EB Daily Market Report - Wednesday, July 28, 2021

Tom Bowley - July 28, 2021

Executive Market Summary

Futures were higher as we approached today's open
We've seen some volatility, but small cap ($SML) and mid cap ($MID) stocks are showing relative strength
The Fed will be providing its latest decision on interest rates (no change expected) and will likely address inflationary concerns - this statement will be released momentarily
Commodities are mixed with crude oil ($WTIC, +1.00%) trading higher, while copper prices ($COPPER, -1.75%) are showing weakness
The 10-year treasury yield ($TNX) is up 2 basis points to 1.25%, while the dollar (UUP) is flat
Big tech earnings reports were released yesterday as Apple (AAPL, -1.59%), Microsoft (MSFT, -0.02%), and Alphabet (GOOGL, +3.47%) all delivered blowout results
Advanced Micro Devices (AMD, +6.57%) is the top performer in the S&P 500 after easily beating its estimates (the AMD chart is featured below)
Humana (HUM, -6.78%), meanwhile, is the worst performer in the S&P 500, despite beating both revenue and EPS estimates
Energy (XLE, +0.65%) is the best sector, followed closely by communication services (XLC, +0.63%); utilities (XLU, -1.17%) is giving up the most ground

Market Outlook

The summer months can produce a few head winds for the stock market, so we always need to keep that in the back of our minds. However, the next few days tend to be quite bullish. The S&P 500, since 1950, has produced the following annualized returns to close out July:

July 29th (tomorrow): +30.16%
July 30th (Thursday): +68.99%
July 31st (Friday): +14.21%

Here's another interesting historical fact: Wednesdays through Fridays have produced nearly all of the stock market's gains over the past seven decades. Mondays tend to be weak and Tuesdays simply offset the Monday weakness. Strength tends to build as the week moves on. I believe it's a psychological reason. Who wants to be at work on Monday? Meanwhile, Wednesday through Friday takes us towards the weekend, which typically puts us in a better mood. Perhaps you have other potential reasons for it, but the facts are the facts.

Also, the 26th through the 6th tends to provide us much better performance than any other time of the calendar month. In my opinion, professionals buy ahead of the money flow from retirement/pension accounts, which typically arrive to start calendar months. The actual arrival of the money drives prices higher for the first week of the month.

None of this provides us any guarantee, but history does favor the bulls as we push towards the end of July.

Sector/Industry Focus

I'm continuing to watch the gambling index ($DJUSCA, +1.98%) closely. 750 is a major support level and the group is once again bouncing off of it:

One stock in the industry group that just reported excellent quarterly results is Boyd Gaming (BYD). EPS came in at $1.54 vs. $.92 expected and the stock has reacted positively today. It's been a leader in the group, so if the DJUSCA strengthens, I'd look to BYD as solid beneficiary:

A break above today's intraday high would be very bullish, in my opinion, as it would confirm a breakout of the recent downtrend.

ChartLists/Strategies

Earnings are beginning to pour in and opportunities to trade are everywhere. One stock that I find very interesting today is as follows:

AMD:

AMD is seeing extremely heavy volume and there are signs of accumulation as today's hollow candle would suggest. If AMD can make a breakout with this type of volume, I believe it could trigger another big advance on a stock that's been consolidating for several months.

I reviewed all the charts on our Short Squeeze ChartList (SSCL), looking specifically for stocks to watch. A short squeeze can't really kick in just because a stock is higher. What we want to see is a stock making a breakout to multi-month highs. That ensures that most of those shorting the stock are underwater. It's the fear of unlimited losses as a stock breaks out that fuels potential meteoric rises. RVP is one stock that would be interesting IF it makes this breakout:

RVP:

The blue circle highlights the lack of volume currently. No one on the short side is panicking. However, if RVP were to clear 12.15 and volume began to accelerate, a short squeeze could emerge.

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, July 28:

FB, PYPL, PFE, TMO, SHOP, MCD, QCOM, BMY, BA, NOW, GSK, LRCX, ADP, CME, EQIX, MCO, NSC, EQNR, HUM, F, GD, EPD, ALGN, CP, TEL, SPOT, ORLY, APH, BCS, CTSH, AFL, XLNX, AVB, SU, ODFL, GRMN, FMX, GNRC, YUMC, CAJ, YNDX, URI, INVH, HES, GIB, UMC, HIG, MAA, IR, TYL, EXAS, SSNC, DRE, ROL, CINF, HOLX, DT, PTC, RJF, VICI, AVY, TDY, UDR, PPD, XPO, ATUS, ACGL, MOH, AEM, BMRN, FBHS, RE, NLY, PEGA, GFL, KL, BG, OC, TEVA, MKSI, TTEK, CCJ, PAG, SLAB, TLRY, IART, INOV, ASGN, WING, CRUS, ENSG, RRR, MTH, NUVA, HP, IRBT, CLB, OII, EXTR, RBBN, COWN

Thursday, July 29:

AMZN, MA, CMCSA, MRK, TMUS, RDS/A, AZN, BUD, SNY, AMT, TTE, SPGI, MO, GILD, TWLO, ICE, EW, SO, NOC, VRTX, KDP, KLAC, PINS, TRP, LYG, CARR, FTNT, DXCM, DLR, BAX, RSG, HSY, YUM, XEL, WELL, STM, TEAM, HLT, MTD, MT, NOK, SWKS, CBRE, ES, AJG, WST, LH, VLO, SGEN, FTV, IP, MLM, ESS, AVTR, EIX, FTS, BIO, TW, NVCR, TFX, CMS, ZEN, ARES, PCG, CG, CVE, CLVT, WAB, ARGX, LKQ, TXT, MAS, CPT, CTXS, HBAN, MHK, MPW, QGEN, DECK, AOS, LPLA, GLPI, TAP, MMP, PFPT, DLB, WEX, NLSN, FSLR, TPX, UPWK, TXRH, MSTR, X, CFX, POWI, ADS, WRI, MTSI, AUY, MMSI, OSTK, SWN, TEX, TMHC, WERN, SBH, VCYT, OPK, EHTH, VCRA, NXGN, BJRI, MTLS

Economic Reports

FOMC decision and policy statement at 2:00pm ET

Happy trading!

Tom