EB Daily Market Report - Wednesday, October 26, 2022

BIG Announcement - Mark Your Calendar

I've been discussing market manipulation throughout 2022 and now we've created an event about it. Mark your calendar for Saturday, November 5th. I'll spend much of that morning discussing "amateur hour", the disparity in gaps vs. trading throughout the rest of the day, monthly options expiration, money flows, and other manipulation-related topics. It'll be an eye-opening morning, devoted to uncovering the schemes of market makers.

This is VERY important. EB.com members do NOT need to register. You are automatically registered and we'll send you room instructions the morning of the event. Just mark your calendar. If you'd like to see a bit more information about the event, CLICK HERE. If you do register, you'll simply be subject to promotional emails.

Executive Market Summary

• Futures were weak overnight, but much weaker on the NASDAQ
• Microsoft (MSFT, 6.40%) and Alphabet (GOOGL, -7.31%) were both down significantly after reporting quarterly results and guidance that did not impress Wall Street
• Energy (XLE, +1.65%) and health care (XLV, +1.53%) are strong today, while communication services (XLC, -2.35%) and technology (XLK, -1.51%) are weak
• Internet ($DJUSNS, -5.88%) is very weak, owing to the GOOGL quarterly report
• Meanwhile, the 10-year treasury yield ($TNX) is down 10 basis points to 4.01%, but unable to lift the growth-oriented NASDAQ
• Cryptocurrencies remain strong with etherium ($ETHUSD, +3.64%) and bitcoin ($BTCUSD, +2.32%) leading the charge
• Commodities are quite strong today, especially crude oil ($WTIC, +3.31%), which has jumped back above $88 per barrel
• The Dow Jones is showing leadership with more than a third of its components up more than 1% today; the leader is Visa (V, +4.23%) as Wall Street cheers its latest quarterly results

Market Outlook

The battle remains. I'm going to pull up those same two charts from yesterday - SPY and QQQ - so that you can see what the bulls are up against:

SPY:

QQQ:

It's been more of a struggle for the QQQ after heavyweights like MSFT and GOOGL were pressured at the opening bell, but the good news initially is that the QQQ held its rising 20-HOUR EMA on that morning weakness.

Sector/Industry Focus

Internet stocks ($DJUSNS) are VERY weak after Alphabet (GOOGL) disappointed with its quarterly results and guidance. We have to keep in mind that GOOGL is a LEADER in the space. I can only imagine what we might face when the weakest of the weak report. Which, by the way, will be later today as Meta Platforms (META), formerly Facebook, reports its results. META is a MAJOR LAGGARD and I cannot imagine the news later today will be good.

Here are the three key support levels to watch on the DJUSNS on its hourly chart:

I'm not feeling very good knowing that this industry group's fate could be resting on META. Perhaps it'll be a "sell on the rumor, buy on the news" scenario. We'll see what happens after the close.

ChartLists/Strategies

I love trading stocks just after they report earnings. Many times a stock will sell off hard in the first few minutes of trading and I can play a role similar to the market maker, buying stocks that are in freefall and nearing a key price support level. I like it even more if it's a stock that reports strong results and is a leader - similar to what I did yesterday with WR Berkley Corp (WRB). Today, I bought two stocks shortly after the open - Alphabet (GOOGL) and F5 Networks (FFIV). GOOGL is a leader in a very weak group - internet ($DJUSNS). FFIV is a laggard in the telecom equipment area ($DJUSCT). But both of these stocks had opens above price support, but their early morning weakness tested key price support levels. I anticipated bounces. Here's the daily chart for both:

GOOGL:

This is not a "buy and be a hero" type of trade. I'm looking to get a quick 2, 3, 4 percent and GET OUT. The market hasn't yet shown that we're uptrending. We could go right back down to the recent S&P 500 lows. And a stock like GOOGL could lead us there. So I'm not buying and holding. I'm literally playing the role of a market maker, allowing someone to panic out of shares right after a report comes out, and I'm taking the opposite position. I'm looking to make my money and EXIT STAGE LEFT. Once I saw GOOGL open above price support, I placed my order for 95.25, slightly above the lowest candle body on the chart. Currently, I'm up a bit more than 2%. If GOOGL can move anywhere close to 99-100, I'll be out. I also have set a hard stop at 96.20 to guarantee a 1% profit.

