EB Daily Market Report - Monday, October 11, 2021
Sneak Preview: Q3 Earnings
Later today, at 4:30pm ET, I'll be looking ahead to upcoming Q3 earnings reports, identifying some of the strongest and weakest charts and what that could mean as these companies report their latest results. It's a great opportunity to review a large number of charts as earnings season heats up! Here is a room link for today:
https://earningsbeats.zoom.us/j/83812916634
Keep in mind that the room will open at 4:00pm ET and we'll get started promptly at 4:30pm ET. Hope to see you there!
ChartLists Update
The following ChartLists have been updated. They'll be updated on our website later today:
- Strong Earnings ChartList (SECL)
- Strong Future Earnings ChartList (SFECL)
- Raised Guidance ChartList (RGCL)
Executive Market Summary
- Futures were mostly lower overnight as we kicked off a new trading week, one that begins Q3 earnings season
- After early morning strength, all of our major indices have turned lower this afternoon as 20-day EMAs have proven to be difficult resistance near-term
- The bond market is closed in observance of Columbus Day; the stock market, however is open as usual
- Crude oil prices ($WTIC, +1.52%) are threatening to close above $80 per barrel for the first time since 2014
- Bitcoin ($BTCUSD, +3.53%) is up nearly $2000 today and has been strengthening relative to etherium ($ETHUSD) - more on this below
- Energy (XLE, -0.05%) got off to a fast start today, but has lost its momentum since this morning's session, despite the continuing rise in crude oil
- Materials (XLB, +0.37%) is today's leading sector, while utilities (XLU, -1.40%) trail
- Renewable energy ($DWCREE, +5.49%) is having a very solid day as Enphase Energy (ENPH, +5.09%) leads the S&P 500
- Meanwhile, apparel retail ($DJUSRA, -2.39%) is one of the key lagging industries
Market Outlook
I pointed out above that utilities (XLU) are struggling today. This comes on the heels of a failed breakout attempt above its 20-day EMA. The good news, however, is that if the XLU prints a low beneath the late-September low, we'll very likely see a positive divergence. That exact scenario is what lifted energy (XLE) recently. Here's the current XLU chart:
This is a very small piece of the U.S. equities market, but it's still a group that could definitely find an intermediate-term low if a positive divergence emerges.
Sector/Industry Focus
Cryptocurrencies have held up much better than U.S. equities since early September. In fact, bitcoin ($BTCUSD) has moved to its highest level since May 2021, and is beginning to show relative strength vs. etherium ($ETHUSD), though for now I'd still give the upper hand to etherium. Here's what the current relative picture looks like right now:
The relative PPO is above its centerline and strengthening, which is excellent news. You can also see that the $BTCUSD:$ETHUSD ratio has been rising for the past six weeks. However, it's got more work to do to clear the relative double top from June and July.
ChartLists/Strategies
I ran a scan of our latest Strong Earnings ChartList (updated today), looking for consumer discretionary stocks that could be poised to run if I'm right about the group leading during the balance of Q4 and into 2022. Here are a few:
ABNB:
The AD line is quite strong and the trend here is positive.
DKS:
I featured DKS last week as it was testing its 50-day SMA. That area of support has failed, but the bottom of gap support could be a second key area to watch for a reversal. Specialty retail ($DJUSRS) is one of the hottest groups right now, so it wouldn't be far-fetched to see DKS begin to rebound and strengthen.
HLT:
I like the strengthening hotels group and I especially love HLT's recent breakout and successful tests of the rising 20-day EMA. HLT is now in an uptrend, so riding it until it fails makes sense to me.
LULU:
LULU recently gapped up from the low 380s on MASSIVE volume after earnings were released. It's been one of the best clothing & accessories stocks the past 4-5 months, it's just unfortunately been part of a bad group. I like the reward to risk entry on LULU if gap support is tested. We're almost there.
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, October 11:
None
Tuesday, October 12:
FAST, PNFP, AZZ, SGH
Economic Reports
None
Happy trading!
Tom