EB Daily Market Report - Monday, August 23, 2021
Executive Market Summary
- Futures were strong overnight and our major indices gapped higher and strengthened throughout the day
- Treasury prices and yields are mostly flat, but the U.S. dollar (UUP, -0.53%) is retreating after setting a new 2021 high last Thursday
- The lower dollar is buoying both energy (XLE, +3.85%) and materials (XLB, +0.97%)
- We're seeing plenty of strength in aggressive sectors as well, with all 5 groups up more than 1%; communication services (XLC, +1.51%) and consumer discretionary (XLY, +1.47%) are leading
- Three defensive sectors are failing to participate in today's rally as utilities (XLU, -1.43%) lag the most
- Crude oil prices ($WTIC, +5.60%) have jumped more than $3 per barrel, moving back above $65
- Energy names litter the S&P 500 leaderboard, led by APA Corp (APA, +7.74%) and Occidental Petroleum (OXY, +6.99%)
- Both the S&P 500 and NASDAQ are currently at all-time highs
Market Outlook
You've got to hand it to the bulls. This rally on the S&P 500 started exactly where it needed to - at key short-term price support. On the following 60-minute chart, you can see three price lows on the SPY (ETF that tracks the S&P 500) near the 436 level, which also coincided with gap support in July:
I find it quite interesting that the last couple of "significant" declines on the hourly chart saw very little deterioration in the hourly AD line (blue circles). It's as if any weakness is being used by professionals to accumulate. Sound familiar?
Sector/Industry Focus
Advances and declines around options expiration day each month are always entertaining, to say the least. Consumer discretionary is rebounding today and I want you to focus on the SCTR rankings of the industry groups leading today:
4 of today's 5 best discretionary groups have the worst SCTRs among all discretionary groups - all at 10 or below. The best performing sector today BY FAR also has the lowest SCTR score by far - energy (XLE) with a SCTR of 11. The next worst sector SCTR score? Consumer discretionary with a 62.
Market makers needed a bounce in these two areas and today they're leading the market higher. It's MAGIC!
I swear, I can't make this stuff up.
ChartLists/Strategies
I ran a scan of 52-week highs on our Strong Earnings ChartList (SECL) that have SCTR scores below 90 and volume already at least 20% above normal (with another hour left in the trading session). The following is the scan syntax, followed by the stocks returned:
Scan Syntax:
Stocks Returned:
M and NVDA are both portfolio stocks, added last week. GLOB has been on fire, setting new highs every day and very, very overbought. I wouldn't be interested in chasing this one. However, the other two, MDXG and MXIM, look quite interesting as they're both just breaking out after a lengthy period of consolidation. Here's what their charts look like:
MDXG:
This triangle measures 4 points, so a breakout above 13 measures to 17, a nice potential profit from the current price level. If the stock does pull back, I'd fully expect that rising 20-day EMA to hold on a closing basis.
MXIM:
The volume here is MASSIVE. Barring a final hour meltdown, I'd expect to see MXIM move higher in the days and weeks to come.
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 23:
JD, PANW
Tuesday, August 24:
MDT, INTU, PDD, BNS, BMO, BBY, HEI, HTHT, AAP, TOL, JWN, URBN, VNET
Economic Reports
August PMI composite: 55.4 (actual) vs. 59.5 (estimate)
July existing home sales: 5,990,000 (actual) vs. 5,830,000 (estimate)
Happy trading!
Tom