EB Daily Market Report - Friday, August 19, 2022
Portfolio ChartLists
I will update the Portfolio ChartLists over the weekend (hopefully). I'm traveling out of town for a golf tournament. If I can't get to them this weekend, they should be available early next week. Thanks for your patience - I need a golf break! :-)
On a related note, the EB Weekly Portfolio Report, normally out on Sunday around noon, could be delayed as a result of my traveling.
Executive Market Summary
- Futures were very weak overnight and we saw a significant gap lower at the opening bell
- It's definitely a "risk off" kinda day; cryptocurrencies are getting slammed, with most down in the 8-11% territory
- Applied Materials (AMAT, -3.86%) posted excellent quarterly results, but reported those results on a bad day and most stocks are considerably lower on the session
- Deere & Co (DE, -0.98%) missed its earnings estimate, but has managed to escape major damage technically
- Consumer discretionary (XLY, -2.06%) is the worst-performing sector today, with recreational services ($DJUSRQ, -4.23%) leading the charge lower
- Crude oil prices ($WTIC, +1.64%) are moving back to $92 per barrel, but have been unable to negotiate resistance (prior support) near $93 per barrel and the 20-day EMA, currently just under $93
- The 10-year treasury yield ($TNX) has jumped 10 basis points to 2.98%, spooking many growth names
- Boeing (BA, -3.37%) is today's worst Dow Jones performer and it had the 11th most net in-the-money call premium discussed in our max pain email sent out over the weekend
Market Outlook
We can just laugh, right? Options expiration Friday arrives. It's the 19th of the calendar month - which is the worst day of all calendar months, historically-speaking. There are billions and billions of net in-the-money call dollars at stake. And John Hopkins, my partner, shoots me a text this morning and says, "So I'm listening to CNBC and two hosts say, "I have no idea what happened overnight" when looking at bright red futures. Seriously? No idea? This is EXACTLY why I have no respect, only disgust, for this "news" network. Here's a GREAT opportunity for SOMEONE to explain the world of options and max pain to an audience eager for a bit of education. Instead, it's "we have no idea". Maybe your large financial sponsors can help clue you in? And be sure to bring Peter Schiff back so he can be sure to describe how low we're going on this leg down.
Do you think I'm the only one that understands this monthly thievery? Trust me, I'm not. But the thought of educating the public so they can navigate the stock market better obviously is a lesser priority for CNBC.
Oh, and let's talk manipulation. I did a Special Presentation on Tuesday as my Trading Places show for that day. I explained how Wall Street manipulates the general public via gaps and early morning weakness. Well, what have we seen this week? Here's what the QQQ (ETF that tracks the NASDAQ 100) looks like right now:
Since that August 15th close of 333.06, we've now seen the following gaps lower over the past 4 days:
- Tuesday, August 16th: -1.00
- Wednesday, August 17th: -3.21
- Thursday, August 18th: -0.05
- Friday, August 19th: -3.11
That's a total $7.37 of PURE MANIPULATION. So while the QQQ is now down a bit more than 10 bucks from that 8/15 close, roughly 70% of it was manufactured by market makers. Do you know what that's done to the amount of net in-the-money call premium? This is the type of information that you MUST have in order to be a successful trader. It's why market makers are the best traders on the planet. Or maybe they're just lucky? (sarcasm)
I will likely begin to scale back in to my QQQ position in the green-shaded area. I might even consider a leveraged QLD position if we see an intraday break beneath the rising 20-day EMA and a close back above it. Gap support at 317.08 from the August 9th close will also be very interesting, if we get there. I had a position in the QID (ETF that SHORTS the NASDAQ 100 at a 2 to 1 clip) that I closed on this morning's weakness. I was simply hoping to make money, not a killing. I'm still very much bullish and was just happy to take a profit there. Hold longer if you'd like, but remember to keep a trailing stop in place. As long as the NASDAQ continues to print lower highs and lower lows, you could hold the QID. But at the first sight of any reversal, I'd be O-U-T. Also, remember that the major indices have very strong AD lines, which tells us that the afternoon tends to be much more bullish than the morning. So if we rally this afternoon, I could consider re-establishing a QID position at the close and heading into Monday. Obviously, that's pretty risky as you have to be willing to hold over the weekend and take whatever the market hands you at the opening bell.
Sector/Industry Focus
Renewable energy ($DWCREE) is really struggling today, but remember it's "Opposite George" week. Care to guess which industry group has risen the most over the past month?
This just highlights the technology industry groups, but tires ($DWCTIR) and automobiles ($DJUSAU) are next in line at 26.85% and 18.97%. Since you're an EarningsBeats.com member and a new student of Opposite George week, you won't be too surprised to see the technology weakness today, as follows:
Nearly everyone says you CANNOT time the market. Are you beginning to understand why I say YES YOU CAN?
That's the ONE THING they try to teach (or should I say BRAINWASH?) on CNBC - that you can't time the market. I should write a novel and/or a movie script.
ChartLists/Strategies
If you haven't already moved into max pain candidates on the short side, I'd be most comfortable in cash from a trading perspective. If you don't anticipate a move, and jump in AFTER that anticipated move is confirmed, it becomes quite risky. This weekend, I'll provide a few interesting trade candidates on any further weakness. For now, I'll pass. Remember, while the 19th is the worst calendar day of the month, the Monday AFTER options expire is the worst day period. It doesn't guarantee us that we'll see follow-through selling on Monday, but the odds favor that. Given the recent history of gaps lower, and amateur hour from 9:30am ET until roughly 11:00am ET, we might find some nice opportunities late in the morning on Monday.
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.
Friday, August 19:
DE, VIPS, FL, MSGE, BKE
Monday, August 22:
PANW, ZM, NDSN, DLO
Economic Reports
None
Happy trading!
Tom