EB Daily Market Report - Friday, March 11, 2022

Tom Bowley - March 11, 2022

ChartLists/Reports

I'm updating several ChartLists today. The following should be updated by the end of the day today:

Strong Earnings (SECL)
Strong Future Earnings (SFECL)
Raised Guidance (RGCL)
Strong AD (SADCL)
Bullish Trifecta (BTCL)

If you don't see them updated on our website later today, definitely check back in over the weekend.

Also, I haven't provided the Short Report or the Seasonality Report for March. Honestly, I'm not comfortable providing these reports right now, because they typically focus on possible long trading candidates. And while I could report on stocks that suffer historically during the month of March, I'm concerned that the current weakness could end at any time, though I do believe we have one more leg lower. I plan to release both these reports at the beginning of April and then we should be back on track again.

Executive Market Summary

Futures strengthened considerably this morning as reports surfaced that progress was being made in talks between Russia and Ukraine
After starting off in positive territory, sellers have taken over - especially among growth stocks
The March consumer sentiment tumbled from 62.8 in February to 59.7 this month, well below estimates
The IWF:IWD ratio (growth vs. value) has been falling rather significantly since 3pm ET yesterday
Crude oil ($WTIC, +2.70%) is up nearly $3 per barrel today as the day-to-day volatility continues
The 10-year treasury yield ($TNX) is flat today near 2.00%
Technology (XLK, -0.83%) and consumer discretionary (XLY, -0.78%) are today's laggards, not too surprising when considering the move away from growth stocks today
Financials (XLF, +0.52%) and health care (XLV, +0.31%) are benefiting from the rotation toward value

Market Outlook

Did you see the consumer sentiment report this morning? It's been dropping in recent months, suggesting a possible recession ahead (it's just one signal, not THE signal). This morning's report fell much more than expected and shows that a considerable toll is being taken on the consumer as we deal with inflation, soaring crude oil prices, the prospect and likelihood of higher interest rates, and the Russia-Ukraine war. I believe the stock market is pricing in a recession right now and is much more concerned with domestic issues than the war, but that's just my opinion. Recessions take most EVERYTHING down. In the last "normal" recession (ignoring the pandemic in 2020) was in Q4 2018. Apple (AAPL), nearly everyone's fan favorite, fell from 56 to 34. That's a BIG drop. AAPL is on the verge of a big breakdown and I believe the selling is just getting started. I've said before, and I'm sticking with it, that my minimum drop on AAPL is to 140. It could be more.

As the S&P 500 attempts to go higher today, check out these favorite relative ratios:

These ratios measure the market's "risk-on vs. risk-off" mentality. Risk-off is the type of environment where the stock market could be absolutely clobbered, so please be careful. The S&P 500 low from yesterday to today is higher, but ALL of these risk-on ratios are lower - in a few instances, MUCH lower.

Sector/Industry Focus

If I'm right about the stock market taking another turn to the downside, then gold should once again become a solid short-term trade. Therefore, I bought back in today after a rather sizable short-term selloff. Here's the current chart:

The best entry would come at the rising 20-day EMA, but getting there likely depends on the overall market. If the S&P 500 can shake off the "risk-off" mentality today and move higher into the Fed meeting, then the GLD could see a 20-day EMA. If we hit that level, I'll likely add to my position. I cannot see the stock market moving higher now through the Fed meeting and beyond. If it doesn't go down further into the Fed meeting, then I expect it to upon the Fed policy decision on Wednesday.

I guess we'll soon find out.

ChartLists/Strategies

Energy names have been very strong in 2022, but some have pulled back rather significantly and might be worth a trade. For instance, one energy company that just reported strong results and exploded higher was W&T Offshore (WTI):

It traded up just prior to the report, then gapped higher after its earnings. However, it's sold off fairly hard and is now back at 20-day EMA support, which is where I bought a bit. I think a short-term move back to 5.50-5.60 is quite possible near-term.

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, March 11:

BKE

Monday, March 14:

MTN, COUP

Economic Reports

None

Happy trading!

Tom