EB Daily Market Report - Monday, August 2, 2021
Executive Market Summary
- Futures were strong to begin the week and the month
- Unfortunately, as more money rotated into treasuries, we've seen the 10-year treasury yield ($TNX) fall to an earlier low of 1.15%, a drop of 9 basis points from Friday's close
- That rotation to bonds has resulted in an equities reversal; the NASDAQ has held onto most of its gains as semiconductors ($DJUSSC, +1.07%) and software ($DJUSSW, +0.19%) have outperformed
- Commodities are mixed, but crude oil ($WTIC, -3.62%) have been hit hard
- Energy (XLE, +0.16%), quite surprisingly, have managed to stay in positive territory
- Materials (XLB, -0.80%) are the worst performing sector today, while consumer discretionary (XLY, +0.54%) have been strong
- Automobiles ($DJUSAU, +3.24%) are showing leadership once again as Tesla (TSLA, +4.07%) breaks above 700 for the first time since April
- Global Payments (GPN, -10.41%) is the worst S&P 500 performer, despite reporting better-than-expected revenues and earnings
- This week is the busiest during earnings season with over 1500 companies reporting their latest results
Market Outlook
I'm not sure if there's a group that's much more influential than semiconductors ($DJUSSC), so it's noteworthy any time we see the group break out. It's trying to close above 7600 for the first time in history and we're seeing a number of stocks in the space either breaking out or nearing key breakout levels. Here's the latest chart on the DJUSSC:
This final hour of trading could result in yet another breakout in the DJUSSC, or possibly a topping and reversing candle. Either way, I love the group as we move throughout the balance of 2021. But if we see a weak finish, a short-term top could be in place.
Sector/Industry Focus
Software ($DJUSSW) has been strengthening technically as you can see below, but it is now printing a negative divergence on its daily chart:
While this sign of slowing momentum could lead to some choppy action, that rising AD line suggests there are still plenty of investors accumulating shares in this space. The DJUSSW also has a nice history in August during this secular bull market:
Software's best month vs. the benchmark S&P 500 has arguably been August. So, if the S&P 500 continues its advance, it makes sense that software would rank among its leaders.
ChartLists/Strategies
Here are a couple of attempted breakouts in recently mentioned stocks on our Short Squeeze ChartList (SSCL):
KDMN:
RVP:
These stocks are so unpredictable and certainly not worth the risk for everyone. However, breakouts on increasing volume could lead to very significant advances. RVP's finish today, in particular, is important. While its volume isn't earth-shattering, it is looking to close at a 4-month price high with the heaviest volume we've seen in the past month.
Here's another interesting chart today in software. Is it reversing?
A number of software stocks reversed hard off earlier lows and could be setting up for a big advance, especially given the group's bullish August tendencies.
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, August 2:
GPN, NXPI, SPG, RACE, SBAC, PXD, AWK, WMB, ANET, O, ZI, TTWO, ON, EMN, FANG, SEDG, CLR, BRKR, CNA, MOS, TREX, VNO, COLM, VRNS, LEG, ACHC, TGTX, NSP, KMT, TSEM, RMBS, UCTT, RIG
Tuesday, August 3:
BABA, LLY, AMGN, FIS, BP, COP, ATVI, ETN, PSA, MAR, LHX, MTCH, PRU, DD, MCHP, KKR, CMI, ZBH, PSX, AME, PEG, VERSK, WEC, ZBRA, EC, ET, WLTW, OXY, WAT, PAYC, RNG, OKE, XP, CLX, IT, XYL, ALNY, PEAK, AKAM, WMG, CZR, LYFT, DVN, J, LYV, INCY, MKL, DISCA, FICO, LDOS, BEN, FMC, FNF, DVA, HST, IPGP, HSIC, AFG, WLK, BHC, TX, UAA, SEE, H, RL, LSCC, WK, HLF, HLI, CAR, LPX, UNM, NVTA, SKLZ, AYX, SPT, SPWR, CDLX, ARNC, IGT, SABR, MIME, SWI, CWH, OMI, KTOS, EVTC, GDOT, SKT, AVID
Economic Reports
July PMI manufacturing: 63.4 (actual) vs. 63.1 (estimate)
July ISM manufacturing: 59.5 (actual) vs. 60.8 (estimate)
June construction spending: +0.1% (actual) vs. +0.3% (estimate)
Happy trading!
Tom