EB Daily Market Report - Wednesday, August 3, 2022
Executive Market Summary
- Futures were strong overnight and buyers have poured in throughout the day
- Money is rotating EXACTLY where it needs to go as well
- Aggressive areas, including growth stocks, are leading today
- The NASDAQ is up 2.6% and showing relative strength; the Volatility Index ($VIX), meanwhile, is down more than 9%
- Moderna (MRNA, +16.87%) and PayPal (PYPL, +8.88%) are leading the S&P 500 as traders cheer their quarterly earnings news
- Technology (XLK, +2.71%) and consumer discretionary (XLY, +2.65%) are very strong, but don't lose sight of hourly negative divergences - more on this below
- Crude oil ($WTIC, -3.80%) is breaking down, threatening to close beneath $93 per barrel for the first time since late February; currently, the WTIC is at $90.81 per barrel
- The 10-year treasury yield ($TNX) was at 2.85% earlier today, but reversed at the 20-day EMA as expected; it now resides at 2.75%
- This is a very good day for the bulls
Market Outlook
No matter how many short-term warnings I see, it's never wise to short a secular bull market rally. If you do, you want to make sure you keep your line in the sand and allow stops to take you out of short positions. As I discussed yesterday, the highs today are now accompanied by hourly negative divergences across all major indices (except the Dow Jones - as we've yet to set a new high) and key sectors. Check out our two most important sectors - technology (XLK) and consumer discretionary (XLY):
XLK:
XLY:
Relative strength in the bottom panels of both charts shows us that these two groups are leading again and that is VERY GOOD news for the stock market. I'm convinced we have confirmed the June bottom now and that pullbacks can be bought, especially any 20-day EMA test.
Sector/Industry Focus
Think this rally is sustainable? I absolutely do. I'm not saying we won't see pullbacks from time to time, especially after short-term negative divergences print. But my sustainability ratios are soaring across the board. Check them out relative to the S&P 500:
It's a thing of beauty. The only ratio that is even remotely struggling at all is the TRAN:UTIL, which is one of the less powerful signals among the entire list. And this one isn't bad. The May relative low continues to hold, but we're just not seeing a huge relative rally. So perhaps even stronger performance by the transports would be on my wish list. Don't misunderstand me, though, the TRAN has improved significantly and is now trending higher. But a bit more relative strength in the group would be nice.
ChartLists/Strategies
I've already discussed the Short Squeeze ChartList (SSCL), so I won't discuss it further today, but just be aware that it is once again crushing the S&P 500, which is having a very nice day itself. Today, let's discuss a few Bullish Trifecta ChartList (BTCL) stocks. The beauty of this ChartList is that it's SUPER-FOCUSED on stocks that are resident on ALL 3 of the following ChartLists:
- Strong Earnings ChartList (SECL)
- Strong AD ChartList (SADCL)
- Raised Guidance ChartList (RGCL)
It just makes common sense that stocks that have (1) beaten Wall Street consensus estimates as to both revenue and EPS, (2) raised guidance, and (3) show significant signs of accumulation might make great trading candidates. Here are two that look solid to me:
AMCR:
SAIC:
Both of these stocks are leaders in their space, show excellent AD lines, tested trend lines, and reversed with hammers off the key 20-day moving average test. I expect both to rebound and move higher 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.
Wednesday, August 3:
CVS, BKNG, MRNA, REGN, EPD, MET, MCK, FTNT, NTR, EXC, O, MELI, YUM, ET, TT, ALL, ABC, LCID, ALB, EBAY, SLF, CDW, ANSS, ETR, PPL, IR, HZNP, BIP, MRO, CLX, GNRC, FLT, ATO, TW, BMRN, TPL, MGM, WTRG, OVV, HST, CRL, NI, GDDY, FICO, DOX, AFG, LUMN, EQH, DT, WES, QRVO, LSI, UTHR, MPW, LAMR, BRKR, BWA, DISH, LNC, WSC, TTEK, HOOD, BERY, CFLT, RGLD, RUN, WU, CLH, SMG, DQ, ATHM, UAA, TNDM, ALSN, SITM, RPD, SPR, LIVN, TWNK, SFM, OUT, WERN, KLIC, NUVA, BCO, ACLS, FROG, XHR, EVRI, ELF, VCEL, CRTO, NBR, SWTX, FSLY, ADTN, SSYS, CCRN
Thursday, August 4:
LLY, BABA, AMGN, COP, CI, ZTS, DUK, VRTX, BDX, EOG, FIS, PSA, ICE, APD, TRI, MNST, SRE, SU, BCE, SQ, RSG, CTVA, MSI, JCI, WBD, LNG, PH, ED, APO, DDOG, TEAM, APTV, CBRE, RPRX, DASH, K, AEE, BALL, VMC, LYV, CEG, VTR, EPAM, PBA, PWR, RKT, SWKS, PODD, NET, QSR, EXPE, OWL, TWLO, PARA, HWM, TRGP, LNT, TECH, HUBS, AES, NLOK, IRM, ABMD, AMH, APA, PCTY, OTEX, REG, WRK, CUBE, NFE, AGL, WMS, BKI, NRG, G, NBIX, ZG, HII, DBX, FND, DOCS, AMC, RGA, SWN, NXST, XPO, DNB, CHH, ITT, W, PENN, SYNA, OLED, GIL, POST, MUR, CVNA, LNTH, AMN, GH, LYFT, POWI, IRTC, NTRA, CROX, YETI, QDEL, ELY, NEWR, TDC, PRFT, DUOL, APPN, SEAS, PZZA, FOUR, OPEN, PGNY, NKLA, TRIP, DH, HL, NUS, YELP, FTDR, MYGN, SHAK, KTB, BYND, TTGT, SPCE, KTOS, RAMP, TDS, MDRX, FLGT, ERJ, MNRL, SBH, CRSR, FNKO, GDYN, FVRR, BIGC, PLYA, TGLS, GPRO, TMST
Economic Reports
June factory orders: +2.0% (actual) vs. +1.1% (estimate)
July ISM services: 56.7 (actual) vs. 53.0 (estimate)
Happy trading!
Tom