EB Daily Market Report - Wednesday, September 9, 2020
Executive Market Summary
- Futures were strong across the board this morning
- The NASDAQ is up nearly 3% at last check, with the S&P 500 and Dow Jones up slightly less
- The dollar (UUP) is down slightly, but trades above its 20 day EMA for the 2nd straight day
- Slight weakness in UUP has provided a spark for materials (XLB, +2.96%)
- Materials trail only technology (XLK, +3.80%) as all 11 sectors are up at least 1%
- Energy (XLE) lags the other 10 sectors, gaining just 1.22%; crude oil ($WTIC, +4.03%) is bouncing
- Computer hardware ($DJUSCR, +4.10%) and software ($DJUSSW, +3.86%) are among the best performing industry groups, helping to lead technology
- Airlines ($DJUSAR) are noticeably weak on the session with several component stocks littering the S&P 500 losers
Market Outlook
The 60 minute chart will provide us an initial signal of a potential break of the current downtrend, but it must first negotiate the declining 20 hour EMA. The strength today on the NASDAQ 100 ($NDX) has been nice, but it's only carried us to test that moving average:
While the obvious negative the past few days has been the price action, there are a few positives as well. The hourly PPO has now turned higher, so any future price drop beneath Tuesday's low will likely result in a positive divergence. Next, the AD line in the bottom panel is actually setting a new high in the midst of this selling episode. That's what leads me to believe that this is not mass distribution of tech stocks. If the NDX does negotiate the falling 20 hour EMA, the next test would come at gap resistance from the Friday, September 4th close, which was 11,620.40.
Sector/Industry Focus
Technology (XLK) will have a lot to say about how long we pull back/consolidate/base. Tuesday's close was almost squarely on the 50 day SMA, the first such test for the XLK since breaking above that key moving average back in April. The XLK has printed a higher high today after having lower highs the past three days, so it's definitely possible that the worst is behind us. How the XLK reacts to its test of 20 day EMA resistance will provide us a short-term clue:
Our last serious bout of selling was in June. At that time, we saw the S&P 500 drop initially and then printed a retest of that low. The XLK, however, never went back to retest that initial June drop as its relative strength climbed. The XLK's relative strength (XLK:$SPX) will be something to watch throughout September.
ChartLists
There was only one stock on our Strong Earnings ChartList (SECL) that met our Downtrend Reversal criteria yesterday. It was Williams Sonoma (WSM), and the stock has moved up again today:
Running that same Downtrend Reversal today, however, produces a much larger result as 12 companies have met the criteria of 5 consecutive lower highs the past 5 sessions - with a higher high today. The stocks are as follows:
ATEN, AXNX, CERS, EA, EBS, ECOM, ERIC, ETRN, QTRX, RCII, TDC, TGT
Here are two that I find interesting:
EBS:
EBS has really been beaten up the past 4-5 weeks since trading above 135. It's fallen all the way back to test a key gap support area. EBS is volatile and isn't for everyone, but the reward to risk has most definitely improved with this recent selloff.
TGT:
TGT fell slightly beneath the top of gap support around 147, and even penetrated the rising 20 day EMA slightly, but today's push to the upside very well could end the recent slide in the stock. I would be looking for a return back to the 155 level reached after earnings.
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.
Wednesday, September 9:
ZS, HDS, RH, NAV, VRNT, AEO, AVAV, GME
Thursday, September 10:
ORCL, CHWY, PTON
Economic Reports
None
Happy trading!
Tom