EB Daily Market Report - Monday, January 25, 2021

Tom Bowley - January 25, 2021

Today's Event

At 4:30pm ET today, I'll be hosting our "Q4 Earnings" webinar. I'll be looking ahead to point out upcoming earnings reports that Wall Street is expecting to be blowout. Here's the link for the room (should open by 4:00pm ET at the latest):

https://us02web.zoom.us/j/83424865370

If you cannot make today's event, no worries. We record all of our events and we'll make sure you receive a copy of the recording.

ChartList Updated

The Short Squeeze ChartList (SSCL) has been updated on our website. You can download it into your StockCharts.com account if you're an Extra or Pro member.

Executive Market Summary

Futures were mixed at the opening bell with NASDAQ shares rallying behind a gap higher in Apple (AAPL)
The Dow Jones, however, has been operating in negative territory all day
There were tremendous early surges in heavily-shorted stocks like GME, BBBY, and SPWR; many of these short squeeze stocks have since returned closer to their Friday closes
Commodities are mixed with gold ($GOLD) slightly lower and crude oil ($WTIC) slightly higher
Strength today is found in defensive areas of the market, a potential short-term warning sign, especially if it continues
There were no key economic reports and the 10-year treasury yield ($TNX) has fallen 5 basis points to 1.04%, another signal of rotation to safety
Volatility ($VIX) has climbed nearly 10% today (but was much higher earlier) - yet another signal to be careful near-term
Tomorrow will kick off earnings season for many big NASDAQ companies; MSFT, TXN, SBUX, and AMD are among those that will be reporting on Tuesday

Market Outlook

As I looked at the 60 minute charts today, I realized that we have some short-term issues that we may potentially have to work through. The NASDAQ 100 ($NDX) has been a very strong index and a leader, yet its hourly chart suggests another short-term high could be dangerous from a momentum perspective:

We're nearing the upper end of the channel that was established after the Pfizer vaccine news in November. It's also worth noting that the hourly PPO hit a recent high close to 1, which has presented problems in the past.

Don't misunderstand me. I remain very bullish U.S. equities. But we've had a huge run and if we can't extend the current rally with big earnings reports coming up later this week, we may have to settle for a period of consolidation.

Sector/Industry Focus

We've bounced back from earlier lows, a definite short-term positive, but I do question the nature of this short-term rally. The big NASDAQ companies reporting earnings this week will have the burden of producing strong enough results that new money wants to enter. Friday's sector leaderboard ended in defensive fashion and today's is defensive as well:

A strong finish in the final hour with money rotating more aggressively is on my wish list. Barring that, however, we need to be a bit more cautious this week, especially with signs of aggressive selling this morning.

ChartLists/Strategies

It's been a wild day with tremendous swings in both directions. I ran a scan of Strong Earnings ChartList (SECL) stocks that tested their 20 day EMAs and also had SCTR scores above 90. There were eight as follows:

CPRI, EV, IEA, LB, MDB, NET, NTLA, SAIL. I thought IEA and NTLA looked interesting.

IEA:

NTLA:

These stocks look similar technically. Both are leaders in their respective industry groups. Both have been in steady uptrends. And both have pulled back 20% (or close to it) from their recent price highs before attempting to rebound today off 20 day EMA support. IEA has the better looking PPO, so I'd give that one the better odds of a successful bounce.

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, January 25:

KMB, BRO, GGG, AGNC, STLD, CR, HXL, FUL, BOOT, HTLF

Tuesday, January 26:

MSFT, JNJ, VZ, NVS, NEE, TXN, SBUX, AMD, RTX, AXP, MMM, GE, LMT, CNI, PLD, UBS, COF, FCX, PCAR, ROK, ADM, DHI, MXIM, VAR, BXP, CHRW, FFIV, WRB, IVZ, EHC, ALV, PII, ALK, XRX, SLGN, AUDC, LRN

Economic Reports

None

Happy trading!

Tom