EB Daily Market Report - Tuesday, August 18, 2020
Note - No DMR on Wednesday
There will be no Daily Market Report out on Wednesday as I'll be spending the day selecting the stocks for the Top 10 Stocks webinar.
Special Events
We have two very important events on our schedule this week:
Tuesday - August Max Pain - begins today at 4:30pm ET. Here's a link that you can use to join me today (room should be open by 4:00pm ET):
https://us02web.zoom.us/j/84762367160
Wednesday - Top 10 Stocks - we'll be announcing the stocks that will comprise our 4 portfolios tomorrow evening, beginning at 5:30pm ET (room instructions will be sent out tomorrow afternoon)
Updated ChartLists
Yesterday, we updated the Strong Earnings ChartList (SECL). Today we've updated both the Raised Guidance ChartList (RGCL) and the Short Squeeze ChartList (SSCL). You can view or download each of these updated ChartLists from our website.
Executive Market Summary
- Futures were higher at the opening bell and the S&P 500 set a new all-time high at 3395
- Commodities are rallying, while the 10 year treasury yield ($TNX) is down 2 basis points
- Gold ($GOLD) moves back above $2000 per ounce
- Tesla (TSLA) and Amazon.com (AMZN) lead strong consumer discretionary sector
- Apparel retailers ($DJUSRA), however, are weak with Kohls (KSS) down more than 15% after reporting earnings this morning
- Communication services (XLC) and technology (XLK) also are strong today
- Energy (XLE) and utilities (XLU) are the weakest sectors
Market Outlook
The S&P 500 set a new all-time intraday high this morning, reaching 3395.06, which eclipsed the high set back on February 19, 2020. It must close above 3386 to set a new all-time closing high. In my opinion, that is just a formality. I expect it to occur very soon. The biggest obstacle will be the fact that options expire on Friday and there's plenty of net in-the-money call premium. I'll be discussing that more this afternoon during our August Max pain webinar that starts at 4:30pm ET. In the meantime, check out the 5 year weekly chart. We're all the way back:
I am seeing bullish signals just about everywhere I look. Yes, options might present a near-term problem. I also recently showed a negative divergence on the daily chart of the NASDAQ 100 ($NDX). But again, that's a short-term issue. Sector relative strength is a much better place to look for longer-term, sustainable bull market signals, and that points to higher prices ahead.
Sector/Industry Focus
Consumer discretionary (XLY) is having another excellent day today and an overlooked group in 2020 - restaurants & bars ($DJUSRU) is attempting to make an absolute breakout:
The bottom part of the chart is more important, however. Yes, the DJUSRU is trying to break out, but it's because the market overall is so strong that it's literally dragging even the weaker groups higher. The relative downtrend persists, suggesting that if you're planning to buy any restaurant stocks, I'd consider only the absolute best performing stocks within the group. Here's how I'd view the large cap area of the DJUSRU, using the SCTR Report tool at StockCharts.com:
Chipotle Mexican Grill (CMG) remains one of the better investments in this space currently.
ChartLists
I ran the Downtrend Reversal scan against 4 ChartLists - SECL, SFECL, SADCL, and RGCL - and today there were 10 trading candidates to consider that were printing an intraday higher high (vs. previous day) for the first time in at least 6 days. Here are the 3 I thought looked most interesting for a potential reversal:
FEYE:
FEYE has moved just below the top of gap support and is attempting to bounce off its 20 day EMA. It's aggressive, but worth considering. (Disclosure: I own FEYE shares)
LAKE:
LAKE would have had even more appeal closer to 19, but the reward to risk here from the 20-21 level still makes sense, especially if you purchase a partial position and fill it out if 19 support is tested. The volume in June suggests institutional accumulation took place as well.
SWCH:
SWCH is at a price support level where I'd be looking for a potential reversal, so the fact that it's showing up on our Downtrend Reversal scan indicates that this could be that reversal.
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:
Tuesday, August 18:
WMT, HD, SE, A, AMCR, JACK, GDS, AAP, CREE, KSS, LZB
Wednesday, August 19:
NVDA, LOW, TJX, TGT, ADI, SNPS, VIPS, NDSN, SQM, LB, VNET
Economic Reports
July housing starts: 1,496,000 (actual) vs. 1,240,000 (estimate)
July building permits: 1,495,000 (actual) vs. 1,300,000 (estimate)
Happy trading!
Tom