EB Daily Market Report - Monday, November 8, 2021

Executive Market Summary

• Futures turned higher this morning after being slightly lower overnight
• Tesla's (TSLA, -3.36%) Elon Musk announced a plan to sell a 10% stake and allowed Twitter followers to vote on it; they voted to approve it
• Cryptocurrencies are strong as etherium ($ETHUSD, +3.42%) sets new all-time high; bitcoin ($BTCUSD, +5.56%) rises above 66,000
• Commodities are mixed with crude oil ($WTIC, +0.33%) relatively flat at $81.50 per barrel
• Materials (XLB, +1.23%) and energy (XLE, +0.82%) are pacing today's slight advance
• Utilities (XLU, -1.56%) and consumer stocks - discretionary (XLY, -1.01%) and staples (XLP, -0.88%) - lag the key indices
• Advanced Micro Devices (AMD, +10.78%) and NVIDIA (NVDA, +3.60%) continue their torrid runs higher, driving semiconductors ($DJUSSC, +2.24%) higher
• Despite a lack of economic news, the 10-year treasury yield ($TNX) is up 4 basis points to 1.49%

Market Outlook

As Dow transports ($TRAN) break out and keep charging higher, their relative performance vs. Dow utilities ($UTIL) widens, suggesting much further economic strength ahead. Here's the latest price relative chart:

This TRAN:UTIL chart is one of my favorite intermarket relationship charts to evaluate the sustainability of a market advance. Seeing this breakout further confirms the bullish U.S. equity market that I've been discussing for years.

Sector/Industry Focus

I've said on many occasions that I'm not a fan of materials stocks (XLB). It's not that I don't believe they'll go up on an absolute basis. Rather, I just don't believe they'll outperform the S&P 500 - at least not until I believe the dollar (UUP) has broken down. I'm looking for the dollar to rise and breakout.

But materials is breaking out on an absolute basis, and that's almost always bullish, in my view. Note that the PPO is accelerating so bullish price momentum is strengthening:

Given today's breakout, I could see materials performing well near-term, but I'd still be cautious from an intermediate-term perspective, and especially from a long-term perspective.

ChartLists/Strategies

The market's been incredibly hot, but that doesn't mean there haven't been downtrending stocks. In fact, when I ran our Downtrend Reversal scan against 3 of our ChartLists - the Strong Earnings (SECL), Strong Future Earnings (SFECL), and Strong AD (SADCL) - I found 5 stocks that today are breaking streaks of lower highs for 5 or more consecutive days. The stocks are as follows:

I've sorted them in SCTR order. Note that two of the stocks are in the Insurance Brokers ($DJUSIB) area, which has been downtrending for the past couple weeks. I believe MMC and AON have simply been swept up in the short-term rotation out of this industry. As the group strengthens today, these two stocks are back in play. I prefer MMC:

The red circle highlights the fact that today is the first time the DJUSIB has outperformed the S&P 500 is two weeks. Should this group continue to strengthen, it would set up both MMC and AON for short-term strength. I'd be concerned if MMC were to close below BOTH 161 price support and the rising 50-day SMA, currently just beneath 160. Otherwise, I'm looking for a trip back to test those prior highs.

(Disclosure: I bought MMC shares this afternoon)

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, November 8:

PYPL, RBLX, TTD, IFF, AMC, BEKE, VTRS, TME, TREX, JKHY, OSH, BKI, FIVN, SWAV, ZNGA, COTY, FSK, NVTA, NEWR, BLDP, SPCE, ENV, TRIP, LMND, DDD, TSEM, CBT, SANM, MWA, BAND, SDC, RDNT, TGLS, EHTH

Tuesday, November 9, 2021

COIN, DASH, NIO, BNTX, PLTR, U, SYY, DHI, TOST, UPST, RNG, BSY, CAH, DAR, DOCS, WRK, WYNN, MIDD, SGMS, ADT, IGT, EVBG, ELY, SEAS, MLCO, FUBO, SAIL, CARG, VCYT, HAE, NUVA, LGND, FLGT, TWNK, VCEL, NSTG, OCGN, SENS, TGI, ACB, AVID, PRPL, VERI

Economic Reports

None

Happy trading!

Tom