EB Daily Market Report - Wednesday, April 28, 2021

Tom Bowley - April 28, 2021

Executive Market Summary

Futures were mixed once again as the S&P 500 showed slight gains into the open, while the Dow Jones and NASDAQ began the day in negative territory
Not much has changed since the open, except that small caps ($SML) and mid caps ($MID) have both found their way into positive territory - though barely
Crude oil ($WTIC) is jumping more than 1.6% to nearly $64 per barrel as optimism grows over fuel demand later this year
The dollar (UUP) is flat and attempting to break its recent losing streak
Earnings are dominating the S&P 500 big movers; Enphase (ENPH, -14.57%) beat EPS estimates, but is running into a wall of sellers today, topping the list of biggest losers
Energy (XLE, +3.10%) is today's best performing sector and many energy stocks litter the best performing S&P 500 stocks
Communication services (XLC, +1.19%) is also strong as internet stocks ($DJUSNS, +2.64%) surge following a strong quarterly report by Alphabet (GOOGL, +4.18%)
Apple (AAPL, -0.33%) and Facebook (FB, +1.23%) report their quarterly results after the closing bell today

Market Outlook

I'll be watching the Fed announcement closely, as I always do. The bond market's reaction is important because if bond traders sell and send yields higher, those proceeds tend to find their way into the stock market, which will only encourage more stock buying. Currently, I see the 10-year treasury yield ($TNX) in the middle of a 1.50%-1.75% trading range, although I'm looking for this range to be cleared to the upside rather than the downside:

The negative divergence that surfaced several weeks back hinted at a period of consolidation, which we've seen. The pink arrows highlight what I look for after a negative divergence prints - a 50 day SMA and/or PPO centerline test. We saw both. The blue arrows highlight a significant trendline that connects price lows over the past 9 months. That trendline will intersect 1.50% in the next couple weeks, increasing the likelihood that 1.50% holds as support if bond traders begin buying treasuries in earnest following the Fed announcement this afternoon.

Sector/Industry Focus

Internet stocks ($DJUSNS, +2.64%) received a big lift this morning after Alphabet (GOOGL, +4.18%) reported better-than-expected quarterly results. However, it should be noted that GOOGL could be printing a doji (closing price at or very near opening price, which indicates indecision and a potential reversing candle). GOOGL also has broken out with a negative divergence in play. Unless GOOGL continues to push higher and eliminates that negative divergence, we should expect to see more selling ahead to reset the PPO at or near its centerline:

The blue circle is highlighting the PPO beginning to turn higher again. This is VERY important, because if GOOGL continues to strengthen over the next couple days, that negative divergence will disappear and bears will likely have to wait for a more significant period of selling. If GOOGL reverses here, though, it could suffer the same fate it did back in June and December of 2020 - trips back to the 50 day SMA to help reset the PPO near the centerline.

ChartLists/Strategies

For those wondering about a potential ETF to trade as a result of the renewed strength in energy, the XLE is an obvious choice. Not so obvious, however, is the PSCE, which is the small cap energy space. Check out how the PSCE fares when energy shows leadership:

Since energy began showing relative strength in late October, you can see the XLE performing very well. But what you may not realize is that the PSCE (small cap energy) has been leading the XLE by a wide margin. There's more risk in small energy companies, but obviously much more reward potential as well.

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, April 28:

AAPL, FB, QCOM, BA, SHOP, SONY, SNY, NOW, GSK, ADP, NSC, CME, EQIX, MCO, BSX, HUM, GD, SPOT, ALGN, F, PSA, EBAY, APH, ORLY, AFL, YUM, SWK, WELL, ROK, WCN, TDOC, GRMN, AVB, SIRI, UMC, URI, GIB, IR, YNDX, ETR, HES, MGM, EXR, LOGI, AVTR, INVH, HOLX, DISCA, TYL, RJF, MAA, ROL, CINF, PTC, DRE, AVY, ATUS, MAS, TDY, MKL, MOH, RE, CREE, NLY, ICLR, IPG, TECK, TEVA, PEGA, AZPN, OC, SC, CLR, MLCO, CONE, OSK, AER, PAG, WH, SLAB, GRUB, SAIA, BPOP, PPC, ASGN, HELE, ALSN, SLGN, AUY, INOV, WING, R, FORM, MC, MTH, TROX, WERN, EAT, TWOU, CAKE, UCTT, LC, PI, RBBN, OII, NBR, AXTI

Thursday, April 29:

AMZN, MA, CMCSA, MRK, TMO, MCD, RDS/A, BMY, CAT, AMT, SPGI, MO, GILD, SO, ICE, EQNR, NIO, VRTX, NOC, TWTR, NEM, KLAC, KDP, KHC, BAX, BCE, DLR, PH, TROW, DXCM, CARR, XEL, STM, FTNT, SWKS, HSY, NWG, TEAM, RMD, WLTW, FMX, CBRE, SGEN, AJG, LH, FTV, WST, NOK, IP, NVCR, RCL, WDC, PCG, CHD, GNRC, TFX, BIO, CMS, TW, ZEN, CTXS, ALNY, VICI, AEM, CLVT, WAB, EMN, ABMD, DPZ, BMRN, CG, FBHS, MHK, ARES, TXT, LKQ, MPW, DVA, FIVN, CPT, LPLA, AGCO, TAP, CX, AOS, GLPI, MMP, ERIE, ATR, WEX, FSLR, SYNH, TPX, COLM, TXRH, WSC, X, COG, SRCL, MSTR, CFX, OMCL, JHG, CLGX, SWI, PRGO, POWI, CRUS, FCN, MTSI, TMHC, MDC, MMSI, ONTO, TEX, OSTK, TREE, GPI, HP, TDS, BLMN, MDRX, ERJ, EHTH, MTLS, FLWS, VCRA, COWN, ETH, MITK, BZH

Economic Report

FOMC policy statement due out at 2pm ET (no interest rate change expected)

Happy trading!

Tom