EB Daily Market Report - Wednesday, June 1, 2022

Spring Special - A BIG Success!

Thanks to all who participated in our Spring Special! That's our ultimate "customer satisfaction" test and we really appreciate your loyalty and support! A great big THANK YOU from all of us here at EarningsBeats.

ChartLists Updated

I have updated the following ChartLists and they are available for download/viewing on our website:

• Short Squeeze ChartList (SSCL)
• Raised Guidance ChartList (RGCL)
• Bullish Trifecta ChartList (BTCL)

Executive Market Summary

• Futures were higher overnight and this morning as our key indices gapped higher
• It's been a struggle to add to those pre-market gains, however
• Energy (XLE, +1.93%) is strong, but that's about it; financials (XLF, -1.27%) is the biggest laggard
• One day after showing tremendous strength in cryptocurrencies, most are down substantially today; bitcoin ($BTCUSD, -4.79%) is back challenging the psychological level at 30000
• Facebook (FB, -3.35%) COO Sheryl Sandberg just announced she's stepping down
• The 10-year treasury yield ($TNX) is up another 9 basis points today to 2.93%, but it's providing no lift for financials
• Salesforce.com (CRM, +10.33%) is the biggest gainer in the Dow Jones after reporting better-than-expected quarterly results

Market Outlook

A short-term issue has emerged as earlier highs in both the S&P 500 and NASDAQ 100 were accompanied by negative divergences on the hourly charts. That's no guarantee of downside action ahead, but it does provide us a short-term warning sign and a possible 50-hour SMA test. Here are the two charts, highlighting this potential slowing price momentum:

We're not at any critical price or trend line resistance levels - those are closer to 4300. But we should at least beware of a possible top due to the negative divergence. The last one in March didn't really produce a big selloff, so there's no sort of guarantee here. Still, I wanted to at least bring it to your attention.

Here's the NASDAQ 100:

While we could see a turn back to the downside at any moment, I believe the closer we get to those major price and trend line resistance levels, the better the reward to risk to consider shorting.

Sector/Industry Focus

I remain a big fan of health care stocks (XLV), despite their recent underperformance. Absolute price support is still holding and overall relative strength in 2022 remains in a serious uptrend. I believe the group has seen some profit taking as money has rotated a bit more into aggressive areas like consumer discretionary (XLY). If we see another leg lower in the S&P 500, I expect relative strength to return to the XLV:

From a price support perspective, the XLV really needs to hold the 124-126 support zone. I believe it will.

ChartLists/Strategies

Most of our ChartLists have been updated - either yesterday or today. So be sure to view/download them at your leisure. In order to download them, you need to be a StockCharts.com Extra or Pro member. Basic membership only allows one ChartList per account and that's your default ChartList. Therefore, you won't be able to download our ChartLists into your account. Extra and Pro memberships at SC.com allow you to store hundreds of ChartLists, so you can easily download all of our research and work directly into your account, saving you HUNDREDS of hours of work. I used the StockCharts.com platform in my trading when I traded full-time. That's why our service here at EarningsBeats.com uses the platform as well. If you are not a member at StockCharts.com, you can continue to use our service without issue. It's simply easier if you're able to download our ChartLists into your account.

We've "paused" our monthly Short Reports and Seasonality Reports, while the stock market remains in a cyclical bear market environment. I suspect we'll be back to our normal monthly reports later this summer. One thing I can say, however, is that bears are getting much more aggressive. Our Short Squeeze ChartList (SSCL) includes stocks with a short percentage of float greater than 20%. The number of such stocks in all of our SSCLs this year have been rising, meaning that more companies are being heavily shorted. That is another form of sentiment that has turned much more bearish this year, a very positive signal for U.S. equities ultimately. We just have to work our way through all of the current issues. When the market ROARS higher later this year, though, our Short Squeeze ChartList will be a very powerful tool, in my opinion. Here are the number of SSCL stocks at various intervals in 2022:

• November 2021: 35
• December 2021: 37
• January 2022: 33
• February 2022: 40
• March 2022: 39
• April 2022: 43
• May 2022: 50

The number is on the rise as market participants turn more and more bearish. Again, this is a VERY good thing for those in the secular bull market camp - which is definitely where I am. I've remained steadfastly bullish long-term, even while predicting this current cyclical bear market back in December 2021. I'm absolutely convinced we're going back up in a BIG, BIG WAY. Like the trade war and pandemic, this inflation-induced cyclical bear market will pass. When it does, many of these heavily-shorted stocks are likely to explode.

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.

Wednesday, June 1, 2022:

VEEV, HPE, MDB, NTAP, CHWY, GME, PATH, S, PSTG, CPRI, DCI, ESTC, WB, PVH, SMTC, NCNO, AI

Thursday, June 2, 2022:

CRWD, LULU, HRL, COO, OKTA, TTC, CIEN, RH, ASAN, STNE, NAPA, PD, SPTN, DBI

Economic Reports

May PMI manufacturing: 57.0 (actual) vs. 57.5 (estimate)

May ISM manufacturing: 56.1 (actual) vs. 54.5 (estimate)

April construction spending: +0.2% (actual) vs. +0.4% (estimate)

Happy trading!

Tom