EB Daily Market Report - Thursday, July 21, 2022

Executive Market Summary

• Futures were mixed overnight, but the NASDAQ continues to show leadership
• Initial jobless claims AGAIN came in above expectations as recessionary signs increase
• Tesla (TSLA, +9.80%) is surging higher after its quarterly earnings report last night
• The European Central Bank (ECB) increased interest rates for the first time in 11 years; the hike was 50 basis points, higher than the widely-anticipated 25 basis point increase
• Crude oil ($WTIC, -3.63%) dropped back below $100 per barrel as energy (XLE, -2.20%) is easily today's worst-performing sector
• 9 of 11 sectors are higher, led once again by consumer discretionary (XLY, +2.13%); TSLA is giving the XLY a big boost
• Health care (XLV, +1.34%) is also quite strong
• TSLA leads all S&P 500 stocks on the session, with Danaher (DHR, +8.73%) close behind; DHR also reported its quarterly results this morning

Market Outlook

The momentum is now clearly with the bulls. We've seen positive divergences, bullish rotation, confirmation in the form of rising sustainability ratios, bearish sentiment to help stock prices launch higher, and great leadership. It's very important to understand that, until proven wrong, we are in a new secular bull market rally. That means we look for short-term pullbacks, not long-term selloffs. One way to spot those short-term pullbacks ahead of time is to watch for negative divergences to form on the shorter-term, 60-minute charts. Here's what that currently looks like on the NASDAQ 100 ($NDX), our best-performing index:

When we do finally top short-term, I'd be watching that green circle for an area where we might pull back to. The rising 50-hour SMA is typically tested AFTER a negative divergence prints. Also, the 12160 level would be a logical price support area as that was key resistance prior to our recent breakout.

Sector/Industry Focus

One very poor area of the stock market, not just year-to-date 2022, but also throughout the pandemic, has been the gambling industry ($DJUSCA). We're definitely seeing improvement, but has it turned the corner?

As Yogi Berra would say, "it's deja vu all over again!"

We've seen this story before. A positive divergence prints (lower prices, higher PPO), the group turns higher briefly, then fails at key price resistance with no breakout in the AD line. Well, here we are again. The positive divergence has printed and the group has turned higher. So now the question becomes, "can gambling stocks actually STAY bullish?" I'll be watching. I believe the group has bottomed.

ChartLists/Strategies

From our Short Squeeze ChartList (SSCL), Beyond Meat (BYND) is trending higher and volume is picking up. A breakout above the early-May high could really begin to unnerve shorts, who might begin to pile in on the buy side:

It certainly seems as though BYND will make it up to the resistance level highlighted. But its breakout above that level could determine whether we see a true short squeeze. Volume should explode higher on a short squeeze.

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.

Thursday, July 21:

DHR, T, PM, UNP, ISRG, MMC, BX, ABB, COF, IQV, FCX, DOW, TRV, NUE, PPG, NOK, DHI, SIVB, FITB, SNAP, TSCO, HBAN, DOV, STX, WRB, KEY, DGX, POOL, DPZ, IPG, SNA, EWBC, AAL, RHI, WAL, CBSH, WBS, MAT, AN, THC, SON, SNV, ALK, TCBI, TPH, AIR

Friday, July 22:

VZ, NEE, AXP, HCA, SLB, ROP, TWTR, RF, CLF, ALV, GNTX

Economic Reports

Initial jobless claims: 251,000 (actual) vs. 240,000 (estimate)

July Philadelphia Fed Manufacturing Index: -12.3 (actual) vs. 0.4 (estimate)

June leading indicators: -0.8% (actual) vs. -0.5% (estimate)

Happy trading!

Tom