EB Daily Market Report - Monday, April 26, 2021
Event Today
I'm hosting our quarterly "Q1 Earnings" webinar, where I'll be providing the best earnings reports to date (in my opinion), plus I'll be listing companies that will be reporting over the next few weeks where I'm expecting stellar results. The link to today's 4:30pm ET webinar will be sent out in a separate email later today.
I hope you can join me!
Executive Market Summary
- Futures were mixed overnight, but our major indices did gap higher at the open, albeit fractionally
- Small caps ($SML) are showing leadership and the NASDAQ is outperforming both the S&P 500 and the Dow Jones
- 8 of 11 sectors are higher, paced by energy (XLE, +1.22%) and financials (XLF, +0.88%)
- Defensive areas are lagging, led by consumer staples (XLP, -0.99%) and utilities (XLU, -0.71%)
- The Federal Reserve begins a two-day meeting tomorrow, which culminated with its latest policy statement on Wednesday at 2pm ET; I'm expecting little in the way of surprises, instead looking for further accommodation
- Tesla (TSLA, +1.16%) reports its quarterly earnings after the bell today
- Today's Top 5 industries belong to either the materials (XLB) or energy (XLE) sector
- Semiconductors ($DJUSSC, +1.37%) are also strong as Skyworks Solutions (SWKS, +4.44%) potentially breaks out to an all-time closing high
Market Outlook
The NASDAQ is approaching a major resistance level, just as key component stocks like Tesla (TSLA), Apple (AAPL), Microsoft (MSFT), Facebook (FB), Alphabet (GOOGL), and Amazon.com (AMZN) get set to report their quarterly results later this week. I believe we're going to see an earnings-related push to carry the NASDAQ to fresh all-time highs. If I'm right, the next question will be whether the NASDAQ and its growth-oriented components lead the next phase of this bull market. That will be answered in time, but for now let's simply watch the NASDAQ and its breakout attempt:
I see two possible scenarios here. First, we're in a cup with the recent trip down to test the rising 20-day EMA the "handle". That could lead to a breakout sooner rather than later (perhaps today?). The second scenario would be the more frustrating where this week's earnings don't result in a breakout and we see a further period of consolidation on the NASDAQ that could see it fall to test the rising trendline and establish point D in an A-B-C-D-E ascending triangle pattern, similar to what we saw after the September 2020 top. Thus far, I only count A-B-C in this pattern.
Both of these patterns are bullish and I absolutely see either ending in bullish fashion with another break to all-time highs in this more aggressive NASDAQ index. So, for me, the question isn't whether we break out, it's when.
Sector/Industry Focus
Financials (XLF), especially banks ($DJUSBK) can lead the stock market higher from time to time, but they're more likely to be average performers during a bull market. They'll do well, but they'll likely be outperformed by technology (XLK) and consumer discretionary (XLY). Here's a chart showing the recent consolidation, followed beneath by relative strength panels:
There's more room for relative upside in financials in the near-term and I believe we'll likely see it, but the long-term belongs to the XLK and XLY.
ChartLists/Strategies
Keep one eye on those industry group relative strength charts. You can download the entire ChartList into your StockCharts.com account if you're an annual EarningsBeats.com member. Paying attention to where money is rotating and where we're getting healthy pullbacks is the first step to enjoying solid profits, in my opinion. Most traders chase stocks, but I prefer to look for consolidating leaders within consolidating groups. For instance, banks are beginning to strengthen on an absolute basis after pulling back on a relative basis. That chart is shown above in Sector/Industry Focus.
Below are two bank stocks that are or have been consolidating while the group rests and now look ready for potential breakouts:
PNC:
All of those blue circles are bullish developments in my view. PNC is a very large bank for those more interested in "alleged" safety. I do think larger companies are generally safer, but an investment is an investment. They're all risky to some degree.
SBNY:
SBNY is about one-fifth the size of PNC, but its chart looks even better to me. I love relative strength leaders and SBNY has been one within banking since the positive vaccine news in November. Breakouts on either of these two banks, along with many others, should be viewed bullishly near-term.
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, April 26:
TSLA, CNI, NXPI, PHG, CDNS, LU, SBAC, OTIS, AMP, ARE, SSNC, SUI, CHKP, BRO, MASI, PKG, LII, UHS, MKSI, ACI, OMF, AMKR, TNET, SSD, JBT, PCH, WRI, RRC
Tuesday, April 27:
MSFT, GOOGL, V, NVS, LLY, TXN, UPS, AMGN, SBUX, RTX, GE, MMM, SYK, AMD, MDLZ, FISV, BP, CB, SHW, ABB, MMC, ECL, COF, ILMN, WM, UBS, PINS, ROP, MSCI, CNC, CSGP, GLW, ADM, PCAR, EQR, DTE, MXIM, YUMC, SYF, OKE, EIX, ENPH, TER, TRU, ESS, IEX, PFG, BXP, PPD, ACGL, ENTG, PHM, UDR, HAS, CHRW, FFIV, IVZ, HUBB, CRSP, ST, PII, JNPR, MANH, TX, BYD, JBLU, OLN, RXN, NCR, CROX, GPK, FEYE, AWI, TENB, ABG, APAM, SSTK, MATX, NAVI, USNA, SYX, AUDC, ATEN
Economic Report
March durable goods: +0.5% (actual) vs. +2.0% (estimate)
March durable goods ex-transports: +1.6% (actual) vs. +1.5% (estimate)
Happy trading!
Tom