EB Daily Market Report - Wednesday, May 19, 2021
No DMR on Thursday/Friday
Today's DMR will be a bit abbreviated as I'm preparing for tonight's "Draft".
I will be out of the office later this week, so I will not be publishing a Daily Market Report on Thursday and Friday. I'll be back to a normal schedule on Monday.
Quarterly Draft
Today is the day. We'll be hosting our quarterly "Draft" where we'll announce the 10 equal-weighted stocks that will comprise each of our 4 portfolios over the next 3 months. It all starts at 5:30pm ET and will likely last from 90 minutes to 2 hours. The room will be open at least 30 minutes prior to the start. You can access the room by clicking this link:
https://earningsbeats.zoom.us/j/83266520272
Executive Market Summary
- Futures were very weak overnight, not a huge surprise with options expiring later this week
- The NASDAQ, the weakest index at the open, is now the best relative performer
- Cryptocurrencies are attempting a massive recovery after a brutal selloff earlier in the session
- Max pain stocks from last night are mostly moving in the direction we anticipated
- Energy (XLE, -1.95%) and materials (XLB, -1.47%), two of the best sectors in recent months, are struggling with options expiration around the corner
- Meanwhile, renewable energy ($DWCREE, +2.82%) and semiconductors ($DJUSSC, +1.15%), two beaten-up industries in May, are rebounding
- Enphase Energy, (ENPH, +5.96%) is again near the top of the S&P 500 leaderboard
Market Outlook
It's options expiration week, so I look for "opposite George" (a Seinfeld reference that many of you might remember). Things that weren't working previously suddenly are working. And the scorching hot areas are struggling to find a bid. And it's all occurring to ensure that market makers can enjoy nice dinners throughout the week. Mind you, it's nothing earth-shattering. On the charts, it just looks like a bit of profit taking. Energy, for example, tested its rising 20-day EMA earlier today:
The green arrows mark simple 20-day EMA tests, while the black arrows mark much more important short-term price support.
Sector/Industry Focus
I always enjoy looking at the Sector Summary during options expiration week as many times everything turns upside down. Check out today's change:
Two of the best recent sector performers - energy and materials - find themselves in the bottom two spots today. Technology, arguably the worst sector over the past couple months, is down but leading on a relative basis.
It's always an interesting picture come options expiration week.
ChartLists/Strategies
Expect the unexpected this week. Last night, during our Max Pain webinar, I highlighted several stocks that could go up or down based on options expiration this week. AMC Entertainment Holdings (AMC) had the most money at risk as the net in-the-money call premium was roughly $36 million. It would behoove market makers to see a drop here, so check out today's action:
Volume is much lighter today, yet already more than $20 million has been rescued for market makers. Amazing, isn't it?
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, May 19:
CSCO, LOW, TGT, JD, TJX, ADI, BEKE, SNPS, CPRT, KEYS, LB, ZTO, FUTU, VIPS, GDS, CAE, EXP, SCVL
Thursday, May 20:
AMAT, ROST, PANW, HRL, KSS, RL, DECK, WMS, BJ, WOOF, LSPD, CSIQ, PLCE, SVM, TGI
Economic Reports
None
Happy trading!
Tom