EB Daily Market Report - Monday, August 24, 2020

Special Event Today

At 4:30pm ET today, we're hosting a webinar, "Powerful Scanning Strategies for our Strong Earnings ChartList". We're opening this event to the public to demonstrate how we approach the market on a day-to-day basis, but I'm sure there'll be a few tips and tricks mixed in. Please join me if you can. If you have a scheduling conflict, no worries. We'll be recording the event as always, so you can be sure to check it out when it's convenient.

Executive Market Summary

• Futures were higher across the board as Wall Street began a new week on a bullish note
• The 10 year treasury yield ($TNX) has climbed a basis point to 0.65% as positive COVID-19 news is helping to lift stocks that have suffered during the pandemic
• Energy and financials are today's leading sectors
• The lowest SCTRs among industry groups are leading today - that includes airlines ($DJUSAR) and recreational services ($DJUSRQ)
• Commodities are mostly lower as the U.S. Dollar (UUP) has rallied off an earlier gap down
• Cruise lines and airlines dominate the S&P 500 leaderboard today
• Plenty of losers are found among health care, which is the worst performing sector

Market Outlook

One bearish seasonal pattern not holding true today is the typical decline we see on the Monday following monthly options expiration on the prior Friday. I haven't updated the study that I did a couple years back, but when I reviewed Monday trading action for the 68 year period beginning in 1950, here's what I found about Monday's S&P 500 performance throughout the calendar month:

26th through 6th: -11.92%

7th through 10th: -18.74%

11th through 18th: +8.58%

19th through 25th: -44.22%

Monday the 19th has been the worst day, with annualized returns of -86.63%. Monday the 24th hasn't been a whole lot better, however, with annualized returns of -63.96%.

2020 is different, though, on many different fronts, so why not reverse the Monday fortunes while we're at it, right?

Sector/Industry Focus

Many stocks that benefited throughout this pandemic are struggling today as the market digests positive COVID-19 news. Stocks like Zoom Video Communications (ZM), Teladoc Health (TDOC), and Peloton Interactive (PTON) are being distributed, while many beaten-down stocks in airlines and cruise lines recover. The good news is that the overall market is not selling off, we're simply seeing rotation. There are plenty of beneficiaries of this rotation, including clothing & accessories ($DJUSCF), as that group is making a definitive breakout:

This is yet one more example of a consumer discretionary industry group moving higher to attempt to lead this very influential and aggressive sector higher.

ChartLists

I did something a little different today. Since clothing & accessories is attempting a breakout and we know that money is rotating into names that have struggled on a relative basis since March, I decided to scour our Weak AD ChartList to try to identify individual stocks that might be showing more bullish signals. Here are two that I felt were worthy of consideration:

KTB:

We haven't seen the breakout above the June high just yet, but the action in this stock since gapping higher (blue circle) in July has been bullish. Note the successful rising 20 day EMA tests (green arrows) and the high volume (blue arrow) that accompanied the July gap up.

GIL:

GIL has already made the breakout above the June high and the AD line here has been strengthening. There's still some work to do in terms of relative strength, but overall, GIL appears to be trending solidly higher. The green arrows mark successful 20 day EMA tests on this one as well.

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 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, August 24:

PANW

Tuesday, August 25:

CRM, MDT, INTU, ADSK, BMO, BBY, HRL, HEI, SJM, HPE, ATHM, TOL, PSTG, HAIN, URBN

Economic Reports

None

Happy trading!

Tom