EB Daily Market Report - Friday, February 26, 2021

Tom Bowley - February 26, 2021

Executive Market Summary

Futures were higher this morning, but relative strength has returned to growth stocks - at least for a day
The 10-year treasury yield ($TNX) has fallen 6 basis points today to 1.45% and that could be encouraging a return to growth stocks
Crude oil ($WTIC) is lower by 3.34% as it approaches $61 per barrel; energy (XLE, -2.26%) is the worst performing group as a result
The only 3 sectors in positive territory are communication services (XLC, +1.61%), technology (XLK, +1.50%), and consumer discretionary (XLY, +0.82%)
Internet ($DJUSNS, +2.27%) and semiconductors ($DJUSSC, +2.78%) are two standout industry groups
Starbucks (SBUX, +4.54%) was upgraded and is breaking out on the session to an all-time high

Market Outlook

The following chart illustrates the move back to growth stocks today:

This is a 10-day 10-minute chart, so it's certainly not an indication of any long-term trend. But the short-term downtrend must break before any longer-term trend can begin to emerge. It's going to be important to get back above the 1.69 relative level. If you recall, that is the level that held as support for months. Today's reversal in this relationship is a start, but ONLY a start.

I also think it's important to repost the upcoming historical strength on the S&P 500 (since 1950):

February 26th (Friday): +21.05%

March 1st (Monday): +78.65%

March 2nd (Tuesday): +9.67%

March 3rd (Wednesday): +27.80%

March 4th (Thursday): +43.81%

March 5th (Friday): +32.21%

There's certainly no guarantee that historical strength will translate into 2021 strength, but it's still good information to be aware of.

Sector/Industry Focus

Internet stocks ($DJUSNS) is rebounding today from a key support level. It would be good from a fairly short-term perspective for the DJUSNS to hold onto this support:

Today's strength has taken the DJUSNS back to its 20 day EMA. A further strengthening into today's close would be more bullish.

ChartLists/Strategies

Here are two software stocks ($DJUSSW) that are among today's best performers on the Strong Earnings ChartList (SECL):

APPS:

This has been one of the strongest stocks in the entire market over the past year. Its relative strength is solid, as is its price/volume trends. Note the recovery in its gap support zone.

TTD:

The rebound in TTD shares has been nice, but this one has more work to do, in my opinion. Its relative strength is not as solid as APPS. Note also that it's been trading beneath its 20 day EMA, suggesting more of a period of consolidation. It's approaching its two key moving averages, plus an upcoming test of gap resistance near 845. Clearing this trio of resistance would be bullish.

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, February 26:

PEG, DKNG, IEP, EVRG, VST, LAMR, FL, BLDR, CRI, CRON, FLR

Monday, March 1:

ZM, NIO, FMX, NVAX, XRAY, AI, SRPT, PRGO, BHVN, DDD, SGMS, SWCH, TGNA, CDLX, NSTG, INO, SSYS, WKHS, PGEN, INSG

Economic Reports

January personal income: +10.0% (actual) vs. +9.4% (estimate)

January personal spending: +2.4% (actual) vs. +2.2% (estimate)

February Chicago PMI: 59.5 (actual) vs. 61.0 (estimate)

February consumer sentiment: 76.8 (actual) vs. 76.4 (estimate)

Happy trading!

Tom