EB Daily Market Report - Wednesday, November 4, 2020

Tom Bowley - November 04, 2020

ChartLists Updated

We have updated two of our ChartLists today as follows:

Strong Future Earnings ChartList 225 charts). Any stock in what I consider to be a strong industry group with a SCTR above 80 is included on this ChartList - unless it's on the Strong Earnings ChartList. Also, any stock in what I consider to be a weak industry group with a SCTR above 95 is included.
November Seasonality ChartList (20 charts). I've annotated key price support/resistance level(s). These stocks represent the best performing stocks historically during the month of November. The population was S&P 500 and NASDAQ 100 companies.

Executive Market Summary

Futures were very strong overnight and our major indices gapped significantly higher
The NASDAQ was the best performing index at the open and continues to be this afternoon
Split power between the White House, Senate, and House of Representatives has typically resulted in better stock market results; it's quite likely the rally taking place is occurring on the heels of Republicans likely maintaining control of the Senate
Biogen (BIIB, +39.14%) is soaring on news the FDA is likely to approve its Alzheimer's drug
Health care providers ($DJUSHP, +7.42%) are breaking out, quite possibly for political reasons
There's a wide variance in sector performance; only 7 sectors are gaining ground
Materials (XLB, -1.21%) and utilities (XLU, -0.66%) are lagging badly
Crude oil prices ($WTIC, +3.88%) have moved back above $39 per barrel as supply fell this morning - an oversupply has been the biggest problem with energy, in my view

Market Outlook

The current rally, while overwhelmingly bullish, still has work to do. The good news is that all of our major indices have broken above their 20 hour EMAs on their intraday charts. Adding to that bullishness is the fact that both the S&P 500 and NASDAQ 100 cleared overhead price resistance at 3425 and 11600, respectively. The downside is that we do still remain in a period of consolidation, so whipsaw action should be expected, especially with the Volatility Index ($VIX) remaining at 29. The drop of nearly 17% in this "fear meter" is very encouraging, though. We want to see the fear slowly evaporate as we move through November and December and into 2021. One uncertainty - the U.S. election - is behind us, although there's still no winner.

We've seen a huge reversal in the performance of growth stocks today vs. value stocks (IWF:IWD), which also is encouraging, but like the major indices, this ratio remains in consolidation mode:

The black-dotted lines show continuation patterns (symmetrical triangles). The first was confirmed with a breakout to the upside. The second has yet to be confirmed. A breakout to the upside, however, would be bullish.

Tomorrow will see over 600 companies reporting their quarterly results, including 9 of our 39 portfolio stocks. It's going to be a big day and could quite possibly be very volatile.

Sector/Industry Focus

Health care (XLV,+5.43%) is the biggest driver behind today's advance. The group had been lagging badly, but is soaring today, breaking out above key absolute price resistance as you can see below:

We need to watch the two red circles. Both absolute and relative breakouts are circled, but they need to hold into today's close or they're suspect.

ChartLists/Strategies

I ran a 52-week high scan against our Strong Earnings ChartList to find companies that could be breaking out today. I also added a filter to screen for those companies with a SCTR score below 80. The reason was to look for companies that were more likely to be breaking out from a period of consolidation. The following stocks were returned:

INFO, HON, PAYX, CGNX, CL, RPM, DRE, ABT.

I particularly liked the setup on CGNX, so let's take a look at that one:

Let's see if CGNX can clear resistance on a closing basis. If not, there's a decent chance we could see another test near 68. A breakout, however, given the stock's relative strength and improving industry group, could mean much higher prices ahead.

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, November 4:

QCOM, MELI, PSA, MET, VRSK, ALL, AWK, ANSS, FNV, CTVA, HLT, SLF, PAYC, AEE, HOLX, TYL, EXR, PODD, QRVO, ET, EXPE, PXD, TRMB, GDDY, JKHY, LBTYA, KGC, MTCH, ALB, ZNGA, SMG, RGLD, HST, LNC, FROG, PRGO, CF, H, WEN, QTWO, CCJ, QLYS, FTDR, STAA, RPD, APA, MRO, SGMS, CLH, GDOT, NUS, SUN, UPWK, OUT, AXNX, FIT, TTGT, SGRY, ELF

Thursday, November 5:

BABA, TMUS, BMY, AZN, LIN, ZTS, DUK, SQ, D, BDX, BKNG, CI, UBER, REGN, GM, GOLD, MNST, SRE, BCE, EA, PTON, IAC, BLL, RSG, PH, AIG, ED, MCHP, TTD, ROKU, MTD, PPL, EOG, ZG, ABC, VMC, FLT, CNQ, INCY, TTWO, EPAM, AMCR, NET, ALNY, CAH, BMRN, HUBS, EVRG, KL, NLOK, CDAY, CNP, PBA, AVLR, DNB, CNHI, LYV, SRPT, DISCA, CABO, GH, XRAY, WRK, TECH, OTEX, PCTY, TEVA, RGEN, XPO, WYNN, AYX, CZR, BILL, NWSA, IRM, AZPN, DBX, MLCO, RBA, HLT, RUN, LAMR, TNDM, AAXN, IRTC, SRCL, HBI, RP, ANGI, NVTA, PLNT, ADT, CHH, EBS, DXC, APPN, TREE, RDFN, YETI, STMP, SAIL, BLDP, SPCE, EVBG, GOOS, SWCH, AMN, SVMK, NKTR, VIAV, LAUR, VG, SYNA, TRIP, MTSI, CSOD, CARG, REGI, PGNY, TDC, MXL, TDS, EPAY, AAWW, YELP, ACMR, GLUU, ODP, GPRO, VCEL, EB, INSG