EB Daily Market Report - Friday, September 24, 2021

This will be an abbreviated report as I'm out of the office all day today.

Futures were weak to start the day, but we have seen a bit of recovery. Perhaps the biggest news technically is the breakout in the 10-year treasury yield ($TNX), which is up another 4 basis points to 1.45%. That should aid financials (XLF) and industrials (XLI) in the near-term.

Recently, I've discussed my two biggest concerns being the downtrend in the TNX and also in transports ($TRAN). They tend to move in the same direction as the chart below suggests:

The correlation coefficient highlights the fact that there tends to be positive correlation between the TNX and the TRAN, which makes perfect common sense. If you believe the economy is strengthening or will strengthen, you want to sell bonds (driving yields higher), while moving into economically-sensitive areas like the transportation stocks. Accordingly, this surge in the TNX could finally be the catalyst that drives transportation stocks higher.

Nike (NKE, -6.38%) and Costco (COST, +2.60%) reported their quarterly results yesterday after the bell and they are responding quite differently. NKE lowered revenue guidance, blaming supply chain issues, and it's moved into a gap support zone, but in the process of possibly losing the top of that gap support, a short-term negative:

Today is likely either a breakdown for NKE, or a potential bottom if we see a strong afternoon rally. My expectation would be a test of the next support level near 146.

I'll be back on Monday with my usual DMR.

Happy trading!

Tom