EB Daily Market Report - Monday, September 14, 2020

Tom Bowley - September 14, 2020

Executive Market Summary

Futures began the morning in positive territory and that strength has carried U.S. equities higher
Commodities are jumping with gold ($GOLD) up nearly 1%, while silver ($SILVER) advances nearly 2%
The U.S. dollar (UUP) is back beneath its 20 day EMA, aiding the rotation into commodities
Real estate (XLRE, +2.48%) and financials (XLF, +1.94%) lead all 11 sectors higher today
Consumer stocks are among today's weakest areas, but both discretionary (XLY, +1.04%) and staples (XLP, +0.88%) are higher
Gilead Sciences (GILD, +3.68%) announced it would buy Immunomedics (IMMU, +99.91%) for $88 per share
Biotechs ($DJUSBT, +3.83%) are getting a big lift from this deal
The 10 year treasury yield ($TNX) is flat with no economic news out today
There won't be many earnings reports out this week, but two large caps are scheduled for Tuesday after the close - Adobe Systems (ADBE) and FedEx Corp (FDX)

Market Outlook

Railroads ($DJUSRR) are doing their part today to help lift transports ($TRAN). We know the importance of transports performing well during a bull market advance as it tends to send the signal that a bull market is sustainable. The DJUSRR is up more than 1.6% today and breaking out above its earlier September high. I love the bounce off its recent 20 day EMA, too. That's indicative of a trending chart:

I expect railroads to perform very well during Q4. October through December tend to be excellent months for railroads as you can see from the following seasonality chart:

Sector/Industry Focus

Building materials & fixtures ($DJUSBD) is yet another industry group that's recently surged into a leadership role:

It's not enough to simply make absolute price breakouts. We want to see relative price breakouts so that we know we're looking at a leading industry group. FRTA, a building materials & fixtures stock, is featured below as it's now reached a 52 week high.

ChartLists

The Strong Earnings ChartList (SECL) and Strong Future Earnings ChartList (SFECL) have been updated and are available for download on our website. You can can download the entire ChartLists into your StockCharts.com account if you're an Extra or Pro member there. If you're not a member at StockCharts.com, you can view the charts in these ChartLists one chart at a time.

Our major indices are up today, but remain in consolidation mode. Still, there are stocks breaking out to new 52 week highs every day. Here are the 15 stocks on our *updated* SECL that have pushed to a new 52 week high:

ADM, BLDR, COOP, CROX, DAR, DKS, DLTH, EXPD, FRTA, NSC, PFSI, PVG, RCM, SGRY, SHW

I'd be careful with above stocks that have weak PPOs and weak AD lines. They could go higher, but I'd make sure a tight stop was in place. For instance, let's check out BLDR:

The relative strength here is solid and BLDR is part of a leading industry. Volume trends are excellent as well, so there's plenty to like here. But I'm always a bit leery of a stock that makes a false breakout, especially if a negative divergence is in play. So the breakout can be traded, but just be careful if we see an afternoon reversal.

Footwear ($DJUSFT) has been strengthening, so that provides a bit more confidence trading a stock like Crocs, Inc. (CROX):

The bottom panel shows the recent relative surge in footwear stocks. So we know that money is rotating into this area of the market. CROX has also been a solid relative performer vs. its footwear peers since the pandemic began. My biggest question here is whether CROX can close above its January high close of 43.40. If so, we could see CROX begin a significant trend higher.

I also like the breakouts being made in both FRTA and NSC:

Both of these look poised for further gains, while viewing their prior price resistance as new price support.

Earnings Reports

Here are the key earnings reports for the next two days, 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, September 14:

LEN

Tuesday, September 15:

ADBE, FDX, CBRL

Economic Reports

None

Happy trading!

Tom