EB Daily Market Report - Monday, May 10, 2021
ChartLists Updated
I'm aware that members were having difficulty downloading our Strong Future Earnings ChartList (SFECL). After reviewing over 1000 charts late last week and over the weekend, both the Strong Earnings ChartLists (SECLs - there are now 2 of them again as there are 624 companies on this ChartList now) and Strong Future Earnings ChartList have been updated today. You can download the latest ChartLists from our website. I'll be working on updating the Raised Guidance ChartList (RGCL), Short Squeeze ChartList (SSCL), and the Strong AD ChartList (SADCL) over the next couple days and will let you know here in the DMR when they are complete and ready for review/download.
Executive Market Summary
- Futures were mixed overnight and U.S. equities remain bifurcated
- Dow Jones stocks are performing very well, the S&P 500 is flat, and the NASDAQ is being sold off
- Technology (XLK, -1.56%) is the primary laggard, but it has company as communication services (XLC, -1.30%) and consumer discretionary (XLY, -0.81%) are also in negative territory
- Defensive groups - utilities (XLU, +1.50%) and consumer staples (XLP, +1.30%) are leading, along with energy (XLE, +1.27%)
- Earnings reactions continue to favor defensive areas, while aggressive areas show a much higher chance of selling after earnings
- Trade Desk (TTD, -26.29%) is a prime example; they beat estimates as to both revenues and EPS, then raised guidance and announced a 10-for-1 stock split - to no avail
- 3M (MMM, +2.66%) and Proctor & Gamble (PG, +2.18%) headline the Dow Jones leaderboard today
Market Outlook
The CRB Index ($CRB) has not seen much selling in the past 5 weeks. It's been on a tear and is the primary reason that both energy (XLE) and materials (XLB) remain so strong. It's also regained everything lost as a result of the pandemic and has moved to test a key 5-year high and major resistance level on its weekly chart:
It's obvious that the CRB's absolute chart is strong, but you can see from the bottom panel there still isn't a lot of relative strength. Also, the black circles point out that a weekly PPO above 5 has historically been a reason for concern.
Here's the bottom line: Trade commodities and commodity-related stocks while they're hot, but be prepared if their relative leadership role never materializes.
Sector/Industry Focus
Over the past 3 months, we've seen tremendous leadership in materials (XLB) and its various industry groups. Aluminum ($DJUSAL) has risen 94% in the past 3 months, but strength has been spread out as the following industry group summary depicts:
Aluminum's been the best, but it had the most to gain after a very difficult 2 years in which it lost 90% of its value:
Again, the group is hot so momentum trades in this area certainly make sense. Just be aware in the event that the prior downtrend takes over.
ChartLists/Strategies
I ran an RSI 40-50 scan of all materials stocks on our updated Strong Earnings ChartList (SECL). Here are the two that were returned:
AVTR:
SND:
While SND looks tempting, it's a very low-priced stock and there isn't typically big volume. Therefore, it's much easier to be manipulated. Because of this, I'd prefer a stock like AVTR, which, at the end of April, was a $34 stock. It's since given back 10% on moderate volume and sets up better from a reward-to-risk perspective than many materials stocks that have been moving higher relentlessly, with little in the way of selling.
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, May 10:
DUK, APD, MAR, BNTX, SPG, IFF, RBLX, TTD, ES, TSN, OXY, AEE, J, VTRS, NUAN, AFRM, OSH, ZLAB, NVAX, TREX, NLOK, WB, ACM, G, USFD, VOYA, COTY, RBA, BRKS, CHH, TGTX, JCOM, SGMS, RXT, SPCE, EVBG, SAIL, TGNA, SWCH, MGNI, CRNC, ENR, EGHT, SDC, VCYT, ELY, DDD, WKHS, VUZI, MX
Tuesday, May 11:
EA, PLTR, TDG, RPRX, U, BSY, QS, DAR, PLTK, OPEN, ARMK, KGC, HBI, UPST, PRGO, SLQT, LMND, CHK, IGT, ARRY, MIME, MAC, FUBO
Economic Report
None
Happy trading!
Tom