EB Daily Market Report - Monday, June 15, 2020

Today's Event

We will be hosting a public event today at 4:30pm ET to highlight our ChartLists and our new Scanning Strategies area of our website. Here's THE LINK to the webinar, but follow the link on our website if this doesn't work.

Executive Market Summary

• Futures were very weak to start the day, but buyers have returned with the NASDAQ leading the charge and well into positive territory
• Our other major indices have moved into positive territory as well
• Volatility was over 41 earlier, but has fallen back to less than 35
• Walmart (WMT) announced they would be using Shopify (SHOP) to increase their online marketplace
• Communications services (XLC, +1.59%) is today's best sector; health care (XLV, +0.40%) lags again
• The Fed announced it will buy corporate bonds and that's helped put a bid under equity prices
• The 10 year treasury yield ($TNX) has reversed course as well, with a rise to 0.71%
• Crude oil ($WTIC) is up 2%, though gold ($GOLD) remains slightly lower on the session
• DocuSign (DOCU, +6.64%) is higher; it will replace United Airlines (UAL, -0.91%) in the NASDAQ 100

Market Outlook

When a downtrend begins, the absolute first thing I look for to end the downtrend is a move back through the 20 hour EMA. Until that occurs, I'm typically skeptical of intraday bounces. With that in mind, let's look at the S&P 500's hourly chart:

The 20 hour EMA is currently at 3054, the same as price. To me, this is the first test of resistance. The next step is....can we clear yesterday's (Friday's) high of 3088.42. Then comes major gap resistance at 3123.53. The downside is much easier to gauge. 2975-2980 is our short-term support. Can we hold that level? If we do, and move higher to break out, that would add to the bullish argument for U.S. equities. Perhaps we'll simply consolidate in this range.

From a trading perspective, you can trade while the S&P 500 is in a range. Just keep in mind that volatility remains high with the VIX currently at 35. That's better than 45, but it's still historically high. Folks remain nervous, which makes a lot of sense. But Wall Street has a long-term history of "climbing the wall of worry".

I'm confident we're in a secular bull market with new all-time highs on both the Dow Jones and S&P 500 not too far in the future.

Sector/Industry Focus

Automobiles ($DJUSAU) ended last week on a negative note and this morning's start wasn't great either, but it's resulted in a near 20 day EMA test in a chart that is quite bullish otherwise:

The relative strength of autos is not in question right now. This is a group leading and Tesla (TSLA, +4.41%) has been an excellent performer within the space. TSLA is 1 of our 10 Model portfolio stocks and it's bounced beautifully after nearly testing its rising 20 day EMA.

ChartLists

Let's talk breakouts today. If a stock can break out in this environment of high volatility and uncertainty, it likely suggests that the stock is going higher. Looking through our various ChartLists, here are notable breakouts to consider for trades:

MNTA:

The close today will be important, but MNTA is a leader among biotechs and I like to pay attention to breakouts of ANY leaders. Failure to breakout on the close, however, could lead to further consolidation and frustration. In the end, I expect MNTA to do very well.

NET:

NET seems to consolidate when the stock market is very weak, but on the first sign of strength, it tends to break out. That's the case once again today and volume is quite strong to confirm the breakout. The only thing left is the close. Will the breakout hold?

PTON:

PTON joins the list of potential breakouts today. Volume is strong, like the others, so it's important to see the breakout on today's close.

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:

Monday, June 15:

None

Tuesday, June 16:

LEN, HRB, GRPN

Economic Reports

June empire state manufacturing: -0.2 (actual) vs. -30.0 (estimate)

Happy trading!

Tom