EB Daily Market Report - Tuesday, April 6, 2021

Executive Market Summary

• Futures were mixed overnight as all of our major indices opened lower to start the session
• The NASDAQ is showing relative strength today, up 0.34% at last check
• We're seeing strength in consumer names as staples (XLP, +0.64%) and discretionary (XLY, +0.41%) pace the sector leaderboard
• Communication services (XLC, +0.42%) are also strong, led by media agencies ($DJUSAV, +3.49%)
• Treasuries are being bought today as the 10-year treasury yield ($TNX) falls 6 basis points to 1.66%
• Lower yields are weighing on banks ($DJUSBK, -0.67%) and financials (XLF, -0.43%)
• Nike (NKE, +1.55%) is leading Dow Jones components today, but McDonalds (MCD, +0.98%) is making a big breakout above its October 2020 high

Market Outlook

Retail stocks (XRT) have been performing exceptionally well as a group. They're consolidating in a bullish ascending triangle, but their absolute and relative strength have been awesome in 2021:

The XRT is also in a sweet spot historically as April has been its best performing month of the year:

Things tend to settle down a bit after April, so you might consider using April strength to slowly unwind positions in the group. May and June aren't horrible months, but they're weak enough on a relative basis to at least consider lowering exposure in the group.

Sector/Industry Focus

One very positive development the past two days has been the breakout in the consumer discretionary sector (XLY). It's still got plenty of work to do on a relative basis, but many times a breakout is the start of renewed relative strength:

The AD line provided us a clue of the breakout that was coming as it had broken out long before price did.

ChartLists/Strategies

Given today's theme of consumer discretionary and retail, I looked through our Short Squeeze ChartList (SSCL) for retailers, looking specifically for possible breakout candidates that might trigger additional buying - or simply identifying key price support. Here are two SSCL stocks that I found interesting:

CVNA:

The red arrows on the left side of the chart marked key price resistance that was finally cleared for good in December 2020. The green arrows mark periods of selling that tested this price support. The red arrows on the right side of the chart highlight 20-day EMA failures recently. CVNA is trying to break through that moving average today. Success could mean the start of an uptrend.

DKS:

I'd be more impressed with today's breakout if we finish strong. That long tail to the top could lead to a bit of short-term selling if we finish that way. However, the recent breakout in the specialty retail group will aid DKS down the road and its relative strength has been quite solid. The short % of float, currently at 21% or so, could help to send DKS higher over the coming weeks.

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.

Tuesday, April 6:

PAYX, LNN, GBX, SGH

Wednesday, April 7:

RPM, LW, MSM, SMPL, SCHN

Economic Reports

None

Happy trading!

Tom