EB Daily Market Report - Tuesday, September 20, 2022
Executive Market Summary
- Futures were lower overnight and we saw our major indices gap lower
- After a brief rally in the morning session, weakness kicked in and our major indices moved to fresh new intraday lows
- As we move toward the closing bell, our key indices are trying to rally - as they have in afternoons recently
- Cryptocurrencies are mixed with bitcoin ($BTCUSD, -2.13%) and etherium ($ETHUSD, -0.78%) both losing ground
- Most commodities are lower today, with crude oil ($WTIC, -1.80%) nearing $84 per barrel
- All 11 sectors are lower on the session, though technology (XLK, -0.29%) is performing best
- Meanwhile, real estate (XLRE, -2.26%) is lagging once again
- Gambling stocks ($DJUSCA, -0.65%) are showing relative strength with Wynn Resorts (WYNN, +3.48%) leading the S&P 500
Market Outlook
The S&P 500 showed a slight positive divergence on its 60-minute chart at today's low, a short-term positive, but the 10-year treasury yield ($TNX) is up another 8 basis points to 3.57%, yet another 11-year high. These are just two mixed signals as we head into a key Fed meeting tomorrow. Here are those two charts:
S&P 500:
The blue arrows mark what I usually look for after an hourly positive divergence prints - a PPO centerline test and/or a 50-hour SMA test.
10-year treasury yield ($TNX):
Just seven weeks ago, we had what looked to be a significant breakdown in the TNX. That would have resulted in higher equity prices, in my opinion. Instead, it turned out to be a head fake. So what's this breakout? The real deal or a head fake. Answering that question correctly will likely determine whether U.S. equities move higher or lower from here.
Sector/Industry Focus
We have no way of knowing what will happen after tomorrow's Fed policy statement, but many interest-rate-sensitive groups should be watched closely. Banks ($DJUSBK) would be one of those. I see a key range from 450 support to 500 resistance, with the DJUSBK currently residing at 461:
My preference is to see a slightly-rising neckline rather than one that's slightly falling, but it's still a fairly easily recognizable head & shoulders reversing (bottoming) pattern. The neckline resides at 500 (resistance), while the reverse right shoulder was established at 450. The bottom panel shows a strongly-rising AD line since the beginning of May, which supports the bullish theory here.
But what will banks do after the Fed's policy statement tomorrow? That's a great question and how this pattern plays out will be a significant factor technically.
ChartLists/Strategies
I discussed the banks above and how the current pattern looks fairly bullish - assuming the reverse right shoulder holds. I ran a scan across our ChartLists looking for banks with SCTRs above 75 (top quadrant of relative performers). This is how the scan looked, followed by the results:
.....and the results:
Here are the banks I found most interesting and near key breakout levels:
FIBK:
CFR:
These are both near rather critical breakout levels and they're both leaders among banks as well. I like the rising AD lines that help to confirm accumulation in addition to the relative strength. If banks do well off of the policy statement tomorrow, don't be surprised to see one or both of these banks breaking out and leading the way.
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.
Tuesday, September 20:
None
Wednesday, September 21:
GIS, LEN, TCOM, FUL, KBH, SCS
Economic Reports
FOMC meeting begins
September housing starts: 1,575,000 (actual) vs. 1,440,000 (estimate)
September building permits: 1,517,000 (actual) vs. 1,621,000 (estimate)
Happy trading!
Tom