EB Daily Market Report - Monday, July 27, 2020
Executive Market Summary
- Futures were strong to open the week and beaten-down NASDAQ shares have reclaimed its leadership role
- Gold ($GOLD) has soared nearly 2% to hit an all-time high above $1930 per ounce
- Silver ($SILVER) is up another 7% as the dollar proxy (UUP) is under further selling pressure
- The 10 year treasury yield ($TNX) is up 2 basis points to 0.61% after a strong durable goods report earlier
- Global markets were mixed with Germany's DAX ($DAX) literally finishing with less than a one point gain
- Technology (XLK, +1.44%) and materials (XLB, +1.27%) are today's leading sectors
- Utilities (XLU, -1.36%), financials (XLF, -0.97%), and energy (XLE, -0.37%) are today's laggards; apparently, energy has not received the memo of dollar weakness
- Tesla (TSLA) is rebounding today and leading a surge in autos ($DJUSAU); biotechs ($DJUSBT) are also performing well
Market Outlook
The declining U.S. Dollar (UUP) remains one of the top short-term stories and it's showing no signs of being over just yet. The UUP is down another 0.78% today, adding to its near-term woes. Meanwhile, and not too surprisingly, materials (XLB, +0.98%) are 2nd on the sector leaderboard today, trailing only technology (XLK, +1.46%). SCTR scores, though, show that there's a new sheriff in town:
Just keep in mind that SCTRs have limitations like any other indicator we might choose to feature. SCTR scores only consider the price action of the last 5-6 months. The dollar began falling apart in March, so we're about 4 months removed from there. Foreign treasury yields have been moving higher, while U.S. treasury yields have been moving sideways to lower. That's creating the weakness that we're seeing in our currency. I understand the desire to trade materials stocks and, honestly, it's not a bad trade right now. Just please remember that the U.S. dollar is at a major pivot area on its long-term chart. Should the dollar reverse, there will be a lot of traders in materials stocks just as they top. So....if you do trade materials stocks, or the XLB, I'd consider keeping a fairly tight stop in place.
Sector/Industry Focus
Aerospace stocks ($DJUSAS, -1.76%) have been extremely weak, especially on a relative basis, and it's not helping today that Boeing (BA, -2.27%) is the worst performing Dow Jones component. BA reports its latest quarterly results on Wednesday morning before the opening bell and I wouldn't be looking for much good news. Check out the chart:
The blue-dotted directional lines are all pointing higher, indicative of BA at least showing a bit of relative strength since the March low. But that's short-term. The solid red directional lines paint a completely different story - one in which BA has been losing absolute and relative strength for most of the past year, long before the pandemic kicked in.
On BA's absolute chart, I see a series of lower highs the past several weeks with 4 equal lows (green arrows). If the market reaction on Wednesday is negative and BA gaps below this recent price support, all signs would point to further weakness ahead.
ChartLists
I generally like to trade very strong, leading stocks just as they begin to turn higher off a downtrend. We have our Downtrend Reversal scan that I like to use, but it requires 5 days of lower highs (before a higher high prints) to be a trading candidate. Not many of our strong stocks have gone down 5 days in a row, but many have gone down 4 days in a row. So I modified our Downtrend Reversal scan to look for stocks on our ChartLists with SCTR scores of 90+ and reversing off a 4 day losing streak. Here are those stocks that meet this criteria on our 4 more bullish ChartLists:
Strong Earnings ChartList (SECL):
ZM, STMP, DDOG, AAWW, ANGI
Strong Future Earnings ChartList (SFECL):
ADRO, NH, NK, ZYXI
Strong AD ChartList (SADCL):
TGTX (3 others also, but they're included above)
Raised Guidance ChartList (RGCL):
2 stocks, but they're included above
Of all the above, let's look at NH:
NH is an incredibly volatile stock and is not suited for everyone. It has lost a third of its market value in just the last few weeks. But it's earlier intraday high topped Friday's intraday high and that COULD mark the start of a reversal and uptrend. We'll see.
One other stock I'd like to mention and it's one that I've discussed previously - Xilinx (XLNX):
(Disclosure: I own XLNX shares)
XLNX is in a strong industry - semiconductors ($DJUSSC) - and is showing marked improvement vs. its peers and especially vs. the S&P 500 (highest relative level in 10 months). I'm planning to write my ChartWatchers article this weekend on improving stocks within strong industry groups. XLNX will likely be one of the stocks I feature, but it does report earnings on Thursday. I expect a solid report as XLNX recently raised guidance, but the reaction to that earnings report will be critical.
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, July 27:
SAP, NXPI, ARE, CINF, BRO, PFG, HAS, RPM, AVY, FFIV, UHS, LM
Tuesday, July 28:
V, PFE, AMGN, MCD, MMM, SBUX, SPGI, MDLZ, MO, AMD, CB, ECL, SHW, RTX, ROP, CNC, DXCM, EBAY, MSCI, CMI, CSGP, AFL, ROK, FTV, DHI, GLW, DTE, EDU, EIX, EQR, LH, AKAM, YNDX, MXIM, TRU, ZBRA, SSNC, BXP, WAT, MLM, MASI, OKE, STX, PKI, OMC, WAB, CHRW, CE, MPWR, UDR, BEN, LW, PKG, PEGA, JNPR, AMED, PII, ASH, HOG, WH, HUN, LSCC, NEO, UNM, IRDM, PRLB, TENB, FEYE, JBLU, BYD, ATRC, AUDC
Economic Reports
June durable goods: +7.3% (actual) vs. +6.5% (estimate)
June durable goods ex-transports: +3.3% (actual) vs. +3.5% (estimate)
Happy trading!
Tom