EB Daily Market Report - Wednesday, July 1, 2020

Tom Bowley - July 01, 2020

Special Notes

Here are 3 notes I want to pass along:

The stock market will be closed on Friday, July 3rd for Independence Day. Therefore, we'll be off as well, so there will be no Daily Market Report. I want to wish everyone a happy holiday weekend. Please be safe if you travel or are celebrating this weekend.
On Monday, we will be having a Members-Only "2020 2nd Half Market Outlook" webinar that will begin at 4:30pm ET. This is typically a lengthy webinar as I'll be discussing my market forecast for the balance of 2020 (and my reasons supporting it), along with a look at many areas of the market to include our ChartLists. It should be a very timely and educational event. I hope you can make it. (If not, no worries as we'll record the event as we always do)
Next Friday, July 10th, we plan to host a "Q&A" webinar beginning at 11am ET. The idea will be to answer many of the most frequently asked questions about our website, our style, our strategy, etc. I'll do my best to answer many of the questions that you've been sending in. Have a question or two you've been wanting to get answered? Use the following Survey Form and send them in!

Executive Market Summary

Most U.S. equities have been higher since the opening bell, although small caps ($SML) and mid caps ($MID) have clearly been exceptions
The NASDAQ 100 ($NDX) is up more than 1% and is trading at a level that would represent another all-time high close
Gold ($GOLD) is down more than 1%, while crude oil ($WTIC) is up more than 1%
The 10 year treasury yield ($TNX) is up 3 basis points to 0.68%, but unable to lift financials (XLF, -0.67%)
Energy (XLE, -1.93%), despite crude oil gains, is the primary sector laggard
Leadership today comes from communication services (XLC, +2.39%) and real estate (XLRE, +2.38%)
Internet stocks are rebounding for a third consecutive day as Facebook (FB, +4.03%) has been very strong
FedEx Corp (FDX) posted staggeringly bullish results and leads the S&P 500 today
Amgen (AMGN) received a positive ruling on an arthritis patent and is surging to a breakout; it's the 2nd best performer on the S&P 500

Market Outlook

Let's take a look at a one month hourly chart of our major indices, so that you can visualize the rotation that continues to take place:

This chart can explain the market better than I can. As we mostly consolidate and drift lower on the Dow Jones, S&P 400 Mid Cap, and S&P 600 Small Cap indices, the NASDAQ continues to trend higher. The S&P 500 is more in the middle of the spectrum. After the top in the first week of June, we're seeing money rotating BIG TIME into those high growth NASDAQ names - companies that are successfully growing their earnings in a very low interest rate environment. Wall Street is in LOVE with these companies and professionals are buying every share being sold. Shopify (SHOP), one of our ten Model portfolio stocks, is up another 4.8% today and has now TRIPLED since March. We absolutely MUST stick with strength.....or you won't keep up with the S&P 500. It's that simple.

Sector/Industry Focus

Most industry groups in the industrial sector (XLI) are down today. One notable exception, however, is delivery services ($DJUSAF), home of FedEx Corp (FDX, +11.85%). FDX reported BLOWOUT quarterly results and moved up to test key resistance before backing off:

It's not too surprising that sellers awaited FDX just above 160. I talked about it on my Trading Places LIVE show earlier this morning. I expected selling in this area. But FDX truly delivered a game-changing earnings report. Their EPS was off-the-charts vs. estimates. FDX in the low 150s to perhaps the upper 140s becomes a very solid buy, in my view. I'm very doubtful that FDX will completely fill that gap back to yesterday's close. In fact, I wouldn't be surprised to see buyers return as we head for today's close.

ChartLists

I used the CandleGlance charts (looked at 30 mini charts at a time) to quickly evaluate all Strong Earnings ChartList stocks. I'm watching the following dozen stocks very closely, awaiting their next breakout, which could represent a significant pre-earnings run higher:

CMG:

AKAM:

DXCM:

MTSI:

TEAM:

TREX:

VRSK:

RNG:

HAIN:

GWPH:

TGT:

OKTA:

OKTA is the only one that's actually in breakout mode right now. RNG is potentially breaking out, but it'll need a strong finish and volume to pick up to confirm that breakout. But generally speaking, if you look at these charts, you'll see LEADERS. These are companies that are leading their peers and the S&P 500. They are companies where management teams are executing their business plans and exceeding revenue and EPS estimates.

I find that I have much more confidence trading stocks like this.....rather than just running a scan of the universe of U.S. stocks.

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:

Wednesday, July 1:

GIS, STZ, UNF, FIZZ, CPRI

Thursday, July 2:

KFY, LNN

Economic Reports

June ADP employment report: 2.37 million (actual) vs. 3.50 million (estimate)

May ADP employment report: 3.07 million (revised) vs. -2.76 million (prior)

June PMI manufacturing index: 49.8 (actual) vs. 49.6 (estimate)

June ISM manufacturing index: 52.6 (actual) vs. 49.0 (estimate)

May construction spending: -2.1% (actual) vs. +0.8% (estimate)

FOMC minutes released at 2:00pm ET

Happy trading!

Tom