EB Daily Market Report - Monday, November 22, 2021

Tom Bowley - November 22, 2021

Holiday Schedule

We'll be closed this Thursday for the Thanksgiving Day holiday. We will be available on Black Friday, though there will not be a Daily Market Report on Friday. The U.S. stock market will be closed on Thursday and it'll have an abbreviated session on Friday, closing at 1:00pm ET.

Executive Market Summary

Futures were higher to open up this holiday-shortened week
While the NASDAQ initially led to the upside, we've seen rotation intraday towards value and away from growth
Energy (XLE, +2.56%) and financials (XLF, +2.17%), last week's laggards, are off and running this week
Communication services (XLC, -0.87%) remains weak and once again is the underperformer
Crude oil prices ($WTIC, +0.92%) are rebounding, aiding the energy sector
President Bide renominated Jerome Powell for a second term as Federal Reserve chair, sending the dollar (UUP, +0.43%) higher and gold ($GOLD, -2.42%) lower
Other commodities were mostly lower as well, with silver ($SILVER, -2.08%) and copper ($COPPER, -0.29%) down
Cryptocurrencies were taking a hit as bitcoin ($BTCUSD) and etherium ($ETHUSD) both fell roughly 5%
The Dow Jones is trading 200 points higher as financials lead; JP Morgan (JPM, +2.94%) and Goldman Sachs (GS, +2.89%) are trading up
Small caps ($SML, +1.14%) is the best performing of our major indices

Market Outlook

I've been discussing the negative divergences across our major indices, and reversing candles can add to the short-term bearishness. The S&P 500 ($SPX) was trading considerably higher earlier today and it's currently leaving a rather lengthy tail (intraday high) to the upside. It's too early to tell if this could lead to short-term selling, but a weak finish would not be a good look technically:

It's always entirely possible that price action continues higher and the negative divergence is eliminated. We still have a long way to go before that happens, though.

Sector/Industry Focus

Industrials (XLI, +0.88%) is rebounding today exactly where it needed to from a technical perspective. After four tops printed near 105.50, the XLI closed on Friday at 105.73 to test both price support and the rising 20-day EMA, which is currently at 105.67:

I wouldn't be surprised to see financials and industrials perform well in the near-term, but the 10-year treasury yield ($TNX) might provide us that clue. Today, the TNX is up 8 basis points to 1.62%, clearly benefiting these two sectors. A move back into the 1.65%-1.75% range on the TNX would bode well for them.

ChartLists/Strategies

I reviewed our ChartLists, looking for potential trades in financials and industrials, since both appear poised to move higher from here. Here are two potential trade candidates that would benefit from further rotation INTO these two sectors:

WAL:

Many banks are showing negative divergences with potential 50-day SMA tests upcoming. WAL, however, already pulled back and tested that key moving average. So I'd give an edge to this bank should the group continue rallying:

TRTN:

After a big move in late October, TRTN has been sideways consolidating and is currently near its 20-day EMA. I believe the 59-60 price range will hold as support and I expect we'll see another upcoming breakout in this transportation services company ($DJUSTS):

I expect to see TRTN trade higher down the road, but I'd still want to keep a closing stop below 59 or so in the short-term. A trip down to the 50-day SMA can't be ruled out and I wouldn't want to hold it to that level. If I was planning to provide the 50-day SMA as a closing stop, then I'd change my entry strategy to the current price, along with a second entry on that 50-day test. Then I'd consider a closing stop beneath gap support at 56.30.

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 22:

ZM, A, KEYS, CRNC, URBN, NIU

Tuesday, November 23:

MDT, ADSK, ADI, VMW, DELL, XPEV, HPQ, BBY, DLTR, J, BURL, SJM, DKS, GPS, PLAN, PSTG, NTNX, ESLT, JWN, AEO, CBRL, GENI, ANF, DY, JACK, ROAD, GES

Economic Reports

October existing home sales: 6,340,000 (actual) vs. 6,200,000 (estimate)

Happy trading!

Tom