EB Daily Market Report - Wednesday, January 12, 2022

Today's Event

We are having a special webinar this afternoon to discuss our popular ETF Analyzer tool (Excel spreadsheet) and how you might use it to your advantage based upon your own risk tolerance, strategies, and objectives. The event will begin at 5:30pm ET and everyone in our EarningsBeats.com community will be invited as it's a free event. If you know anyone that might find this information useful (ie, ETF investors or traders), feel free to pass along a link for our EB Digest sign up form. HERE is the link they can use to sign up. Anyone who misses the event will still be sent the recording, so don't worry if you cannot make the event live.

Executive Market Summary

• Futures were fairly strong overnight and maintained their positive bias into the open, despite a higher-than-expected December CPI reading this morning
• Intraday trading hasn't been as bullish, particularly in small caps ($SML, -0.11%) and mid caps ($MID, -0.15%)
• Growth vs. value has begun to struggle on a relative basis, though prices have risen - more on that below
• Cryptocurrencies are having another strong session with etherium ($ETHUSD) tacking on another 4.1% today
• Gold ($GOLD, +0.51%) is showing strength and that may continue if fear begins to escalate on another downturn in equities
• Crude oil ($WTIC, +2.07%) is having another very strong session, though the energy sector (XLE, +0.08%) is flat
• Sector strength is found in materials (XLB, +0.71%) as nonferrous metals gain substantially ($DJUSNF, +4.16%); steel ($DJUSST, +2.67%) is also surging
• Defensive sectors are literally on the defensive today as health care (XLV, -0.54%) lags the overall market
• Goldman Sachs (GS, -2.89%) is a drag on the Dow Jones, but the technology components are leading this index higher
• The beige book will be released by the time you're reading this DMR; will this report from the Fed influence U.S. equities this afternoon and in the days ahead? We'll soon find out....

Market Outlook

Growth stocks have suffered, as we know, from all the discussions about higher inflation and higher interest rates. So it certainly makes sense to watch their relative performance vs. the benchmark S&P 500 to help interpret Wall Street's reaction to new news relating to both inflation and interest rates. Here's what that looks like to me:

Small and mid cap growth are already showing signs of struggling (sideways consolidation and recent lower relative lows) as the S&P 500 rises. And large cap growth continues to power forward on a relative basis, a hallmark of 2021 action, so nothing has really changed there. The S&P 500, in my opinion, will have more issues when the DJUSGL:DJUSVL ratio weakens. Thus far, the bulls are holding their own and staving off the bears. This will be a key to watch as we move forward throughout earnings season and the balance of Q1.

Sector/Industry Focus

If I'm right about the stock market struggling throughout Q1, I believe gold (GLD) could be a beneficiary. Gold historically performs well during inflationary periods, though that hasn't been the case recently. Gold also performs very well when the Volatility Index ($VIX) surges, so if we begin to see that occur, hedging with the GLD could make good sense. Here's where the GLD currently stands:

GLD seems to be consolidating longer-term in this symmetrical triangle. A breakout to the upside that coincides with increasing volatility could be a signal of further gains to come in Q1.

ChartLists/Strategies

To potentially find shorting candidates, I ran a scan where I look for stocks that have traded above their 20-day EMAs today, but have retreated back below. I also want to see weak PPOs that are trending below the centerline. Here's one example:

OSUR:

Industry relative strength is weak and OSUR's relative strength vs. its peers is weak as well. The AD line is trending lower and has been for several months now. Finally, there's a false breakout above the 20-day EMA, so we can keep our stop tight in the event that OSUR manages to close above its key 20-day EMA.

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.

Wednesday, January 12:

INFY, WIT, SJR, JEF, KBH, ETWO

Thursday, January 13:

DAL

Economic Reports

December CPI: +0.5% (actual) vs. +0.4% (estimate)

December Core CPI: +0.6% (actual) vs. +0.5% (estimate)

Beige Book will be released at 2:00pm ET

Happy trading!

Tom