EB Daily Market Report - Wednesday, June 23, 2021

Special StockCharts TV Appearance

Earlier today, I joined StockCharts as guest host for "Your Daily 5" and I featured 5 well-known companies that I believe are poised for solid pre-earnings moves to the upside. Much of the stock market's long-term performance is attributable to gains enjoyed leading up to the beginning of earnings season. To check out my latest contribution to "Your Daily 5", CLICK HERE for the recording.

Executive Market Summary

• Futures were completely flat as began today's trading session
• The NASDAQ is leading today's action, albeit with fairly small gains
• The IWF:IWD ratio (growth vs. value) is hovering at key resistance in the 1.69-1.70 area
• The 10-year treasury yield ($TNX) is up slightly, despite a couple weaker-than-expected economic reports
• Commodities are mostly flat today as the dollar (UUP) reversals off its earlier low and turns positive
• Consumer discretionary (XLY, +0.83%) is leading stocks higher for a second consecutive day
• Defensive stocks are underperforming, led to the downside by utilities (XLU, -1.05%) and consumer staples (XLP, -0.38%)
• Surging automobiles ($DJUSAU, +4.40%) - featured below - are leading discretionary stocks higher
• Tesla (TSLA, +5.02%) and Ford Motor (F, +4.06%) are the top 2 performers in the S&P 500

Market Outlook

The NASDAQ has not operated in all-time high territory since February highs were established. We've tried on two previous occasions to break through those highs, but with two failures. This time the breakout occurred and we're seeing money rotate back towards both consumer discretionary (XLY) and technology (XLK) to support and confirm the move. I expect we'll see further relative strength in these areas to round out June, although we'll need to keep an eye on the 60-minute chart for possible momentum issues. Currently, this 60-minute chart looks fine:

Until momentum begins to weaken, I'd look for no more than a 0.50%-1.00% pullback before buying resumes.

Sector/Industry Focus

Automobiles ($DJUSAU, +4.40%) are surging today and breaking above key barriers, which is likely to spur further buying in the days and weeks ahead, especially as we begin moving into earnings season:

The daily PPO has just crossed the centerline, a signal that momentum has turned bullish. We're right up against the downtrend line that began in January, so further strength from here would be exponentially bullish. We have a beautiful candle that's cleared the 50-day SMA, but we also had that back in early April and that formed the last high. So while I'm growing more bullish for sure, we need further strength to confirm this breakout is the real deal.

ChartLists/Strategies

Given that we're seeing breakouts in the NASDAQ and XLK, it certainly makes sense to scan for breakouts as they're occurring. On our website, we have several pre-defined scan syntax that can be used, one of which is our 52-week high. Here's the scan I ran today of the Strong Earnings, Strong Future Earnings, and Raised Guidance ChartLists. I used the 52-week high scan syntax, but added a filter for high volume (greater than 120% normal daily volume). Here was the scan I used and then the 4 stocks that were returned:

Of these, RDWR seems to be making a very significant breakout:

If I strip out the volume requirement, the number of breakouts to 52-week highs moves from 4 to 77. So there are plenty of others to consider 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, June 23:

INFO, CNXC, KBH, FUL, PDCO, WGO, SCS

Thursday, June 24:

NKE, ACN, FDX, DRI, BB, SNX, WOR, PRGS, MEI, RAD

Economic Reports

June PMI composite: 63.9 (actual) vs. 67.9 (estimate)

May new home sales: 769,000 (actual) vs. 868,000 (estimate)

Happy trading!

Tom