EB Daily Market Report - Friday, April 16, 2021
Appearance on Your Daily 5
I hosted StockCharts.com TV's "Your Daily 5" today and I explained why I like the 5 software stocks that I discussed in the DMR earlier this week. You can check out the video (and give it a THUMBS UP!) by CLICKING HERE.
Also, I'll be hosting the "Sneak Preview - Q1 Earnings" webinar tomorrow, Saturday, April 17th, at 2:00pm ET. I hope you can plan to join me!
Executive Market Summary
- Futures were strong overnight on Thursday and price action has been solid much of the day today
- The Dow Jones, one day after clearing 34000 for the first time in history, is higher by another 143 points
- The U.S. Dollar Index ($USD) is relatively flat today, but has been downtrending for nearly 3 weeks
- Gold (GLD) is enjoying a very nice breakout and looks to move higher in the near-term
- Housing starts and building permits came in stronger than expected for March; home construction ($DJUSHB, +3.24%) is enjoying a strong day as a result
- Materials (XLB, +1.33%) and utilities (XLU, +1.11%) are the two strongest sectors today, while energy (XLE, -0.72%) struggles
- Boeing (BA, -1.15%) is the only Dow Jones component that's down more than 1% today
- Renewable energy ($DWCREE, +3.20%) is seeing a bit of relief from the heavy selling of late
Market Outlook
The U.S. Dollar Index ($USD) has traded down 9 of the last 11 sessions and it's reached a key price support level, as well as its 50-day SMA:
The two blue circles highlight PPO centerline and 50-day SMA support. If the USD were to fall below 91.25 and its PPO were to drop back into negative territory, that would likely lead to further selling of the dollar.
Sector/Industry Focus
Gold (GLD) has executed a breakout after a recent double bottom had printed. This suggests a likely short-term uptrend for GLD, at a minimum. I typically am not interested in trading gold during a secular bull market advance in U.S. equities, but it is trading bullishly for now:
The confirmation of the double bottom breakout actually occurred a little more than a week ago. After that, the GLD tested the rising 20-day EMA before breaking out again today. If trading GLD on the long side, just beware that a falling dollar provides a tailwind for gold. Therefore, I'd like to see the $USD chart above break down to provide GLD the best opportunity for a further advance. 176 could be a target to test a downtrend line established by the highs that printed in August 2020 and January of this year.
ChartLists/Strategies
Buying finally started to kick in on Plug Power (PLUG) yesterday afternoon and we've seen more than a 10% rally off that low. It's still been very weak, however, since the Tuesday close and our webinar that afternoon. I wanted to share how the options picture changed dramatically on this stock. Here's the latest open call and put interest on PLUG as reported by cboe.com:
The far left column is the open call interest, while the far right column is the open put interest. If you recall from the webinar on Tuesday, there were almost ZERO in-the-money calls below 30 just three days ago. Now look at them. There are more than 15000 calls at 28 and over 7300 calls at 27. This is likely what's held PLUG down this month. I recalculated max pain, however, and it's still fairly high at 32.04, though down more than 4 bucks from the max pain level on Tuesday.
I wanted to share the options activity on Pinterest (PINS). I saw that it fell sharply this morning, so I checked to see what options looked like and here's what I found:
There are few open puts above 86, so this morning when PINS was trading near 84, there were only 2613 puts at 85 and 1404 puts at 86. But if you look at the open calls, you'll see a TON, including 2764 at 70 and 5859 at 75, not to mention 10392 at 80. In the first 30 minutes of trading this morning, PINS fell from 84.08 at the open to 75.31 just past 10:00am ET. The amount of net in-the-money call premium that was wiped out was staggering.
SNAP, another internet stock and also a portfolio stock of ours (like PINS), had an enormous number of in-the-money calls and almost zero in-the-money puts. Check out today's action on SNAP:
The short-term inefficiencies are EVERYWHERE when it comes to options expiration. I call it legalized thievery.
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, April 16:
MS, PNC, BK, STT, KSU, CFG, ALLY
Monday, April 19:
KO, IBM, PLD, MTB, UAL, CCK, STLD, ZION, HXL
Economic Report
March housing starts: 1,739,000 (actual) vs. 1,620,000 (estimate)
March building permits: 1,766,000 (actual) vs. 1,750,000 (estimate)
Happy trading!
Tom