EB Daily Market Report - Wednesday, August 18, 2021
Thursday DMR
I am going to try to publish a very brief Daily Market Report (DMR) on Thursday. Thursday evening is our once-a-quarter "draft" for our 4 stock portfolios and I'll be prepping for the draft throughout the day, right up until the webinar starts at 5:30pm ET.
Executive Market Summary
- Futures were down modestly overnight and our major indices opened lower
- Until 2pm ET, there was little volatility as most of our indices traded in a very narrow range between slightly lower and slightly higher
- The FOMC minutes were released at 2pm ET, however, and we saw initial buying of equities, followed by rapid selling; as I write this, we're right back where we were when the report was released
- The minutes revealed that the Fed discussed tapering the pace of their monthly bond purchases later this year
- Crude oil ($WTIC, -1.70%) has fallen back close to $65 per barrel, a level that hasn't been pierced since May
- Consumer discretionary (XLY, +1.14) is bouncing back and leading all sectors after a horrific day on Tuesday
- Defensive sectors, which have mostly led the stock market recently, are lagging today
- Lowes (LOW, +10.87%) reported better-than-expected quarterly results and leads all S&P 500 stocks today
Market Outlook
What's up with the small cap ($SML) universe? A strengthening domestic economy should play right into the hands of our small companies. Yet the chart is not suggesting an improving group. Instead, the SML has been mired in a very lengthy rectangular consolidation pattern. 1400 has proven to be a key resistance level, while 1250 price support has been counted on by the bulls to hold:
I fully expect that we'll break out of this consolidation to the upside, which is the obvious desired outcome. We do need to be prepared, however, in the event that small caps lose the support identified above.
Sector/Industry Focus
One of the groups that struggled mightily yesterday within consumer discretionary was home construction ($DJUSHB). Things have stabilized a bit today after a couple housing reports came out mixed prior to today's open. Housing starts were worse than expected, but this looks at what's in the rear view mirror. Building permits, which focuses on future economic activity, beat expectations, so traders have chosen to look at the glass as half full today:
The daily PPO is strong, as is the AD line. It certainly appears as though weakness is being viewed as an opportunity on Wall Street. The pattern looks to me to be a potential cup and today's recovery adds to that belief. I'm always looking for bullish patterns to emerge in a secular bull market.
ChartLists/Strategies
Here is a very bullish chart that I found when I ran our 20-day EMA scan against our Strong Earnings ChartList (SECL):
JNPR:
JNPR's PPO and AD lines are both quite strong. If there's one thing missing on this chart, I'd like to see JNPR break out to a multi-month relative high to its telecom equipment peers ($DJUSCT). The group itself has been strong, so if JNPR can establish a leadership role, that would add to the bullishness above.
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, August 18:
NVDA, CSCO, LOW, TGT, TJX, ADI, SNPS, KEYS, ZTO, BBWI, SQM, WB, VIPS, VSCO, LITE, DQ, EAT, PLCE
Thursday, August 19:
AMAT, EL, ROST, BILI, FTCH, TPR, KSS, BJ, M, WOOF
Economic Reports
July housing starts: 1,534,000 (actual) vs. 1,610,000 (estimate)
July building permits: 1,635,000 (actual) vs. 1,620,000 (estimate)
FOMC minutes released at 2:00pm ET
Happy trading!
Tom