ran a scan of our Strong AD ChartList, searching for stocks that have made a higher high today after posting at least three consecutive days of lower highs. In other words, this scan is attempting to catch a possible reversal. Recently, I discussed Zoom Video Communications (ZM), which was downtrending at the time, and I suggested waiting until it printed a higher daily high. Otherwise, you can get caught in a significant downdraft. Check out ZM's chart:

This isn't the only way to trade these stocks, but it's one way. Running this scan, there were 72 Strong AD ChartLists stocks that met this scan criteria today. Here are those that have SCTRs above 95:

DXCM, CUE, NOW, ADVM, MTEM, NLOK, AMZN, CTXS, CALA, MNTA

Of these, here are three I like:

NOW:

The AD line here is very strong, but it wouldn't be a shock to see NOW move lower one more time given that options expire today and next week tends to be a historically weak one.

ADVM:

This is a very volatile and risky stock, but it's part of the exceptionally strong biotech group ($DJUSBT) and it's been a great performer of late. Volume trends are strong and the recent pullback has brought the stock closer to the top of gap support.

MNTA:

MNTA has been trending higher for months and has been a strong relative performer among biotechs. I like the bounce and recovery off its recent 50 day SMA test.

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. 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, May 15:

JD, VFC

Monday, May 18:

BIDU, SE, IQ, BILI

Economic Reports

April retail sales: -16.4% (actual) vs. -11.2% (estimate)

April retail sales less autos: -17.2% (actual) vs. -8.6% (estimate)

May empire state manufacturing survey: -48.5 (actual) vs. -65.0 (estimate)

April industrial production: -11.2% (actual) vs. -11.5% (estimate)

April capacity utilization: 64.9% (actual) vs. 64.1% (estimate)

March business inventories: -0.2% (actual) vs. -0.5% (estimate)

March consumer sentiment: 73.7 (actual) vs. 66.0 (estimate)

Happy trading!

Tom