EB Daily Market Report - Friday, November 19, 2021
Portfolio Stocks
Last night, I unveiled the 40 stocks in our 4 portfolios - 10 equal-weighted stocks in each portfolio. Today's close will mark the "selling" of last quarter's stocks and the entering of the upcoming quarter's stocks. Our quarter runs from November 19th close through the February 19th close. Let's see if we can keep the momentum going!
All four portfolios - the Model, Aggressive, Income, and Strong AD - are available on our site for viewing/download. In the name, you'll see a date and either "AMC" or "BMO" after it. AMC = after market close, while BMO = before market open. These are estimated dates and times of that company's next earnings report. I'll review these dates in 6 weeks or so and make any necessary adjustments as these are just estimates.
Executive Market Summary
- Futures were slightly lower across the board, with the NASDAQ being the lone bullish exception
- NASDAQ stocks are performing well in early action as rates drop
- The 10-year treasury yield ($TNX) has fallen another 6 basis points early this morning to 1.53%; that's more than 11 basis points lower than Wednesday morning
- The growth to value ratio (IWF:IWD) is soaring on the lower treasury yields; it's at 1.882 currently, while the all-time high close was 1.922 on September 1, 2020
- Health care (XLV, +0.46%) holds a slight lead over technology (XLK, +0.41%) in early action
- Renewable energy ($DWCREE, +2.82%) is regaining strength after recent profit taking
- Meanwhile, energy (XLE, -2.92%) is taking a big hit as crude prices ($WTIC, -2.16%) have fallen to $77 per barrel
- Intuit (INTU, +11.89%) is the S&P 500's top performer after reporting excellent quarterly earnings results
- Applied Materials (AMAT, -4.84%), on the other hand, missed revenue and EPS estimates and lowered guidance
Market Outlook
The Dow Jones has been a little weak the past couple weeks and yesterday tested its 20-day EMA. It has potentially another 2% downside to its 50-day SMA, but I'd be surprised to see more selling than that. I'm not even sure we'll get that far. Here's a current look at the chart:
The path of least resistance for U.S. equities remains higher, though short-term pullbacks are necessary and healthy. I wouldn't read too much into the minor selling recently.
Sector/Industry Focus
Consumer staples (XLP), while certainly not one of our strongest sectors on a relative basis, is participating in this secular bull market:
If you looked at nothing but the price chart, you'd likely be quite impressed with this uptrend. But if you're goal is to outperform the benchmark S&P 500, this is NOT the sector to do it with. That relative downtrend is nasty, but bullish for the overall market. We want defensive areas to underperform during secular bull market advances.
ChartLists/Strategies
Today is options expiration day and many times I see significant moves that appear out of nowhere, which makes technical trading a just a bit more difficult. I would continue to be extremely careful on the long side with stocks that are (1) overbought and (2) heavily traded in options. Some stocks in this category have simply ignored these conditions, however. Microsoft (MSFT) is setting fresh all-time highs, despite being overbought, having a TON of net in-the-money calls, and printing a negative divergence. Maybe it sees a big reversal today or early next week, but for now, it just keeps rolling:
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.
Friday, November 19:
FL, BKE
Monday, November 22:
ZM, A, KEYS, CRNC, URBN, NIU
Economic Reports
None
Happy trading!
Tom