EB Daily Market Report - Wednesday, September 8, 2021
Executive Market Summary
- Futures were lower overnight and our major indices opened lower
- Cryptocurrencies are having a relatively flat session after wild trading on Tuesday
- The 10-year treasury yield ($TNX) is down 2 basis points to 1.35%
- The U.S. dollar (UUP) is continuing its advance from Tuesday, though it has backed off earlier highs
- Crude oil ($WTIC) is up nearly 1% and close to $69 per barrel; other commodities are mostly lower
- Utilities (XLU, +1.85%) are today's clear leader, with consumer staples (XLP, +0.60%) in the 2nd spot
- Energy (XLE, -0.97%) and materials (XLB, -0.97%) are both struggling on a relative basis
- Semiconductors ($DJUSSC, -1.41%) are seeing a bit of profit taking, while distillers & vintners ($DJUSVN, +2.76%) are having a strong day
- Coupa Software (COUP, -2.85%) is underscoring the volatility associated with earnings reports; after reporting better-than-expected EPS, COUP gapped to a 7-week high, then sold off 7% in 10 minutes
Market Outlook
On Friday, we'll get another monthly PPI report, followed by the latest monthly CPI report early next week. While headline numbers may continue to point to inflation issues, the stock market AND the bond market both are suggesting we ignore these inflationary pressures altogether. The two key growth-to-value ratios that I like to watch keep rolling higher, which is the visual evidence that stock market participants continue to favor growth stocks. The IWF:IWD ratio is comprised of mostly larger cap names, while the $DJUSGS:$DJUSVS ratio provides us the growth-to-value story at the small cap level. As both move higher, we need to respect the market's message:
IWF vs. IWD:
$DJUSGS vs. $DJUSVS:
While I wouldn't say we're completely out of the woods, I'm also not going to argue with these uptrends that both now extend from mid May. I believe growth should be our preference for trading, with perhaps a bit more caution during the second half of September.
Sector/Industry Focus
Distillers & vintners ($DJUSVN) is taking advantage of a test of key price support, along with the printing of a positive divergence:
I'd look for a minimum of a 50-day SMA test, though 470 represents a very important long-term price support level. I expect that to hold. While I don't look for industries within defensive sectors to be huge winners, I do look for this group to break above that 50-day SMA and trade higher into year end.
ChartLists/Strategies
I looked at a lot of charts from our various ChartLists and wanted to point out several that looked interesting technically to me:
SQ:
SQ has struggled each time it's tested the 280-290 area. To the downside, however, it's been solid when testing or approaching its 50-day SMA. In addition to its 50-day SMA, SQ is also approaching recent price support from 254-256 and a BIG support a bit lower at 247.93.
COUR:
COUR saw a lot of selling on Monday, but so far is holding what has been excellent price support near 35 since the positive earnings reaction in early August.
TJX:
Are we seeing a reversal on TJX at the 50-day SMA and just above key earnings-related gap support? We'll soon find out.
LEVI:
Clothing & accessories ($DJUSCF) have been a problem over the past few weeks, but LEVI is one of its leaders and its relative strength has held up fairly well. I'd continue to watch that. Also, from the chart, you can see that 26 has been an area of excellent price support for the past 3 months. If it breaks down, look for a quick trip down to 24.50. I'd expect one of these two levels to hold as support.
FRC:
FRC is testing trendline support and its 50-day SMA. If the 50-day SMA fails to hold, I'd look for the next decline to reach 188. It's also worth mentioning that FRC has been a leader in the banking space and its AD line remains particularly strong.
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, September 8:
LULU, CPRT, S, GME, RH, WDH, HQY, KFY, ABM, AVAV
Thursday, September 9:
ZS, AFRM, ASO, VRNT, PLAY, ZUMZ
Economic Reports
Beige book to be released at 2:00pm ET
Happy trading!
Tom