EB Daily Market Report - Monday, August 1, 2022

Executive Market Summary

• Futures were weak overnight and our major indices did open in negative territory
• They all rallied into positive territory this morning, but have drifted lower this afternoon to fractional losses
• Cryptocurrencies have cooled off with etherium ($ETHUSD) down nearly 6%
• Crude oil ($WTIC, -4.73%) has fallen back under $94 per barrel, threatening recent price support at $93
• The 10-year treasury yield ($TNX) is down another 5 basis points and is now down nearly 90 basis points from its 3.48% high 7 weeks ago
• Bond traders clearly have looked WAY past inflation and are now squarely focused on the recession, believing the Fed's next move will be to lower rates
• Consumer stocks are leading today's action with staples (XLP, +1.19%) and discretionary (XLY, +0.54%) atop the leaderboard
• Boeing (BA, +6.28%) is "flying" and easily the best performer in the Dow Jones after the FAA announced that Dreamliner deliveries could resume

Market Outlook

Stocks continue to be strong, so what I'm now looking for is a negative divergence to print on the 60-minute chart. That could occur on the next high we see. Check out the current hourly PPO on the NASDAQ 100 ($NDX):

The last time we saw a negative divergence print on this hourly chart, it was in early June. We know what happened after that. I certainly wouldn't expect to see that kind of selloff, but the NDX has seen its hourly PPO reach a high in that 1.0-1.5 resistance area. In other words, we've had a nice rally and a bit of profit taking here cannot be ruled out. I'd consider lessening exposure in the short-term, but I would NOT short. Just my preference of only trading on the long side when we're in a secular bull market rally.

Sector/Industry Focus

On my Trading Places LIVE show this morning, I pointed out the strengthening footwear industry ($DJUSFT). If you didn't catch the show, here's the current outlook for this group:

The DJUSFT appears to have broken its downtrend line, but does still have some work to do on a relative basis. Volume on this move and breakout has been strong and the daily PPO has surged into positive territory as bullish momentum accelerates. Also, on today's show, I discussed 3 footwear stocks - NKE, DECK, CROX - that have improved significantly.

ChartLists/Strategies

I ran one of our scans from our website today against the Strong Earnings ChartList (SECL). The scan was our RSI 40-50 scan. When I ran it against our SECL and sorted it by SCTR, here were the Top 20 results:

The last one on this list got my attention as it was testing key price support.

ATHM:

ATHM's peer group - specialized consumer services ($DJUSCS) - has really strengthened, so we know we have a strong group. ATHM also has a very strong AD line, so that's a signal that weakness early in the day can be bought, particularly if it's testing key price support. ATHM's weakness this morning fell back almost exactly to its recent price support at 33. I'd expect a continuing bounce from here.

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, August 1:

ATVI, WMB, DVN, AFL, SBAC, SPG, GPN, ANET, ON, FANG, MPWR, CF, MOS, J, CHKP, ZI, PINS, CNA, BLDR, DVA, LSCC, CAR, OHI, VNO, LEG, AMG, AMKR, NSP, RDN, AJRD, AXNX, VRNS, SANM, RMBS, RIG, KFRC, HLIT, TWI

Tuesday, August 2:

AMD, SPGI, CAT, PYPL, SBUX, BP, GILD, ABNB, ITW, OXY, ETN, PXD, MAR, MPC, UBER, RACE, EA, MCHP, PRU, WCN, IDXX, MPLX, KKR, PEG, WEC, DD, CMI, VRSK, AME, EXR, CTRA, ZBH, STE, WAT, IT, MTCH, CNP, PAYC, SEDG, ZBRA, EXPD, INCY, MKL, LPLA, XYL, PEAK, ENTG, LDOS, FMC, TAP, WLK, CHK, SCI, RGEN, FNF, HSIC, CZR, AIZ, LEA, SEE, CGNX, EXAS, SRPT, BLD, UNM, HUN, SOFI, RNG, CRUS, LTHM, IGT, SPWR, AYX, MRCY, MSTR, VSH, SPT, JBLU, HLF, CWH, TEX, OTLY, KAR, VCYT, SWI, AVID, ATEN, CNDT, TGI

Economic Reports

July ISM manufacturing index: 52.8 (actual) vs. 52.2 (estimate)

June construction spending: -1.1% (actual) vs. +0.2% (estimate)

Happy trading!

Tom