EB Daily Market Report - Monday, June 6, 2022

Tom Bowley - June 06, 2022

Executive Market Summary

Futures were strong to open the week, as all of our major indices gapped up nicely
As I mentioned was very possible on Trading Places LIVE this morning, however, those gains haven't held up
Our major indices are now bifurcated with the Dow Jones trading in negative territory
The Volatility Index ($VIX, +2.82%) has stubbornly remained in positive territory all day
Most commodities are mixed and near unchanged levels; one exception is natural gas ($NATGAS, +9.89%), which is soaring above $9 - NATGAS hasn't closed there since 2008
The 10-year treasury yield ($TNX) is up 8 basis points to 3.04%; this could be our first close above 3% in a month
Most aggressive areas are performing relatively well, led by consumer discretionary (XLY, +0.86%)
IBM is up another 1.15%, helping to lead the Dow Jones; the only component stronger today is Travelers (TRV, +1.41%)

Market Outlook

There's really not a lot going on right now in the stock market. I see the S&P 500 simply wavering back and forth the past several days. The good news is that it's hanging onto 20-day EMA support, but the bad news is that we still haven't really cleared a key price resistance level:

We have a very big inflation report due out on Friday - the May CPI report. Last month's Core CPI was +0.6% and it's expected to drop to +0.5%. If it comes in hotter than expected, we might see a big red candle similar to the one I drew above. If that were to print after an island cluster, that would potentially signal the start of another downtrend.

Sector/Industry Focus

I thought I'd take a look at the U.S. Dollar ($USD) as it's been awhile since I've done so. During periods of market stress, it's not at all unusual to see dollar strength as it's viewed as a safe haven. I've been calling for a higher dollar and we've seen that throughout much of 2022. Here's the current chart:

The bottom panel is nothing more than the 10-year U.S. treasury yield MINUS the 10-year German treasury yield. This difference historically points in the same direction as the U.S. Dollar. You can see that this positive correlation remains mostly in play. As the dollar searches for a bottom at or near its 50-day SMA, the bottom panel shows that the U.S. treasury yield is not rising as fast as Germany's. That's put recent pressure on the dollar and the dollar is still under pressure. I wouldn't be surprised to see the dollar index fall further, though Fibonacci retracement would look for a bottom somewhere in the 100-101 area.

ChartLists/Strategies

Even if I'm not trading, I'm still doing a lot of homework. We put together so many ChartLists for a reason - they each provide us a different angle into trading. I really like studying the Earnings AD ChartList, because this is a ChartList that summarizes many of the biggest post-earnings movers. With new information, Wall Street is telling us which companies could be in an early stage of accumulation. So before I ever place a trade in them, I can be studying and taking notes. Let me give you an example of a stock that I absolutely have interest in, but not just yet:

MTB:

One thing I really like about MTB is its accelerating leadership role amongst banks ($DJUSBK). While banks are not performing particularly well right now, that will change in time. Knowing leaders in various industry groups will come in handy when those industry groups begin to lead the stock market.

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, June 6:

HQY, COUP

Tuesday, June 7:

SJM, CASY, GWRE, SMAR, VRNT, ASO, UNFI, CBRL, PLAY, GIII

Economic Reports

None

Happy trading!

Tom