FFIV:

The low candle body on FFIV was 136.54. I set a limit buy order at 136.75, which executed shortly after the opening bell. The red arrow above shows FFIV's 20-day EMA at 146.20. This one is extremely volatile, but I'm looking for a possible 6-7% move to 145-146. ANYTHING in that range and I'll take the money and RUN. Now that we've already established an uptrend off the initial low, I've placed a hard stop beneath 138, which again will guarantee me roughly 1%, but it could be much more, depending on how the market closes today.

If I pull up today's Upcoming Earnings ChartList in CandleGlance, using a 3-day 5-minute chart, you can see a number of stocks reversing their early morning move. Much of this is due to our market maker system. Quick moves lower are triggered by lots of sellers during a period when there isn't much liquidity. So the drops are exaggerated. Buying into that weakness can yield quick profits as market makers buy the early selling and help foster strength throughout the balance of the day. The opposite can hold true for gaps higher, but I'm not a fan of shorting at this time, so I ignore those. Here's the CandleGlance featuring the first 9 charts on our Upcoming Earnings ChartList:

Those that gapped down have mostly seen recovery, while those gapping up have mostly moved sideways or turned back down. I believe the key is KNOWING that these are NOT long-term trades. Make your money and move on to the next day. Also, you'll need to figure out a stop loss that's comfortable for you, so that you don't get caught in a HUGE downside move.

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, October 26:

META, TMO, BMY, EQNR, KOF, ADP, BA, NOW, GD, WM, CP, CME, BSX, F, NSC, ORLY, KHC, APH, HES, KLAC, ROP, SCCO, HLT, IQV, ODFL, OTIS, DLR, FTV, RJF, MOH, INVH, URI, AEM, DB, ROL, ACGL, MAA, BMRN, AZPN, TDY, ALGN, GRMN, UMC, ESS, EQT, TYL, AVY, BG, WOLF, UDR, STX, GL, RE, VFC, GGG, MAS, AR, OC, OLN, FBHS, MUSA, SEIC, INFA, DRVN, HOG, PPC, VRT, SLGN, SLAB, TDOC, R, WING, ALSN, QS, TMHC, MTH, GPI, PI, FORM, BOOT, UPWK, IRBT, UCTT, GSHD, LC, OII

Thursday, October 27:

AAPL, AMZN, MA, MRK, SHEL, MCD, TMUS, LIN, TTE, CMCSA, HON, INTC, CAT, SPGI, BUD, PBR, GILD, AMT, MO, NOC, VRTX, SO, PXD, FISV, KDP, EW, LHX, ABEV, AEP, RSG, DXCM, AJG, COF, PCG, SHOP, XEL, RMD, STM, CARR, VICI, BAX, SGEN, TROW, ALNY, WTW, CBRE, HIG, WY, ARGX, DTE, ARES, LUV, PFG, LH, VRSN, LPLA, WST, TECK, CMS, MPWR, PINS, LKQ, CHKP, CSL, TXT, FSLR, SSNC, KIM, CPT, IP, GLPI, RS, SWK, BIO, ERIE, WDC, TW, MMP, CCJ, DECK, ZEN, TFX, EMN, CFR, NOV, BWA, LII, AOS, SWN, HTZ, TXRH, MHK, AN, X, COLM, AUY, VC, ONTO, INMD, HUBG, PRFT, INSM, EXTR, TPH, OSTK

Economic Reports

September retail inventories: +0.4% (actual) vs. no estimate provided

September wholesale inventories: +0.8% (actual) vs. +1.1% (estimate)

September new home sales: 603,000 (actual) vs. 585,000 (estimate)

Happy trading!

Tom