EB Daily Market Report - Tuesday, July 19, 2022

Model ETF Portfolio - The DRAFT

At 5:30pm ET today, I'll be hosting our latest Model ETF Portfolio Draft, where we'll select the ETFs to round out this portfolio for the next three months. I'll be discussing themes and the reasons for the selections we're making as we try to once again outperform the benchmark S&P 500. Since turning much more defensive in January 2022, our Model ETF Portfolio has performed quite well. Is it time to turn more aggressive? Join me this afternoon!

If you can't make it, no worries. Our event will be recorded, so that you can check it out at your convenience.

Executive Market Summary

• Futures were up overnight and that strength carried over to the opening bell
• All of our major indices are very strong today, with the Dow Jones up more than 700 points
• Cryptocurrencies are jumping as well, with bitcoin ($BTCUSD) surging nearly 10%
• Meanwhile, many commodities are lower, though crude oil ($WTIC, +1.35%) is bucking that trend
• Communication services (XLC, +3.54%) and industrials (XLI, +3.41%) are today's leading sectors; all 11 sectors are higher on the session
• Internet stocks ($DJUSNS, +4.13%) are spiking, helping to lead the XLC
• Technology (XLK, +2.91%) is middle of the pack, but semiconductors ($DJUSSC, +4.56%) are quite strong - more on this group below
• One of our max pain stocks from last week, Carnival Corp (CCL, +7.22%) is once again among the S&P 500 leaders
• International Business Machines (IBM, -5.65%) is a laggard today after beating top and bottom lines, but issuing guidance a bit below expectations

Market Outlook

Today's action is bullish. Our major indices are clearing key price resistance and it's happening with money rotating in bullish fashion. Check out the S&P 500 chart and a few sustainability ratios beneath it:

One ratio that was bothering me a bit was the XLY:XLP, which recently neared a new relative low (red arrow). However, that new low was never established and I've circled in blue the rapid relative recovery. Growth is continuing to outperform value, suggesting that Wall Street is pouring into more aggressive areas of the market. This is consistent with secular bull market behavior.

Sector/Industry Focus

I don't know how long this lasts, but right now semiconductors ($DJUSSC) are rallying and helping to lead the stock market higher. I love to see this. Check out this chart:

The group has more work to do, but this latest absolute and relative rally has been impressive. And it's coming on the heels of other bullish signals, which makes this rally much more meaningful, in my view. The 6425 seemed to be formidable price resistance, but the DJUSSC is on its way to clearing it today.

ChartLists/Strategies

Yesterday, I discussed being cautious until we could clear overhead price resistance. Well, today we're clearing overhead price resistance. Both the SPY and QQQ (ETFs that track the S&P 500 and NASDAQ 100, respectively) are currently trading above their recent price highs AND their 50-day SMAs. This is great action and is suggesting higher prices ahead. Here are two stocks from our Strong Earnings ChartList (SECL) that I believe are setting up to move higher:

TXN:

TXN is showing nice relative strength and its peer group, semiconductors ($DJUSSC) are strengthening as well. TXN is beginning to look like a leader within a rapidly-improving group. Clearing the 50-day SMA and price resistance is bullish as well.

TPR:

TPR has been a leader in the clothing & accessories group ($DJUSCF). Now the group is finally turning higher and TPR appears to be clearing an important down channel. I'd expect future tests of 20-day EMA support to hold.

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.

Tuesday, July 19:

JNJ, NVS, LMT, NFLX, TFC, HAL, IBKR, JBHT, CFG, OMC, FHN, SBNY, HAS, ALLY, PNFP, MAN

Wednesday, July 20:

TSLA, ASML, ABT, ELV, CCI, CSX, KMI, BIIB, DFS, MTB, WIT, BKR, LVS, NDAQ, EFX, NTRS, UAL, STLD, CCK, MKTX, REXR, CMA, LAD, AA, KNX, XM, SEIC, WTFC, VMI, SLG, HCSG

Economic Reports

June housing starts: 1,559,000 (actual) vs. 1,588,000 (estimate)

June building permits: 1,685,000 (actual) vs. 1,666,000 (estimate)

Happy trading!

Tom