EB Daily Market Report - Thursday, February 4, 2021

Tom Bowley - February 04, 2021

Executive Market Summary

Futures were up this morning and we've seen strength throughout much of the day
The Dow Jones is threatening a close above 31000, which it did earlier in January
The S&P 500 and NASDAQ are both on the verge of all-time highs
The 10-year treasury yield ($TNX) tested its recent high just below 1.17% before backing off
Financials (XLF, +1.79%) and technology (XLK, +1.15%), two aggressive sectors, lead today's advance
Materials (XLB, -0.34%) is the only sector in negative territory
Earnings, for the most part, continue to be very solid; Both Snap, Inc. (SNAP) and Pinterest, Inc. (PINS) reports after the close today and will impact the internet ($DJUSNS, +0.25%) space tomorrow
The best S&P 500 performer is Align Technology (ALGN, +12.92%), while the worst is QUALCOMM (QCOM, -9.06%); both are portfolio stocks of ours and highlight the risk/reward of holding a stock into earnings

Market Outlook

Our major indices are attempting a breakout, but they haven't quite made it just yet. Today, let's look at the S&P 500, which has an all-time high of 3870.90. We're currently at 3862.43 and this is how it looks on its hourly chart:

The bullish answer is a breakout. Failure to breakout, however, suggests we're in a trading range from 3700-3870.

Sector/Industry Focus

Rates are back on the rise as the 10-year treasury yield ($TNX) has climbed back to the January 12th high of 1.16%. Despite the rates rising again, home construction ($DJUSHB) is threatening a breakout after consolidating for several months:

Recent weakness could certainly be interpreted as a handle. That means a breakout of the pattern would measure to roughly 1525 or so. If the TNX fails at 1.16% and pulls back in the near-term, the DJUSHB could be a big beneficiary.

ChartLists/Strategies

To follow through on home construction, I ran a scan of home construction stocks on any of the following ChartLists:

Strong Earnings ChartList (SECL)
Strong Future Earnings ChartList (SFECL)
Raised Guidance ChartList (RGCL)

Below is the scan syntax I used. Just remember you cannot copy my syntax since it refers to my "favorite list" in my StockCharts.com account. You need to download these ChartLists into your own StockCharts.com account and then be sure to select YOUR ChartLists from the scan dropdown menu.

.....and here were the 4 home construction stocks that were returned in SCTR order:

Of these 4, my favorite would be BZH. It's already broken out and its AD line is very strong, not to mention that BZH's relative strength is excellent as well:

The most recent breakout provides the best price support. That was at approximately 16.30.

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, February 4:

MRK, TMUS, RDS/A, BMY, PM, SNAP, GILD, CI, BDX, ATVI, ABB, ICE, APD, PINS, F, PTON, U, BAX, BCE, MCHP, PH, CMI, ALXN, PRU, YUM, HSY, MSI, BLL, MTD, WEC, CLX, AME, FTNT, ODFL, FTV, ABC, FLT, IP, DGX, XYL, HIG, ZEN, MPWR, CMS, PENN, ESS, TW, NLOK, OTEX, MPW, CG, NWSA, WYNN, BILL, PCTY, CPT, SNA, NBIX, LEA, TPR, TWST, DECK, CSL, PFPT, RL, DXC, WMS, COLM, SKX, UNM, NEWR, PFSI, GOOS, SYNA, TDC, ARNC, WERN, GPI, MYGN, HIMX, KN, SBH, GPRO

Friday, February 5:

LIN, SNY, EL, ITW, REGN, AON, TT, ZBH, CAH, CBOE, BERY, HRC, LAZ, SPB, ADNT, ROAD

Economic Reports

Initial jobless claims: 779,000 (actual) vs. 812,000 (estimate)

Q4 productivity: -4.8% (actual) vs. -2.8% (estimate)

December factory orders: +1.1% (actual) vs. +0.7% (estimate)

Happy trading!

Tom