EB Daily Market Report - Monday, February 8, 2021
ChartLists Updated
Over the weekend, both the Strong Earnings ChartList (SECL) and Strong Future Earnings ChartList (SFECL) were updated. You can view/download those updated ChartLists on our website. I'm also in the process of updating our Strong AD ChartList (it's been awhile), focusing on stocks with SCTRs above 80 that also show strong AD (accumulation/distribution) lines. I'm hoping to have that complete by tomorrow.
Executive Market Summary
- Futures were strong at the open this morning, but the clear winner throughout the day has been small caps ($SML)
- Crude oil ($WTIC) has jumped another 2% today to $58 per barrel, its highest level in over a year
- The 10-year treasury yield ($TNX) hit 1.19% earlier today, but has backed off to 1.16%, down a basis point
- Energy (XLE, +4.44%) is having a very strong day as sectors are mostly split on the session
- Home construction ($DJUSHB, +3.00%) is having another strong day as well (see more below)
- Renewable energy ($DWCREE, +5.92%) is also strong and breaking to fresh all-time highs
- MRO, OXY, and APA are among the energy names lifting the S&P 500
Market Outlook
While you might think that rising crude oil prices ($WTIC) could put a damper on a bull market rally, quite the opposite is actually true. A strengthening crude oil market is typically synonymous with improving global economic conditions. I believe that's what we're seeing now. Below is a chart that highlights the positive correlation between the direction of oil prices and the direction of the S&P 500:
We've got a long way to go before I'd worry about higher energy costs.
Sector/Industry Focus
Home construction ($DJUSHB) has made a breakout. That might seem counterintuitive given the recent rise in treasury yields, but just keep in mind that interest rates remain extremely low. A slight bump should not have a material impact on the industry. Here's the breakout of the cup that I illustrated last week:
I don't expect this to be a leading group in 2021, but I do expect bullish participation.
ChartLists/Strategies
Here are two interesting charts from today:
CRNC:
Earnings were solid this morning, but it's clearly a "buy on rumor, sell on news" event. Given the negative divergence in place, it's quite possible that CRNC hits its 50 day SMA in the near future. Currently, that level is 104. Overall, CRNC remains an excellent relative performer in software ($DJUSSW), so such a pullback could present a very nice opportunity for entry. It's a smaller stock, however, so please understand the higher risks associated with small stocks.
BERY:
I like this breakout and the increasing volume that's accompanying it. It's not my favorite industry group, however, so I'd only enter if I saw my price. For me, that would be a return to the breakout level closer to 57.
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, February 8:
GPN, SPG, KKR, TTWO, NUAN, HAS, CHGG, JKHY, CNA, DNB, RE, ACM, RGA, OMF, CDK, HQY, VRNS, RAMP, AMG, SAIA, CRNC, SSD, AMKR, BECN
Tuesday, February 9:
CSCO, TOT, FIS, SPGI, FISV, DD, HMC, TWTR, CNC, CARR, TDG, WLTW, WELL, ENPH, INCY, MLM, AKAM, FOXA, CGC, PEAK, LYFT, CDAY, FMC, MAS, IT, J, ACGL, QGEN, CCK, UDR, AYX, AIZ, SEE, MAT, HBI, COTY, THC, RPD, HAIN, VSH, HP, GT, YELP, GLUU, MODN
Economic Reports
None
Happy trading!
Tom