EB Daily Market Report - Monday, December 21, 2020
Announcement
We extended our Holiday Special through today. For more information, CLICK HERE.
Executive Market Summary
- Futures were spooked this morning as a new strain of COVID in the UK is resulting in a travel ban between that country and others
- This new strain is showing signs of spreading more quickly, although it hasn't shown to be more deadly
- Many health care experts believe current vaccines should work against this new strain as well
- Still, major indices suffered with this news, overshadowing the $900 billion stimulus deal that Congress agreed to
- Crude oil ($WTIC) is down 2.67% after closing last week above $49 per barrel
- The 10-year treasury yield ($TNX) opened lower this morning, but has rallied back near breakeven - similar to equities
- Europe is getting hit much harder than the U.S. as the German DAX fell 384 points, or 2.82%, today
- Occidental Petroleum (OXY, -5.26%), one of our max pain stocks from last Tuesday, continues to trend lower and is the S&P 500's worst performer today, likely due to options manipulation
Market Outlook
Today's "selloff" was at the open and throughout mostly the early morning. Was it distribution or accumulation, though? I'd argue the latter as we've seen buying throughout much of the day, with the Dow Jones turning positive. As I write this, the S&P 500 and NASDAQ aren't far behind.
But look under the hood of today's action. Check out the sector summary:
This just doesn't smell like distribution to me. Defensive groups and energy (XLE) are at the bottom of the sector leaderboard today, while our 5 aggressive sectors take up residence in the top 6 spots. Growth (IWF, -0.06%) leads value (IWD, -0.29%) on a down day, which also paints a much more bullish picture than the indices themselves might suggest.
Sector/Industry Focus
I always feel good when any aggressive sector bounces off a rising 20 day EMA during an uptrend in the market. Today that's exactly what we're seeing with financials (XLF, +1.75%) and it's the main reason that the Dow Jones is leading. Goldman Sachs (GS, +7.00%) and JP Morgan (JPM, +4.93%) are two of the top three performers in the Dow Jones today, and I especially like JPM's breakout above prior highs:
Banks ($DJUSBK, +3.06%) are having a very strong day, clearing their earlier high in December, which is great news for not only that group, but the entire stock market as we head towards 2021. A healthier banking group means more lending, which will help to spur our economy further.
ChartLists/Strategies
I ran a 20 day EMA scan (from our website) and changed the SCTR > 75 to SCTR > 90 as a filter. I wanted to see which of the best stocks from our ChartLists saw a 20 day EMA test today and is currently trading above that 20 day EMA. Here were the 18 stocks that were returned:
ADNT, AMD, AXTI, COTY, DRI, EAT, EVRI, HAL, KROS, MGI, NLS, PINS, SGMS, TGH, VXRT, WRK, X, XLNX.
The two in bold are portfolio stocks, so I'll highlight those charts below:
AMD:
PINS:
AMD and PINS have both been excellent buys at almost every 20 day EMA test since the pandemic started. AMD did consolidate during September and October, but otherwise that 20 day EMA has been an excellent entry. Those awaiting pullbacks to enter trending stocks should consider rising 20 day EMA tests as at least entry for a partial position.
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, December 21:
HEI, FDS
Tuesday, December 22:
CTAS, KMX
Economic Reports
None
Happy trading!
Tom