EB Daily Market Report - Wednesday, October 14, 2020

Special Notes

It's earnings time! We will have our "Sneak Preview: Q3 Earnings" webinar at 4:30pm ET today. You can access this event by using the room link below. The room should open at approximately 4:00pm ET:

https://us02web.zoom.us/s/81730737635

To re-post from yesterday, I want to make sure everyone is aware that through this Friday, October 16th, anyone who extends their membership for 13 months (one month bonus) for $697 will automatically receive our new ETF service at no additional cost until their next renewal date. Let me give you an example. Let's say you're a current annual member and your membership expires at the end of February 2021. You will receive everything we offer, including our ETF service, through that date and at no additional charge. If you decide to pay us $697 to extend your annual membership another year, you'll receive 13 months (one bonus month) so that you'll then be paid up through the end of March 2022. You will receive everything we offer, including our new ETF service, through that extended date with no additional charge for the ETF service. It will be covered. This $697 annual special represents a HUGE savings as our current expectation is to charge $497 for our ETF service annually, in addition to our $697 regular service, beginning January 1, 2021.

Also, those of you that are monthly or currently enjoying our 30-day trial, may extend using the annual deal above. You will not lose any of your current time. In the case of the 30-day trial, your 13 months would begin AFTER your trial expires. You don't lose any part of your trial. Just wanted to be clear about that.

If you have any questions or if you'd like to extend using this special, please contact us at [email protected]. It's our way of saying thank you for your support and commitment!

Executive Market Summary

• Futures were up slightly this morning, but that strength has not lasted as our major indices are in the red
• The NASDAQ is underperforming today, after recent relative strength in this technology-laden index
• Energy (XLE) is the best performing sector today, possibly due to options expiring this Friday and so many energy stocks downtrending of late
• Communication services (XLC, -1.16%) and real estate (XLRE, -1.04%) are the two sectors losing > 1%
• Outside of energy, the best performing industry group is autos ($DJUSAU, +2.91%)
• NIO, a member of our Strong AD Portfolio, is soaring today (+23.68%) after analysts at JP Morgan called NIO the "long-term winner" in China's EV (electric vehicle) market
• Earnings are mostly being reported ahead of expectations, which is a positive for valuations as we move forward
• Bank of America (BAC) was the only stock that I saw reporting worse-than-expected EPS and it's on the S&P 500 loser board, falling more than 4%
• United Health (UNH, -2.53%) is leading the Dow Jones lower today, despite beating expectations

Market Outlook

The S&P 500 has broken below its 20 hour EMA, a short-term negative, but it's moved very close to gap support at 3477. Failure to reverse at gap support would then open the door to a 50 hour SMA test (3461), or a bigger 20 day EMA test, currently at 3413, but rising. Here's a picture of the gap support on a one month chart:

If we connect the highs from this rally and then drag that same sloped line to the lows, you'll see that a short-term channel is also in play right now. The problem that the bears have right now is that there are myriads of support levels that they must negotiate to regain control of the action. I just don't see it happening. My worst case would be the S&P 500 falling back to maybe 3400.

We'll soon find out.

Sector/Industry Focus

Health care providers ($DJUSHP, -1.21%) were on the cusp of a very important breakout and were undoubtedly hoping for the UNH earnings report to be a catalyst. Barring an afternoon surge, that's not likely to happen. Here's the current technical outlook for the DJUSHP:

Clearly, an absolute breakout is what the health care longs want to see. But, perhaps even more importantly, I want to see this group end its 6-month relative downtrend. That opportunity was missed today as well.

ChartLists/Strategies

I reviewed a number of charts in our Strong Earnings ChartList (SECL) and here are two that I believe are worth considering on the long side at current prices:

RNG:

I believe RNG has begun uptrending again, heading into its next earnings report. That suggests that buying on a rising 20 day EMA makes good sense because you can keep a tight stop. I really like that AD line on the rise as well.

ADSK:

Software ($DJUSSW) is regaining relative strength as the group now trades near a multi-month relative high. ADSK has been consolidating in a bullish inverse head & shoulders that just broke to the upside. I see a short-term move higher to its initial measurement near 265 to test the early-September high.

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.

Wednesday, October 14:

UNH, BAC, WFC, GS, INFY, USB, PGR, PNC, UAL, AA, SNBR

Thursday, October 15:

TSM, ISRG, MS, TFC, WBA

Economic Reports

September PPI: +0.4% (actual) vs. +0.2% (estimate)

September Core PPI: +0.4% (actual) vs. +0.2% (estimate)

Happy trading!

Tom