EB Daily Market Report - Wednesday, February 24, 2021

Tom Bowley - February 24, 2021

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Executive Market Summary

Futures were lower to open the day, but like yesterday, we've seen buying since this morning with relative strength on both the Dow Jones and S&P 500
The Dow Jones touched the 32000 level for the first time in history, though we're currently just beneath that psychological level
January new home sales crushed estimates and Toll Brothers (TOL) easily surpassed EPS estimates
Energy (XLE, +4.06%) continues its recent dominance, as industrials (XLI, +2.17%) and financials (XLF, +1.99%) push higher as well
Aerospace ($DJUSAS, +5.00%) and airlines ($DJUSAR, +4.00%), two beaten-down pandemic industries, are leading the industrial sector higher
Home construction ($DJUSHB, +0.93%) is up less than 1%, despite the good news in new home sales and TOL
The 10-year treasury yield ($TNX) hit 1.44% earlier today, but was at 1.39% at last check
Crude oil ($WTIC) has jumped another 2.5%, climbing to above $63 per barrel

Market Outlook

One way to visualize the rotation that's been taking place is to watch the IWF:IWD ratio. This does show a short-term breakdown, though the long-term uptrend remains firmly in place in my view. We saw plenty of bounces around the 1.69 relative level, but that support has failed this week:

I don't expect a huge decline in this ratio, but it's certainly possible that we'll see the 1.55 level revisited after losing 1.69 relative support.

Sector/Industry Focus

Aerospace ($DJUSAS) is an area that I've suggested avoiding for quite awhile. It's not only performed poorly on an absolute basis, but its relative strength has been horrific. That's beginning to change though, which is good for the overall market:

This is what keeps secular bull markets alive and kicking. When we see profit taking in recent leaders, it can lead to overall selling if other lagging groups don't step up. The DJUSAS has been stepping up, but requires much more strength to move into a leadership position. For now, it's holding up to simply support profit taking in other areas.

ChartLists/Strategies

I poured over a large number of charts in the Strong Earnings ChartList (SECL). Yesterday, I focused on 3 stocks that had pulled back to key support levels. Here are two industrials that I thought looked quite interesting on breakouts:

JELD:

GMS:

Volume has been ticking higher on both companies and they're both solid on a relative strength basis. Furthermore, their SCTR scores are both at 58, so there's plenty of room to run, in my view.

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.

Wednesday, February 24:

NVDA, LOW, RY, BKNG, TJX, BILI, TDOC, PSA, EXC, VIAC, ANSS, AWK, CQP, HZNP, ETR, LNG, GH, OAS, NTAP, ESTC, ELAN, LB, FNF, BHC, RGEN, WTRG, RDFN, AMED, EV, PSTG, APA, MGNI, NEO, TNDM, DDD, OSTK, CDNA, MMSI, ODP, VCEL

Thursday, February 25:

CRM, ABNB, TD, AMT, ADSK, WDAY, MRNA, DELL, VMW, DASH, CVNA, MNST, KDP, CM, RKT, EOG, AEP, SRE, HPQ, BBY, ZS, ETSY, W, LI, VIPS, FTCH, PLUG, PCG, EIX, DEN, LYV, NVCR, TFX, AES, CLVT, CZR, PBA, BMRN, DPZ, SJM, PLTK, RUN, CABO, ERIE, PLAN, CNP, UHS, SPCE, PWR, AXON, FND, KL, NTRA, BYND, FSLR, MLCO, VIR, NLSN, CLF, NKLA, NCLH, DCI, ADT, FLIR, SRCL, QRTEA, GIL, SAIL, SHAK, SWI, ALRM, IRTC, TREE, LPSN, BAND, GKOS, INSM, NKTR, REGI, KTOS, REZI, OUT, NUVA, MDRX, AXNX, EB, ACMR, GNMK, MNKD, DRQ, GRPN, IHRT

Economic Reports

January new home sales: 923,000 (actual) vs. 855,000 (estimate)

Happy trading!

Tom