EB Daily Market Report - Thursday, January 7, 2021

Tom Bowley - January 07, 2021

Executive Market Summary

Futures were strong this morning and the NASDAQ was poised to lead after a day of lagging
Copper ($COPPER) moves above 3.70 for the first time in 8 years as many global markets rally
Crude oil ($WTIC) gains nearly 0.50%, tacking on to yesterday's first close above $50 per barrel since February 2020
Technology (XLK, +2.52%) and consumer discretionary (XLY, +2.13%) rise sharply to lead our major indices higher
Financials (XLF, +1.70%) add to their sizable gains from Wednesday with banks ($DJUSBK, +2.77%) again leading the push
Renewable energy ($DWCREE, +9.27%), autos ($DJUSAU, +6.05%), and semiconductors ($DJUSSC, +3.45%) - 3 familiar leaders the past year - powered forward on the session
The 10-year treasury yield ($TNX) is up another 3 basis points to 1.07% after reaching 1.09% earlier
Tesla (TSLA, +6.79%) powers through 800 for the first time ever and now has a $765 billion market cap
3D Systems (DDD, +84.75%), one of our Short Squeeze ChartList stocks, breaks out on massive volume

Market Outlook

Dow Jones - 31000. S&P 500 - 3800. NASDAQ - 13000. Check, check, check. And the beat goes on. Those banking on violence in our nation's capital to rough up the stock market are perplexed. Anyone waiting for the hammer to fall after the Democratic party's sweep in the two Georgia senate races.....well, they're going to need to look for another bearish reason to short this market. Secular bull markets put their heads down and charge ahead. Betting against it makes little sense. I read a report a few days ago where one prominent fund manager said this is the biggest bubble of our lifetime and used PE ratio analysis as his "clue" as to this unprecedented bubble. Unfortunately, some folks with predetermined bearish biases will use that to further their bearish rhetoric and claims.

I just look at the charts and don't understand what they're missing. The Volatility Index ($VIX) is still at 22 and change. There's fear in the air. Plenty of investors/traders do not believe in this rally. That's not how euphoric tops and bubbles form. It's actually quite the opposite. We need to see almost NO ONE bearish with so much good news that we can barely contain ourselves. That's when you have to worry about a major top. We have none of that. And nearly every single intermarket chart that I look at suggests this current rally is sustainable. We'll see periodic pullbacks, but stay the course.

Sector/Industry Focus

Ready for another industry group that's joining the party? Check out the health care providers ($DJUSHP), adding to yesterday's closing breakout:

This group had been a laggard, but we must respect any area of the market that breaks out as it garners a lot of attention. We could continue to see relative strength, at least until we challenge the relative high set back in early November (red arrow).

ChartLists/Strategies

Two things. First, I plan to unveil a favorite Short Squeeze ChartList stock of mine in tomorrow morning's EB Digest newsletter. I wanted our members to have this information first.

SKT:

SKT has a HUGE short interest that totals nearly 50% of its float. It's been showing relative strength, so an absolute price breakout could trigger a windfall of buyers and a short squeeze.

Next, given that health care providers have just broken out, you might consider the following stock which is resident on our Short Squeeze ChartList as well. The PPO remains positive and it's been consolidating since that early-September high. A close above 70 could result in a quick trip to test overhead price resistance closer to 80.

OTRK:

Short squeeze stocks are risky and aren't for everyone, but when they begin to see an avalanche of buyers, it can get very exciting in a hurry.

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.

Thursday, January 7:

MU, STZ, WBA, CAG, LW, HELE, DCT, AYI, WDFC, BBBY, ACCD, LNN

Friday, January 8:

None

Economic Reports

Initial jobless claims: 787,000 (actual) vs. 803,000 (estimate)

December ISM services: 57.2 (actual) vs. 54.6 (estimate)

Happy trading!

Tom