EB Daily Market Report - Thursday, January 21, 2021
Executive Market Summary
- Futures were mostly higher this morning, although there was relative strength in NASDAQ shares
- Large cap NASDAQ stocks continue to power this market forward
- Intel (INTC, +3.94%), Apple (AAPL, +3.48%), Advanced Micro Devices (AMD, +3.44%) and NVIDIA (NVDA, +2.59%) are all in the NASDAQ 100's ($NDX) Top 10 performers
- 3 of those names are semiconductors ($DJUSSC, +1.39%) as this industry is propelling the technology area higher
- Renewable energy ($DWCREE, +6.50%) and computer hardware ($DJUSCR, +3.31%) are even stronger within that technology space
- Home construction ($DJUSHB, +2.20) is surging after a huge beat on both housing starts and building permits this morning
- The 10-year treasury yield ($TNX) is up 2 basis points on the heels of surprisingly strong economic data
Market Outlook
Apple (AAPL) is a big part of the stock market because the stock market is capitalization-weighted and AAPL owns the largest market capitalization at $2.3 trillion. So it behooves us to watch AAPL Currently, the stock is nearing its all-time high as it also nears its next quarterly earnings report, which is scheduled for next Wednesday, January 27th after the market closes. Here's a current look at AAPL's chart:
Relative strength lines are just beginning to turn up after a period of consolidation. Remember, when a stock tops and then consolidates - like AAPL did starting in early-September - and loses relative strength. That can be excusable. What's not excusable, however, is when a stock breaks out, but still fails to show any relative strength. AAPL's relative strength seems to be turning up, so my guess will be that it's about to lead the market higher again.
(AAPL is in our Income Portfolio and I own shares.)
Sector/Industry Focus
If you're seeing a rally and only three sectors are participating, it might as well be these three:
Energy (XLE) and materials (XLB) are both struggling today. The surprising part of this is that the U.S. Dollar (UUP) is actually rolling over and trading back beneath its 20 day EMA. Normally a weak dollar would provide a boost to these two groups, but not today. Instead, we're seeing some profit taking. Don't grow too bearish the XLE and XLB, though, as both remain above their rising 20 day EMAs. Today's weakness may turn out to be just temporary.
ChartLists/Strategies
I ran the Downtrend Reversal scan, again looking for possible rebound candidates. It was run against our Strong Earnings ChartList (SECL), Strong Future Earnings ChartList (SFECL), and Raised Guidance ChartList (RGCL) and it produced 7 stocks with SCTRs above 80:
RUN (97.2), WMS (93.0), RYAM (92.9), BKE (91.2), VRAY (91.0), SMG (88.0), AIMC (82.0)
There are two that are very interesting:
RUN:
This is a stock where you really need to catch it on the 20 day EMA test. The 20 day EMA scan syntax that we provide on our website would have returned RUN this morning when it was much closer to its 20 day EMA. Note also that RUN was testing price support simultaneously. The combination of bullish factors can make a trade very appealing.
BKE:
BKE never made it down to its 20 day EMA, but I'm mentioning this one because it's been very strong, it's a leader within a strengthening apparel retail group ($DJUSRA), and it's a member of our Short Squeeze ChartList (SSCL). We have it ranked as the 55th most heavily shorted stock with 22.69% of its float short. If it makes the breakout above 34, watch the volume. If it increases significantly, it'll be a sign that a short squeeze is kicking in. Meanwhile, any trip back towards 31-32 should be met with buyers as the 20 day EMA has been strong support and it currently resides at 31.76 (and rising). Gap support is at 30.85.
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 21:
INTC, UNP, IBM, ISRG, CSX, TFC, TRV, PPG, SIVB, BKR, FITB, NTRS, MTB, KEY, STX, FCEL, TCBI
Friday, January 22:
SLB, EDU, KSU, RF, ALLY, HBAN
Economic Reports
December housing starts: 1,669,000 (actual) vs. 1,558,000 (estimate)
December building permits: 1,709,000 (actual) vs. 1,610,000 (estimate)
Initial jobless claims: 900,000 (actual) vs. 900,000 (estimate)
January Philadelphia Fed Manufacturing Index: 26.5 (actual) vs. 11.0 (estimate)
Happy trading!
Tom