EB Daily Market Report - Friday, September 11, 2020

Tom Bowley - September 11, 2020

Note

Yesterday's DMR was published at approximately 3:20pm ET, a bit later than I generally try to publish, but many didn't receive it until well after the stock market closed. I didn't receive it until 6:30pm ET. I simply want to remind everyone that I post the DMR to our website at the same time that I send out the email. So, if for whatever reason mail is delayed, please be sure to check our website from time to time as it'll always be published there before the market closes - barring an emergency.

Executive Market Summary

Futures were solid overnight and U.S. equities gapped higher, but selling has kicked in
Inflation data was a tad hot for the second straight day, though that's done little to scare off bond investors
The 10 year treasury yield ($TNX) is down 2 basis points to 0.67% today
Financials (XLF, +0.65%) have held up quite well, though
Materials (XLB, +1.17%) and industrials (XLI, +1.03%) are the top performing sectors
Meanwhile, technology (XLK, -1.18%) continues to struggle and that's putting relative pressure on the NASDAQ 100 ($NDX), which is easily the worst performing among our major indices
Peloton Interactive (PTON, -2.27%) crushed revenue and EPS expectations, but has been selling ever since the opening bell
Kroger (KR, +0.40%) reported stronger-than-expected EPS, but was down earlier nonetheless; it has recovered since and turned positive
Nike (NKE) is leading the Dow Jones today, while Apple (AAPL) trails once again

Market Outlook

Let's check out a 30 day, 10 minute relative price chart using the IWF (growth stocks) and the IWD (value stocks), with the $NDX:$SPX (NASDAQ 100 vs. S&P 500) in the panel below:

There are lots of similarities between both these relative lines. But as long as they're both trending lower, maintain a cautious view of U.S. equities. I definitely believe we'll break out of this downtrend later in September and we'll see another solid pre-earnings advance, but we can't fast-forward through the current challenge. We need to let this play out. Building positions for the longer-term is fine, but short-term trading opportunities are more scarce, in my view.

Sector/Industry Focus

While some areas of the market are pausing and consolidating right now, nonferrous metals ($DJUSNF) and footwear ($DJUSFT) are not among them. These groups remain extremely bullish, trending beautifully above its 20 day EMA, and as they both attempt to set fresh new closing highs:

Nonferrous Metals ($DJUSNF):

A major beneficiary in this space has been Freeport McMoran (FCX), which has jumped roughly 20% since breaking above its earlier 2020 high in the first week of August.

Footwear ($DJUSFT):

Footwear is definitely seeing leadership from Nike (NKE), which is up nearly 20% in the past 6 weeks after finally clearing overhead resistance near 100 in July. NKE now trades for 118+ and is aiding the footwear group.

ChartLists

I sifted through the Strong Earnings ChartList (SECL), looking for stocks that have pulled back to what I consider to be fairly solid support, or at least to a point in which it might make sense to begin building a position. Here are three worth mentioning:

CALX:

The green-shaded area represents gap support. You can see the huge volume that accompanied that move higher. I'd expect buyers to be lined up in that gap support zone.

CSGP:

CSGP found buyers near 780 after its blowout earnings report in late-July and we're there again. If the stock does manage to lose that support, I'd expect to see further buying take place if the stock were to fall near 747. 745-747 provided resistance on multiple occasions in 2020, so after breaking above that level with earnings and heavy volume, that prior resistance becomes support. Given a target of 939 (opening gap after earnings), entry from 780 down to 747 provides a solid reward to risk trade setup.

NEO:

NEO is weakening, but the reward to risk improves as it creeps closer and closer to price support. The selling has also been on lesser volume, which could be construed as bullish. Ultimately, it'll need to hold support.

All 3 of the stocks above have held up quite well from an AD line perspective. In other words, price seems to be falling much more than their accumulation/distribution lines. This does not seem to be distribution, in my view. Still, it is September and I do think we have a dicey 2-3 week period ahead of us.

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.

Friday, September 11:

Monday, September 14:

LEN

Economic Reports

August CPI: +0.4% (actual) vs. +0.3% (estimate)

August Core CPI: +0.4% (actual) vs. +0.2% (estimate)

Happy trading!

Tom