EB Daily Market Report - Friday, January 22, 2021
Executive Market Summary
- Futures were down this morning after weakness in a couple of large technology stocks that reported earnings yesterday
- Intel (INTC, -8.13%) and International Business Machines (IBM, -10.16%) weighed on stocks and they're the 2 worst performers in the S&P 500 today
- Communication services (XLC, +0.15%) is the only sector in positive territory this morning
- Energy (XLE, -1.35%) is the primary laggard, though financials (XLF, -0.97%) are also weak
- NASDAQ shares are showing leadership again today as AMD, MSFT, FB, and GOOGL all advance
- Commodities are mostly slipping with crude oil ($WTIC) down slightly more than 1%
- Salesforce.com (CRM, +1.95%) has come to life and is heading for a big test just above 230; CRM is the Dow's best performer today
- Two of our short squeeze stocks, GME and DDD, are up 15% and 12%, respectively, and are leading the S&P 600
Market Outlook
Communication services (XLC) has seen renewed relative strength as you can see from this chart:
And the primary reason? It's been the breakout in internet stocks ($DJUSNS):
In the ChartLists/Strategies section below, I show you how to use our research platform to zero in on stocks likely to benefit from this breakout in the DJUSNS.
Sector/Industry Focus
Home construction ($DJUSHB) and home improvements ($DJUSHI) had both lost a lot of relative strength as they consolidated in rectangular fashion the past several weeks. But the housing starts and building permits numbers yesterday, together with a strong existing home sales report today, has both in the spotlight and nearing breakout levels:
DJUSHB:
DJUSHI:
It would be yet another bullish development for consumer discretionary (XLY) stocks if two more industry groups join the fray.
ChartLists/Strategies
We'll likely see a pullback near-term in internet stocks ($DJUSNS), so we want to be armed with the best of the bunch. Between our Strong Earnings ChartList (SECL), Strong Future Earnings ChartList (SFECL), and our Raised Guidance ChartList (RGCL), we should be able to find some excellent candidates in the space. Here's how you can write a scan to look for internet stocks that are on ANY of the aforementioned ChartLists:
Here were the results:
(Disclosure: I own SNAP, PINS, and UPWK)
Look at the top 2 on this list and check out the relative strength lines.
FTCH:
It's trading in a 57-65 trading range and as it consolidates, its PPO has moved back down near centerline support. I believe FTCH is setting up for a breakout, though another trip down to test its rising 20 day EMA or even 57 support cannot be ruled out.
PINS:
Very similar chart. We're seeing consolidation. Just keep in mind that leaders will often lead. Now that the group has broken out, watch to see breakouts in the leaders. Such moves would likely serve as the beginning of another leg higher.
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.
Friday, January 22:
SLB, EDU, KSU, RF, ALLY, HBAN
Monday, January 25:
KMB, BRO, GGG, AGNC, STLD, CR, HXL, FUL, BOOT, HTLF
Economic Reports
January PMI composite flash: 58.0 (actual) vs. 55.5 (estimate)
December existing home sales: 6,760,000 (actual) vs. 6,550,000 (estimate)
Happy trading!
Tom