EB Daily Market Report - Monday, May 16, 2022

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ChartList Update

The Raised Guidance ChartList (RGCL) has been updated through last week. Other ChartLists will be updated later today or tomorrow as we prepare for the upcoming Portfolio DRAFT on Thursday.

Executive Market Summary

• Futures were slightly lower to kick off the new week
• Cryptocurrencies have bounced off last week's lows, but they're underperforming today; etherium ($ETHUSD) is down roughly 2.7%
• Energy (XLE, +3.23%) is very strong, breaking out to a new 2022 high
• Crude oil ($WTIC, +2.94%) has jumped up to nearly $114 per barrel, helping to lift energy shares
• Other commodities are mostly higher as well, with silver ($SILVER, +3.09%) trying to snap a lengthy 3-4 week downtrend
• Consumer discretionary (XLY, -1.88%) is quite weak, led by automobiles ($DJUSAU, -5.15%); Tesla (TSLA, -5.69%) is nearing critical price support at 700 (double bottom)
• May monthly options expire this Friday and could have a major impact as we move throughout the week; currently, options would favor a rally into Friday's close
• Twitter (TWTR, -7.90%) is the S&P 500's worst performing stock today and it's now trading below its price when Elon Musk announced TSLA would buy the beleaguered internet company

Market Outlook

The NASDAQ is home to many growth stocks that have performed very poorly in 2022. But since this is options expiration week, don't be shocked if the bulls can grab control for a short period. One key price resistance zone I'll be watching is 11900-12000 on the NASDAQ:

I don't like the move lower in the QQQ:SPY ratio this morning, so the long-term prospects are not really improving. But again, in the short-term, with billions of net in-the-money put premium on the table? Yeah, we could rally.

Sector/Industry Focus

Communication services (XLC) has been the worst performing sector for the last 6-9 months. But it is trying to bounce off of a key support level. Is this an ultimate bottom? I wouldn't be that surprised if it is. Check this out:

This major price support test has me a bit more bullish towards industry groups within this space as well. I wouldn't be too surprised to see internet ($DJUSNS) perform well this week if options expiration truly kicks in.

ChartLists/Strategies

Max pain would suggest we'll see a continuation of the short-term reversal in the market last week. A stock like Netflix (NFLX), which has rallied a bit off last week's low, could see further upside to its 20-day EMA:

This NFLX chart is UGLY. However, max pain is a short-term phenomenon that can allow beaten-down stocks like NFLX temporary asylum. We've seen it plenty of times before, so don't be shocked if a few of these downtrodden laggards suddenly catch fire.

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 several 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, May 16:

MUFJ, NU, RYAAY, TTWO, MNDY, DNA, WIX

Tuesday, May 17:

WMT, HD, JD, SE, KEYS, ONON, AER, DOCS, IHS, JBI, NXGN

Economic Reports

May empire state manufacturing index: -11.6 (actual) vs. 15.0 (estimate)

Happy trading!

Tom