EB Daily Market Report - Tuesday, November 2, 2021
Executive Market Summary
- Futures were mixed overnight and that's how we opened this morning
- The bulls have shown resiliency throughout today's session, however, with the Dow Jones attempting to close above 36000 for the first time in history today
- Most commodities are lower today as the dollar (UUP, +0.30%) gains ground and threatens to break to a 3-week high
- Weak commodity prices and the stronger dollar haven't held back the materials sector (XLB, +0.97%), today's best performing sector
- Technology (XLK, +0.86%) also is having a strong session, led by telecom equipment ($DJUSCT, +3.61%)
- The 10-year treasury yield ($TNX) is down 4 basis points to 1.54%; the move lower has had little impact on financials (XLF, +0.37%) and industrials (XLI, +0.19%)
- Avis Budget Group (CAR, +98.96%) posted revenues and EPS that crushed Wall Street estimates
Market Outlook
Small caps ($SML, -0.21%), despite being lower today, are on the verge of a big breakout above 1415, following the recent lead of mid caps ($MID, +0.07%). It's extremely bullish to see wide participation on stock market advances, so bulls would absolutely welcome the SML to the party:
The daily PPO is showing that bullish momentum is accelerating. On pullbacks, we need to see the rising 20-day EMA hold. That would be further confirmation that this uptrend has legs. A breakout in the AD line to coincide with a price breakout above 1415 would be very bullish as well.
Sector/Industry Focus
Clothing & accessories ($DJUSCF, +0.60%) hit an all-time high intraday earlier, but, with a bit over an hour to go today, is failing to sustain that upward momentum. A close near the low today could suggest a short-term pullback to perhaps the rising 20-day EMA. History does not support the DJUSCF leading the market higher as it's mostly been a relative laggard. However, a short-term breakout should be respected:
The bottom panel is the relative strength of DJUSCF vs. the S&P 500. While we've seen brief periods of relative strength, the overall relative trend has been lower for the past year. A definitive break out of this relative down channel would be a very bullish development, but there's still more technical work to do here.
ChartLists/Strategies
I ran the Bullish Trifecta ChartList today, which simply organizes all stocks that are included in three different ChartLists - the Strong Earnings ChartList (SECL), the Raised Guidance ChartList (RGCL), and the Strong AD ChartList (SADCL). Any company that is on all 3 has beaten revenue and EPS estimates in its most recent quarterly earnings report, has raised guidance within the past 3 months, and is showing signs of accumulation with a rising AD line and strong SCTR rank. There are 52 companies that are present on all 3 of these ChartLists. I then ran a scan to see which of these 52 companies have an RSI reading below 50, indicative of a recent pullback and possible entry level. Here were the results of that scan:
All four of these stocks are interesting from a long perspective, but for different reasons:
CRWD:
CRWD was featured in a blog article at StockCharts.com recently when it was on the verge of breaking out. At the time, I said it was either a breakout or a false breakout. Well, now we know. It was a false breakout and these tend to lead to additional short-term selling, which is exactly what we saw. Now CRWD has begun to hit levels where bulls could become much more interested, starting with today's 50-day SMA test.
EVRI:
EVRI remains a strong performer within the gambling group ($DJUSCA). It's also fallen back to test both price support and its 50-day SMA. This is a solid reward-to-risk entry opportunity.
OPEN:
Negative divergences many times result in PPO centerline and/or 50-day SMA tests (pink arrows). OPEN has one of the strongest AD lines anywhere, so it'll be interesting to see if buyers step up in the final hour. Meanwhile, this 50-day SMA test also represents the level of the price breakout at 21 bucks from a month ago.
SSTK:
SSTK meets the definition of a leading stock within a leading industry group. Those bottom panels are all trending higher, which is bullish. The 117 price level seems to represent both short-term price support and trendline support, again marking a very solid reward-to-risk trade opportunity.
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.
Tuesday, November 2:
PFE, TMUS, AMGN, EL, COP, BP, MDLZ, ETN, ATVI, TRI, IDXX, EPD, VRTX, KKR, PRU, RACE, MTCH, MPC, GPN, ROK, DD, CMI, VRSK, PEG, PAYC, AWK, GNRC, MPLX, AME, ES, OKE, WEC, ZBRA, DVN, IT, ZG, MLM, EIX, CZR, XYL, STE, CTLT, WAT, TECH, PKI, PEAK, AMCR, APO, SEDG, MKL, AKAM, EXAS, LYFT, IEP, INCY, LDOS, FNF, FRSH, WLK, FMC, AFG, MMP, LSI, HSIC, UAA, LEA, DOX, XPO, BHC, LSCC, RL, SEE, IPGP, APPS, WU, SPT, CHK, SRCL, UNM, HLF, MIME, COUR, AYX, LPSN, LGIH, RAMP, SGRY, ARNC, CDLX, EGHT, MYGN, BLMN, KAR, EXTR, ICHR, TVTY, VECO, CERS, DENN
Wednesday, November 3:
QCOM, CVS, BKNG, EQIX, HUM, EMR, MET, MAR, EXC, PXD, TT, ROKU, EA, ITUB, SLF, HUBS, MFC, ALL, ANSS, ETSY, CTVA, ALB, FNV, HZNP, ET, CDW, CVE, FOXA, MGM, CRL, IR, TRMB, AEE, TTWO, BR, ETR, FLT, CDAY, QRVO, XP, CLR, TXG, BIP, ATH, LBTYA, PTC, EVRG, UHAL, EQH, GFL, LNC, LUMN, JLL, MRO, QGEN, CF, HST, DISCA, GDDY, PLTK, KL, BWA, SITE, PEN, APA, NI, NCLH, H, TNDM, UTHR, CTRA, SMG, DXC, ITT, CPRI, EXPI, WK, RPD, SRPT, VVV, CLH, FSLY, SPWR, WING, SITM, QLYS, FSR, SKLZ, SPR, KNBE, SHOO, MATX, MGNI, ATRC, REGI, VSH, TTGT, KTOS, EVH, AAWW, EVRI, CRTO, ACLS, ELF, UPLD
Economic Reports
FOMC meeting begins; policy statement at 2:00pm Wednesday
Happy trading!
Tom