EB Daily Market Report - Thursday, August 12, 2021

Tom Bowley - August 12, 2021

Executive Market Summary

Futures were mixed as the Dow Jones opened higher, while both the S&P 500 and NASDAQ fell at the opening bell
Producer prices (PPI) rose much more than expected, just one day after consumer prices rose as expected
The 10-year treasury yield ($TNX) is up more than 3 basis points to 1.37% after inflation was reported higher than expected
Commodity prices are lower, led by silver's ($SILVER) 1.50% drop to $23.14
Health care (XLV, +0.66%) is rebounding after recent weakness, leading all sectors
Sectors are mixed with technology (XLK, +0.29%) also strong, while energy (XLE, -0.66%) and materials (XLB, -0.49%) weaken
The slight strength in the dollar (UUP, +0.10%) could be contributing to the XLE and XLB weakness
Despite technology's strength, semiconductors ($DJUSSC, -1.17%) are weak as Micron Technology (MU, -7.62%), Applied Materials (AMAT, -4.87%), and Lam Research (LRCX, -4.44%) all trade lower

Market Outlook

Recently, I discussed that I felt transports ($TRAN) would eventually recover as I believe our economy will continue to strengthen. Technically, we're beginning to see the TRAN make a push back to the upside. The first step was clearing the 20-day EMA. The IYT is an ETF that tracks key transportation stocks (though it does not track the TRAN specifically). Here's the latest IYT chart and the level that I believe this ETF needs to clear to extend its current rally:

I'd be very surprised if the TRAN or IYT were to move lower and clear those two recent price lows, but anything is possible. A break and close above 259 on the IYT would be very bullish. Also, I'd watch the RSI. Any move in the RSI above 60 would also suggest the downtrend has ended.

Sector/Industry Focus

Commercial vehicles & trucks ($DJUSHR, -0.45%) is experiencing a bit of profit taking today after a nice move higher of late. The PPO has turned positive after being in negative territory for a couple months and we could see a cup form:

The 20-day EMA should now serve as support after it served as resistance throughout June and July. It's also noteworthy that the DJUSHR tends to see its strength accelerate during the September to November period:

The above highlights that upcoming strength over the past 12 years, from 2010 through 2021.

ChartLists/Strategies

Candlesticks are always a key for me in my trading routine, so as I went through our various ChartLists this morning, I looked specifically for reversing candles at or near key price support:

UHS:

UHS gapped up after earnings recently and traded near the 165 level. After the recent selling episode, it now trades roughly 12% lower. I believe there's a reasonable chance that UHS moves higher from here and eventually reaches that 165 level again. The past two days have seen a hammer print (Wednesday) and today a bullish red hollow candle is printing - both suggest accumulation at key price support.

MTN:

Hotels ($DJUSLG) have been extremely weak and MTN has paid the price, but it has now reached a key price support level. We don't have a reversing candle here, though we could see one today. It's still early. I'd keep MTN on my radar and see if a false breakdown and reversal occurs. If so, the reward to risk would set up nicely.

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.

Thursday, August 12:

DIS, BAM, ABNB, DASH, BIDU, PLTR, RKT, BR, WPM, PAGS, SOFI, GDRX, MIDD, GLOB, IQ, CELH, CYBR, EYE, VIAV, UTZ, GRWG, CSIQ

Friday, August 13:

None

Economic Reports

Initial jobless claims: 375,000 (actual) vs. 378,000 (estimate)

July PPI: +1.0% (actual) vs. +0.6% (estimate)

July Core PPI: +1.0% (actual) vs. +0.5% (estimate)

Happy trading!

Tom