EB Daily Market Report - Monday, July 25, 2022

Tom Bowley - July 25, 2022

Q2 Earnings Event

Later today, at 4:30pm ET, I'll be hosting our Q2 Earnings webinar. During this webinar, I'll discuss a few of the better earnings reports that have been released thus far this earnings season. I'll then provide you many strong and weak charts of companies set to report quarterly results over the next couple weeks. It should be another excellent educational event, so I hope to see you there!

The event will be recorded for those unable to attend live.

Executive Market Summary

Futures were relatively flat overnight, though the Dow Jones and S&P 500 did manage to open slightly higher
The NASDAQ, down fractionally, has underperformed throughout the session
It's been a "risk off" type of day as our 3 aggressive sectors lag - consumer discretionary (XLY, -1.15%), technology (XLK, -1.04%), and communication services (XLC, -0.79%)
Meanwhile, energy (XLE, +3.42%) is having a very strong session, buoyed by crude oil prices ($WTIC, +2.15%)
Cryptocurrencies are under selling pressure, with etherium ($ETHUSD) down nearly 6%
The 10-year treasury yield ($TNX) is up 4 basis points to 2.82%
Economic and earnings reports will intensify throughout the week as Apple (AAPL), Microsoft (MSFT) and Alphabet (GOOGL) will release their results this week; Q2 GDP will be out Thursday and we'll hear from the Fed again on Wednesday afternoon
Newmont Corp (NEM, -13.87%) missed its earnings estimate this morning and has broken down badly

Market Outlook

Getting back to my "Market Outlook" discussion from Friday, the 5-day moving average of the equity only put call ratio ($CPCE) did, in fact, turn back higher. That sets the stage for at least a temporary decline. One year ago, any kind of rally and we would've seen the CPCE readings print in the .40s as everyone was bullish. Now, we've reached a point where no one believes rallies can last. Hence, the reversal in the CPCE 5-day moving average. Fear is building again after 1 fairly normal day of profit taking:

As a reminder, those red-dotted vertical lines mark key pivot points in the 5-day moving average of the CPCE. In every case, the S&P 500 struggled short-term (next couple days to a week). So I'm not really surprised that U.S. equities are struggling a bit today. We could see a bit more through the Fed meeting. Depending on the language they use at 2pm ET on Wednesday, however, anything goes from there! We could see a massive rally, or maybe we break below the 20-day EMA and start a broader selloff. Either way, the Fed announcement will likely spark increased volatility.

Sector/Industry Focus

I mentioned in the Executive Market Summary above that we're seeing a risk off environment today. It's rather obvious when we look at the 3 primary sustainability ratios and then perhaps throw in the relative strength of consumer discretionary and technology. Check this chart out:

I believe many traders are growing more cautious this week ahead of the Fed. It makes sense, especially after the nice run we've had the last month or so. What happens AFTER the Fed is likely to be much more meaningful. But for now, as our sustainability ratios fall, I'd be very careful on the long side - from a short-term trading perspective. I am still very bullish, but profit taking will occur from time to time and now seems like a pretty good time to take some profits.

ChartLists/Strategies

Personally, I'm going to remain very cautious short-term, given the now downtrending sustainability ratios and the key Fed meeting and announcement later this week.

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, July 25:

NXPI, CDNS, NEM, ARE, PHG, SUI, BRO, PKG, RPM, WHR, FFIV, RRC, MEDP, CR, HXL, SSD, PCH, SQSP, HTLF

Tuesday, July 26:

MSFT, GOOGL, V, KO, MCD, UPS, TXN, RTX, MDLZ, CNI, CB, MMM, SYK, GE, FISV, UBS, MCO, CNC, GM, ECL, KMB, ADM, CMG, MSCI, ENPH, GLW, PCAR, EQR, AMP, CSGP, CAJ, FE, ESS, AGR, TRU, PARA, TER, IEX, UDR, ACI, BXP, PHM, HUBB, WSO, JNPR, ZION, PNR, MANH, ST, PII, WH, BYD, SKX, AXTA, TENB, TNET, IRDM, CVLT, XRX, NAVI, SSTK, SILK, NXGN

Economic Reports

None

Happy trading!

Tom